A new report released by CB Richard Ellis Canada predicts that Real Estate Investment Trusts (REITs) will drive demand for commercial property this year. Pension funds and foreign buyers will also be responsible boosting the market in 2013.
Alberta is expected to be popular with investors
The Canadian investment property market saw $25.8 billion in sales in 2012. This figure was below 2011’s figure of $28.6 billion, but still very healthy by historical standards.
According to John O’Bryan of CBRE Canada, more pension funds will be entering the market in 2013. Several new REITs have been formed in recent weeks. Mergers and acquisitions have increased as well. This activity “will add fuel to an already liquid investment market.”
Loblaw Cos. Inc. has announced that it will create a REIT from its prosperity holdings. The portfolio is made up of 35 million square feet of property and has a current value of more than $7 billion.
Hudson’s Bay Company has also made a statement about its future plans. Chief Executive Officer, Richard Baker, has stated that his corporation will consider a similar plan for their 11 million square feet of real estate, although it would not be for some time.
The Bloomberg Canadian REIT index has returned approximately 75 per cent over the past three years. Even though REITs have come down from their peak since August, they have increased sharply in the last month. The yield remains at about five per cent. Cash flow growth projections for REITs are as high as 10 per cent.
Alberta is likely to be an active market as U.S. investors look north for opportunities. This is expected to lead to a number of new players entering the market to take advantage of the current demand for yield.
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