Commercial Real Estate News Toronto – 2/2 February 2009

Global CRE investment down 59% in 2008 – cushwake.com – It was the thud felt around the world. Last year, as the credit crunch and economic downturn spread from country to country, investment in commercial real estate across the globe plummeted 59 percent, going from just over $1 trillion in 2007 to just $435 billion, according to real estate services firm Cushman & Wakefield. North America fell 73 percent followed by Europe at 52 percent, and then Asia 45 percent. Latin America, investment dropped by a relatively low 9 percent.
Commercial Property News, Feb 18, 2009

CREA predicts real estate prices to fall to 2000 levels – Property sales in Canada this year are expected to drop back to 2000 levels before rebounding in 2010, according to a new report from the Canadian Real Estate Association. The Ottawa-based group, which represents 100 boards across the country, issued a new forecast for 2009 and predicted sales would fall to 360,900. That would be a 16.9% decline from 2008. Sales last year fell 17.1% from 2007. His group is forecasting a rebound by 2010 and forecasts sales to jump to 9.9%.
Property Wire, Feb 18, 2009

Canadian commercial real estate returns fall to 14 year low – ipd.com – IPD released the 2008 results for the ICREIM-IPD Canada Annual Property Index, which at the end of December 2008 covered C$96.5 billion of commercial real estate. The Index saw a total return for 2008 of just 3.7%, down sharply from the 15.8% recorded in 2007, and the lowest level since 1994. Despite the softening of investment yields, direct property still outperformed equities, which fell by -31.4% according to the MSCI Canada Index, and REITs which returned -39.3% according to the FTSE EPRA/NAREIT Index.
Canada News Wire, Feb 20, 2009

Commercial market rough, but not like the 90s – cbre.com – The commercial real estate market is in rougher shape than it was a year ago but this is nothing compared to the early 90s, according to CB Richard Eliis Ltd. The real estate company’s annual market outlook was heavy on comparisons to the crash that occurred last decade. Last decade developers were getting 7% yields but were borrowing at 11% — a crash was inevitable. For starters, he pointed out, interest rates are much lower. But there is also less supply of office space coming on stream.
Calgary Herald, Feb 25, 2009

Commercial property outlook bleak – Downtown Toronto and Calgary are the two Canadian cities that face the most “significant challenges” with millions of square feet of office space set to be developed during one of the worst global economic downturns, commercial real estate executives heard at an industry meeting yesterday. “Toronto class A development will hit 4.6 million square feet of development at a time of weakening demand,” John O’Bryan, vice-chair of realty firm CB Richard Ellis, said in a market forecast in Toronto.
Toronto Star, Feb 26, 2009

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Commercial Real Estate News Toronto – 1/2 February 2009

First Capital Realty to acquire units in Allied Property REIT – firstcapitalrealty.ca – FCR-T – First Capital Realty announced that it has agreed to acquire from institutional investors an aggregate of 1,766,800 units of Allied Properties REIT in exchange for common shares of First Capital Realty at a ratio of 0.81 First Capital Realty shares per Unit. Based on the five day volume weighted average price of First Capital Realtys shares on February 6, 2009, this equates to $14.23 per Unit.
First Capital Realty News Release, Feb 09, 2009 RTTNews.com, Feb 09, 2009 Canada News Wire, Feb 09, 2009

Allied Properties REIT responds to unsolicited proposal – alliedpropertiesreit.com – AP.UN-T – After reviewing the proposal from First Capital Realty and its implications for Allied’s business and unitholders, the Trustees have decided not to enter into discussions with First Capital, as they disagree with the stated benefits of the proposal and do not consider a combination to be in the best interests of Allied unitholders. Allied has become a large, durable urban-office franchise and intends to remain focused on the consolidation of Class I and like office properties in major urban markets.
Allied Property REIT News Release, Feb 11, 2009

First Capital may bid for Allied Properties REIT – firstcapitalrealty.ca – FCR-T – First Capital Realty Corp., the country’s largest community shopping centre owner, has taken a major position in office landlord Allied Properties REIT and has not ruled out a takeover. Toronto-based First Capital’s interest in the office properties, which are made up of small buildings, is focused on gaining access to Allied’s numerous ground floor retail operations in dense urban centres — in particular Toronto’s lucrative downtown.
Financial Post, Feb 09, 2009

Three Toronto Real Estate Brokerages Being Investigated – Over the past couple of months the Real Estate Council of Ontario (RECO) has issued a freeze order, freezing the accounts of three Toronto real estate brokerages. A list of the brokerages can be found on RECO’s website. When a real estate brokerage is representing a seller, they are typically responsible for holding the purchaser’s deposit in their Real Estate Trust Account until closing. RECO regularly audits brokerages to ensure that they are operating in accordance with REBBA.
MoveSmartly.com, Feb 09, 2009 CBC.ca, Feb 09, 2009 Toronto Star, Feb 09, 2009

