Emerging Trends in Real Estate 2016 Changing opportunities€¦ · Real Estate 2016 Changing opportunities ULI – PwC Annual Real Estate Trends Program November 2, 2015 . PwC 1.0%

Emerging Trends in Real Estate 2016 Changing opportunities

ULI – PwC Annual Real Estate Trends Program November 2, 2015

PwC

1.0%

13.7%

85.3%

2016

Abysmal–poor

Modestly poor–modestly good

Good–excellent

Despite caution, outlook is still positive Expectations remain high

Emerging Trends in Real Estate 2016: Changing opportunities

2

Source: Emerging Trends in Real Estate 2016

PwC

Outlook is positive across North America Expectations remain high


3

1.1%

14.9%

84.0%

U.S.

Abysmal–poor


Good–excellent

1.0%

13.7%

85.3%

Canada

Abysmal–poor


Good–excellent


PwC

2016 Emerging Trends in Real Estate

Caution rules

Liquidity and lack of investable assets

Office leasing: an evolving market

Stronger U.S. dollar generates some optimism

Lower oil prices: mixed impact

PwC


Foreign investment: Canada retains its allure

Housing affordability concerns rise

Rise of the renter

Technology creates opportunities and challenges

Resilience of the suburbs

PwC

How do you feel about the overall market? Liquidity and lack of investable assets


6

2.0

2.3

2.5

2.8

3.0

3.3

3.5

3.8

4.0

2008 2009 2010 2011 2012 2013 2014 2015 2016

Buy Sell Hold

2016 Emerging Trends Barometer

Sell

Hold

Buy

Source: Emerging Trends in Real Estate 2016, Canadian respondents

PwC

Survey respondents feel good about the market, but transaction volume is declining Liquidity and lack of investable assets


7

$0

$5

$10

$15

$20

$25

$30

$35

$40

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(p)

Total investment volume (billions $) Buyers in 2015

Private

REIT/REOC

Private Equity

Pension Fund/Advisor

Institutional

Foreign

Source: CBRE Marketview, Q2 2015

PwC

Less space per worker due to rising use of technology and new work processes Office leasing: An evolving market


8

2000 2010 2020 ?

Number of workers per 1,000 sf

253 sf per worker 225 sf per worker 138 sf per worker

Source: Corenet Global, PwC

PwC

So, where does it end? Office leasing: An evolving market


9

PwC

Canada is more affordable Stronger U.S. dollar generates some optimism


10

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

2000Q4

2001Q4

2002Q4

2003Q4

2004Q4

2005Q4

2006Q4

2007Q4

2008Q4

2009Q4

2010Q4

2011Q4

2012Q4

2013Q4

2014Q4

U.S and Euro exchange rates

C$ per Euro C$ per US$

Source: Haver Analytics

PwC

Net effect of lower oil prices on GDP growth Lower oil prices: mixed impact


11

Capex

-0.9

Exports -0.2

US Growth

+0.3

Consumer Spending

+0.5

Total

-0.3

Source: Oxford Economics

PwC

Fixed direct investment remains strong, with impact of the U.S. declining Foreign investment: Canada retains its allure


12

64.1%

49.4%

29.0%

34.3%

5.0% 11.7%

1.7% 4.0%

0.7%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

2004 2014

United States Europe Asia & Oceania Latin America Others

Source: Statistics Canada, April 2015

PwC

Real estate investment sees more activity from the private sector Foreign investment: Canada retains its allure


13

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

$2.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 (p)

Total investment volume (billions $)

36.6%

36.3%

21.2% 6.0%

Foreign sources

United States Asia

Europe United Kingdom

39.5%

37.3%

10.6% 9.7% 2.9%

Capital type

User/Other Private

Public Institutional

Equity Funds

Source: Real Capital Analytics, PwC

PwC

Housing affordability varies by city Housing affordability concerns rise


14

Source: TD Economics, Quarterly Regional Housing Report

10.4

4.3 4.0

4.6

3.7

6.3

4.0

5.1

3.9

5.3

11.6

4.3 3.9

4.5

3.5

7.0

3.9

5.0

3.8

5.7

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Vancouver Edmonton Calgary Saskatoon Winnipeg Toronto Ottawa Montreal Halifax Canada

