PwC Canada and ULI’s Emerging Trends in Real Estate (ETRE) report says a marked deepening of recent trends such as higher interest rates and more expensive and increasingly scarce capital which are creating a bifurcation of real estate and more difficulties for many companies which is leading to a reset in Canadian real estate.
Alexander Isreb
But the sector is relatively resilient and adaptable and companies are generally confident about overall demand for real estate, with many pointing to Canada’s immigration-fuelled population growth as a source of long-term strength for the industry.
A key trend and issue is the outlook for capital availability in 2024. A significantly higher number of survey respondents expect various types of debt and equity capital will be undersupplied compared to 2023 and previous years, which will add to the financing challenges facing real estate companies and impact their investment strategies and development plans in 2024, said the report.
“This year it was all about capital. There is compelling data to show that scarcity of capital has impacted investment volumes. However, this creates opportunity as we saw many new private debt funds established to take advantage of this unique moment in time.” said Frank Magliocco, Real Estate Leader, PwC Canada.
The report said there are many factors holding back industry activity including interest rates which are predicted to stay higher for longer, rising financing costs and less capital being made available for real estate. However, this provides real estate players an opportunity to consider ways in which they can add long-term value, whether it is the adoption of transformative technology in construction, process changes and innovation or the adoption of generative AI.
It said amidst the deepening housing affordability crisis, there is still some hope which the multifamily housing segment offers. Innovative approaches and recent government initiatives, such as GST relief for new purpose built projects are generating interest in this sector. Governments are introducing policies to streamline housing approvals and remove tax barriers, while industry players are exploring innovative solutions to address the issue.
“Market forces are challenging public policy objectives and corporate ESG goals. Industry leaders are keenly watching this space as they look for some respite from the economic headwinds, inflation, and volatile interest rates,” added Richard Joy, Executive Director, Urban Land Institute, Toronto.
The report said industrial and multifamily real estate options continue to lead the way for a second successive year as a best bet, followed by grocery-anchored retail. An honorable mention goes to debt funds given this moment in time. As for office spaces, they continue to decline as a favoured asset class. This trend has been further exacerbated because of the shift to hybrid work, which has had a profound impact on utilization of corporate real estate, including the increase in suburbanization.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list
About Us
Canada’s Podcast is the number one podcast in Canada for entrepreneurs and business owners. Established in 2016, the podcast network has interviewed over 600 Canadian entrepreneurs from coast-to-coast.
With hosts in each province, entrepreneurs have a local and national format to tell their stories, talk about their journey and provide inspiration for anyone starting their entrepreneurial journey and well- established founders.
The commitment to a grass roots approach has built a loyal audience on all our social channels and YouTube – 500,000+ lifetime YouTube views, 200,000 + audio downloads, 35,000 + average monthly social impressions, 10,000 + engaged social followers and 35,000 newsletter subscribers. Canada’s Podcast is proud to provide a local, national and international presence for Canadian entrepreneurs to build their brand and tell their story.
