Calgary and Edmonton are now the top cities for real estate investment, according to a new report from PwC and the Urban Land Institute, which says the two Alberta cities have displaced Toronto and Vancouver for 2013.

Investors will favour apartment and office buildings next year while developers will focus on the retail market but overall the report says mediocre will be the new measure of what defines a good market.

The report, which reflects the views of over 900 individuals throughout Canada, the United States and Latin America, says “compared to everyone else Canada will do very well” which seems to be the theme across the country.

“The Canadian real estate community understands real estate fundamentals and knows how to react to fluctuations in monetary policy and capital markets. Canada’s real estate industry continues to operate well despite uncertainties in domestic and global economies,” said Lori-Ann Beausoleil, PwC Canada’s real estate leader.

Suggestions that emerged from those who participated in the survey:

• Core real estate in major markets should be held, which for institutions means a place to keep their money in “income-producing trophy properties” across all property classes.

• Green offices are something major tenants want and they are willing to move from older buildings if they can get an advantage form a new one.

• Land bank out west because the escalating inflow of workers will continue unless there is reversal in energy and commodity markets.

• Infill sites represent intensification opportunities, especially ones located near mass transit.

• There are still opportunities for home builders to construct large layouts which is an under served market, as soaring condo prices and “unfriendly units” create an opening for that segment.

• If luxury condos dip, buy. Increased urbanization will continue and upscale space and the best downtown locations will reclaim any lost value quickly.

Calgary got the top spot in the survey as rents are rising in the oilpatch and acquiring real estate is becoming more difficult. The report predicts more of the same in 2013 with a focus on demand for office and industrial space.

John O’Bryan, chairman of CBRE Canada, who spoke about the Canadian commercial market at conference to discuss the report, says the employment numbers just lean towards the west. “Anywhere that has any resource base is doing exceptionally well,” he said.

Mr. O’Bryan said 2012 might be called the year of the real estate investment, highlighted by Dundee REIT’s $1.266-billion purchase of Scotia Plaza in Toronto with partner H&R REIT which occurred right under the nose of the pension funds.

“It’s almost the perfect environment for them,” said Mr. O’Bryan, about REITs. “Take office buildings, two thirds of all of the transactions have been REITs. Conditions can’t be any better. They’ve got the balanced sheets, they’re proven in the capital markets.”

Source: Garry Marr, Financial Post

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