Home price/income ratio

2013 2014 2015 2016

PwC

Housing affordability varies by city Housing affordability concerns rise


15

- 500 1,000 1,500 2,000 2,500

Hong Kong

Russia

China

United Kingdom

Italy

Sweden

Japan

Spain

Germany

France

Greece

Denmark

Canada

United States

Australia

2.41

5.41

5.94

10.87

9.68 11.61

14.65

Average home size

around the world

7.43

10.31

6.13

10.38

8.34

7.80

28.09

29.39

Source: CommSec, RBA, UN, US Census Bureau

PwC

Could we see a rise in older renters? Rise of the renter


16

Source: Census Data, CMHC estimates

5.2%

22.9% 23.2%

19.7%

12.8%

7.6% 8.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

15 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75 +

Renters by age

PwC

Improvements in mass transit benefit suburbs Resilience of the suburbs


17

Source: Pembina Institute

Toronto

59.2 km

$14 billion

Montreal

14.0 km

$416 million

Vancouver

11 km

$1.55 billion

Calgary

25 km

$802 million

Ottawa

12.5 km

$176 million

PwC

Technology spending impact on CRE Technology creates opportunities and challenges


18

Source: Altus Group

$59.3

$6.3

$1.2

CRE global technology spending

Automation systems

Smart building technology

IT software systems 67.5% 68.0% 68.5% 69.0% 69.5%

Areas where improved effectiveness would impact

investment returns

Forecasting visibility (leasing, capital, cash flow)

Investment and debt management

Valuation and cash flow analysis

Accounting and property management

Management of budgeting cycle

PwC

2016 markets to watch

PwC

Top markets reflect cautious outlook 2016 markets to watch


20


2012 2013 2014 2015 2016

Vancouver 2 4 4 4 1

Toronto 1 3 5 3 2

Montreal 7 5 9 6 3

Ottawa 5 6 6 5 4

Saskatoon 6 7 3 8 5

Winipeg 9 8 7 7 6

Edmonton 4 2 2 2 7

Halifax 8 9 8 9 8

Calgary 3 1 1 1 9

PwC

Property type outlook

PwC

Outlook for all sectors improves Property type outlook


22


2014 2015 2016

Industrial/distribution 3.22 3.47 3.61

Hotels 2.46 3.43 3.45

Office 3.17 2.96 3.41

Multifamily 3.31 3.28 3.40

Retail 3.37 2.87 3.22

PwC

2016 expected best bets

Mixed-use and destination retail

Industrial in the East, bargains in the West

Redevelopment of older properties

Well positioned suburbs

Condos and rental apartments

PwC

Emerging Trends in Real Estate 2016 US summary

Coordinating offense

and defense

PwC


Office: a barometer of change

18-hour cities 2.0 Next stop: the suburbs…what is a suburb?

A housing option for everyone

Parking for change

PwC

Generations are on the move again Resilience of the suburbs


26

Source: US Census Bureau

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

Suburb to City

Within City

City to Suburb

Between Suburbs

2013 to 2014 Metropolitan Mobility

Baby Boomers Generation X Millennial

PwC

The changing face of the labor market is having an impact on who, where, and how work is being done Office leasing: An evolving market


27

(894,136)

410,616

(483,520)

(1,000,000)

(800,000)

(600,000)

(400,000)

(200,000)

-

200,000

400,000

600,000

Leaving Joining Shortage

persons

…who is in charge?

44.3%

30.6%

13.8%

11.3%

Millennials Gen X

Boomers Gen Z

% of total labor market

10-year labor force poses the question…

Source: U.S. Census Bureau, Bureau of Labor Statistics, PwC

PwC


Infrastructure: Network it! Brand it!

Food is getting bigger and closer

Consolidation breeds specialization

The return of the human touch

We raised the capital, now what do we do with it?

PwC

Capital waiting to be allocated continues to accumulate We raised the capital, now what do we do with it?


29

Source: Prequin, Quarterly real estate update, Q2 2015, Federal Reserve Flow of Funds

$0

$50

$100

$150

$200

$250

$300

2010 2011 2012 2013 2014 2015

$ m

illi

on

s

Institutional dry powder and REIT Cash

PwC

30

2016 markets to watch

PwC

2016 markets to watch Not a red tide, but a green one!


31


PwC

2016 markets to watch Top 10 market volatility


32

Source: Emerging Trends in Real Estate 2013 and 2016

2016

Dallas/Fort Worth

Austin

Charlotte

Seattle

Atlanta

Denver

Nashville

San Francisco

Portland

Los Angeles

2013

San Francisco

New York City

San Jose

Austin

Houston

Boston

Seattle

Washington D.C.

Dallas/Fort Worth

Orange County

PwC

Emerging Trends in Real Estate 2016

Follow us on Twitter @PwC_RealEstate

#ETRE2016

Download your copy of the report at: www.pwc.com/ca/emergingtrends

Documents

Emerging Trends in Real Estate 2016 Changing opportunities€¦ · Real Estate 2016 Changing opportunities ULI – PwC Annual Real Estate Trends Program November 2, 2015 . PwC 1.0%