Commercial Real Estate Market: Why are the analysts getting it all wrong?
A new report forecasts a huge surge in Canadian commercial real estate investment in the second half of 2013. No doubt this is accurate but exactly how it is expected to play out and where that money will go seems to be way off base.
So why are the analysts getting it all wrong?
The report recently covered in a story by the Vancouver Sun has it half right, at least in terms of increased investment in Canada's commercial real estate sector. So where are Canadians and international investors being misled?
Some analysts are still attempting in vain to convince Canadians and the world that Toronto and Vancouver are going to bounce back this year following a softening at the end of 2012.
Considering we have only just begun the slide and a look at proven real estate cycles suggests just the opposite. It's more likely we'll be seeing an extended downturn period in BC and ON for a while, with diving housing prices taking down consumer spending and investment. That may curb spending and taking on new debt, but it will also chop wealth and growth off at the knees by taking down spending and burying Canadians in those provinces in negative equity. Certainly that will not result in the ultimate outcome desired and will not bode well for the popularity of those in charge today.
The above mentioned report also points to a coming stabilization of the Euro Zone and boom in the U.S. economy as factors which will increase investment in these cities, whereas common sense would suggest that while some residual benefits may be felt if this does pan out more money would actually flee to those spots which are performing better. In Canada that would mean Alberta.
Furthermore these predictions rely on outdated business trends and companies moving into the country's biggest downtown areas to grab office space. That isn't what we are seeing emerge or what is expected to play out as global tech trends evolve and companies continue to move to more affordable locations like Edmonton, AB.
No longer do businesses need to be headquartered in Toronto or even Calgary to tap the best talent or maximize revenue. This will continue to drive migration of individuals and head offices to Edmonton, along with the best talent and most investment dollars.
This is lining up Edmonton retail properties to be amazing performers in 2013 and some of the best investment picks on the planet for commercial real estate investors getting in during the first half of the year.
Euro zone or U.S. rebound or not it's unlikely we'll see a sweet spot to invest in Vancouver or Toronto for a while, and either way Edmonton stands to gain.