Lenders remain aggressive as competition for prime real estate
lending opportunities in Canada intensifies. Borrowing rates remain
at historical lows and other lending terms have become increasingly
favourable for borrowers. The relaunched commercial mortgage-backed
security lending programs in Canada have started to pick up steam
and, together with life insurance companies, pension funds and
Canadian banks, are the dominate lenders in the Canadian lending
market. With resilient market conditions, U.S. and international
players have also been attempting to deploy real estate loans for
real estate investments in Canada, while borrowers are working to
lock in loans before interest rates rise.
TWO | ASSET COMPETITION
International investors continue to actively seek investment
opportunities in Canadian real estate, and European and Asian
investors are aggressively bidding on core assets. Well-located
office, industrial and retail assets all attract multiple bidders
when brought to the market. While owners are reluctant to part with
assets, some generational shifts are leading high-net-worth
individuals to divest long-held assets.
THREE | LEASING
Although the demise of Target in Canada has made U.S. and
international retailers more cautious and restrained regarding
their Canadian expansion plans, leasing interest among foreign
retailers remains fairly strong. While the vacancies left by Target
have caused some turmoil for several weaker suburban retail
centres, demand for centrally located urban retail space
(particularly, high street retail space) remains very robust.
Office leasing activity and office rents remain sound across
Canada, except in Alberta where the drop in global oil prices has
caused many oil and gas companies to shrink their operations.
FOUR | ASSET MANAGEMENT
Large asset managers continue to consolidate operations, as the
valuation of asset-management fee income continues to rise.
Canadian financial institutions seeking to expand their active
asset-management businesses for institutions and high-net-worth
individuals are considering acquisitions of all types of
asset-management platforms to meet their customers' needs. In
this dynamic market, asset managers are devoting more attention to
anticipated heightened regulatory scrutiny regarding their
FIVE | GLOBALIZATION OF REAL ESTATE
Pension funds and insurance companies from all over the world
are investing in Canada and elsewhere as they strive to diversify
risk. With increasing activity in diverse markets, pension funds
and insurance companies need to create global teams with local
knowledge and credentials. Due to the capitalization rate
compression in traditional core assets and in response to the
changing demographics of urbanization and aging, international
investors are turning to development of multifamily housing and
acquisition of seniors' accommodations. At the same time,
Canadian pension funds are devoting greater attention to investing
in U.S. and global markets to diversify their holdings and manage
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