We have all heard the expression: “Location, location, location” when it comes to buying real estate. Though that may be true for the immovable property itself, the 2018 Emerging Trends in Real Estate report (the Report) published by PwC Canada and the Urban Land Institute (ULI) suggests that the new and emerging trend in real estate is a demand for mobility.
Mobility in capital
According to the Report, real estate business prospects in 2018 are higher than in 2017, signaling an increased optimism from owners, developers, and investors in the Canadian real estate sector. The survey also shows that “real estate investors expect to buy and sell property more frequently than in 2017”. The challenge, however, is finding institutional-quality real estate and high-quality commercial properties to invest in. As such, many investors expressed a need to be more creative and innovative in the hunt for stronger yields by making adjustments to their portfolio and being flexible to the opportunities that arise.
The Report stated that real estate investment trusts (REITs) are likely to make strategic adjustments in the year ahead in order to generate returns to guarantee their distributions. This could come in the form of selling assets and/or developing and redeveloping assets already held. Whatever the case, investors are watching closely and are ready to buy the properties that REITs put up for sale.
As one interviewee puts it, “having capital is no longer an advantage. The advantage comes from being able to move quickly, deal with more complexity, and leverage strategic partners”.
Mobility between cities
Billions of dollars have been invested by all levels of the Canadian government into developing transit infrastructure in recent years. The transit projects underway include the REM automated transportation network in Montreal, the Eglinton Crosstown LRT in Toronto and the Confederation Line LRT in Ottawa. These transit projects will inevitably impact and shape real estate opportunities as transit infrastructures play a significant role in supporting daytime commutes and late-night services.
Transit infrastructure often influences how people work, play, or both and a reoccurring pattern shows that social, residential and employment hubs are generally clustered around transit infrastructure. Interviewees in the Report carry the sentiment that smart developers buy around developed and developing transit systems. Furthermore, it is noted in the report that the “link between transit infrastructure and real estate development is expected to grow stronger in the years to come.”
Mobility created by talent
Technological advancements are said to be imperative for real estate companies to “improve deals and investments, mitigate risk, better understand tenants and their needs, and open up new profitable possibilities.” This is largely credited to these advancements’ ability to provide data and business insights to real estate companies’ property portfolios.
The Report also predicts that autonomous vehicles (AVs) will become a disruptive force in the real estate sector. This is because AVs will impact the way developers use their existing properties. Developers are also likely to revisit how they think about developing new properties and their use of space when less personal cars and surface parking spaces are needed.
While real estate properties can’t be moved, that doesn’t stop the Canadian real estate sector from progressing around this limitation and swiftly seizing opportunities. The Report suggests that Canadian owners, developers, and investors are expecting a lot of movement in 2018.
The author would like to thank Jenny Ng, Articling Student, for her assistance in preparing this legal update.
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