With Federal funds work on Toronto Union Station to begin – Construction hoarding goes up at Union Station on Monday, a sure sign of life for the city’s long-desired facelift for the key transportation hub. Also coming to life – and not a moment too soon for Toronto – is a surge of federal government interest as a major financial partner, not the bit player once imagined, in the renewal. Mayor David Miller, thrilled at Ottawa’s freshly minted enthusiasm, if not about the likely process for flowing funds, says the city is moving ahead, rather than wait for a dollar figure for the federal contribution.
Globe and Mail, Feb 08, 2009

Canada’s commercial construction outlook dims – It is clear, based on a number of key indicators, that the short-term outlook for commercial construction in Canada has deteriorated over the past six months. First, office-based employment for the country as a whole has stagnated, dropping by 23,000 jobs since last summer. Second, according to Cushman & Wakefield LePage, the office vacancy rate for the country as a whole has increased from 5.9% in third-quarter 2008 to 6.1% in fourth-quarter 2008.
Daily Commercial News, Feb 11, 2009

CB Richard Ellis quarterly net income falls 94.7% – cbre.com – CB Richard Ellis Group Inc. one of the world’s largest commercial real estate services firms, said its quarterly net income fell 94.7 percent, but it beat Wall Street’s outlook, sending its shares up 11 percent. Fourth-quarter net income fell to $6.5 million, or 3 cents per share, from $122.4 million, or 54 cents per share, in the year-earlier quarter, the company said on Tuesday. Those results do not include noncash goodwill and other intangible asset impairments.
Reuters.com, Feb 11, 2009

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Tips for Commercial Real Estate and Start-Up Entrepenuers – Toronto

I have been helping a lot start up companies these days.  It seems like there many of them are building the business they have always dreamed of if they find themselves out of work.

Here are a few suggestions if you are looking for small commercial office space in Toronto:

1) Although they can be expensive, sometimes the best solution is a business center.  They offer great flexibility and a short term (even month to month – most landlords require a 3 year lease).  They can also provide for easy expansion.
SOS Realty – Business center solutions across Toronto
For a full list of business centers in Toronto call us – 416-992-9869.

2)  If you are serious about starting a new business and are able to commit to a 3 year term, give yourself at least 3 or 4 months to find the right solution and recognize that start up costs are usually underestimated. Everything from furniture to computer systems can really add up.  If you need some help we offer great referrals on used furniture, office insurance and IT/Phone companies that can come in and have you up and running quickly.

3) Another solution you may like to investigate would be a shared space scenario.  Here is a link to a few out there.  If you have too much space and are looking to rent offices with another company to help on rental costs E-mail Me!.  We can also talk about some free advertising on this site?!

4)  Don’t expect most agents to work hard for you if you require less than 1,000 square feet, it’s just a reality.  Unfortunately most agents do not work for start ups as there is not much money in it.  That’s one of the many things that sets me apart.  I consider commercial real estate a relationship business.  I’m not out for the quick deal but for the long haul.  Treat me how you would like to be treated and we will get along great.  I want to be there now so when you need the bigger space in the future I’m the first one you call!  Its always great to have a trusting relationship with an agent, particularly when the quick project / short term requirements pop up!

Hope this advice helps.  Good luck on your search!

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LEED Toronto

Very cool post on Blogto.com, a site I follow regularly.

As both the commercial and real estate industry continue to get battered by the ongoing economic downturn, a number of analysts and economists are setting their sights on LEED certified buildings. And now, the city is joining in.

A motion by Councillor Cesar Palacio, Ward 17, is calling on the city to promote LEED certified buildings. In the motion, Palacio says, “Toronto does not have the authority to compel developers to comply with the LEED standard, but does have the ability to offer very valuable incentives to do so.”

He recommends offering reasonable tax incentives to encourage and promote LEED-designed buildings in the city. But he says the city could go even further and allow LEED-certified buildings to enjoy a property tax exemption for a number of years, adding that the rule would apply to any new buildings built or retrofitted to a LEED standard.

Currently Toronto has nine buildings with LEED certification (one more than we did in May of 2008, when we had eight).

For those readers not totally sold by the environmental movement – Palacio’s motion may also make economic sense for the city. A report by CoStar, a commercial real estate information company, found that LEED-certified commercial buildings sell for 67 percent more and bring in average rents that were 36 percent higher than non-certified buildings. And another report from McGraw Hill Construction shows that in spite of the downturn in the real estate market, the value of green construction INCREASED from $10 billion (all figures U.S.) in 2005 to almost $50 billion in 2008. It also suggests that by 2013, green construction may be worth as much as $150 billion.

The election of Barack Obama in the US may increase the worth and investment opportunities of the eco-economy, as he pledged to create 5 million “green collared” jobs. Maybe the city, provincial, and federal governments in Canada will see fit to follow.

http://www.blogto.com/city/2009/01/looking_to_leed_toronto/

ROFO.com

I was recently catching up with Alan Bernier, CEO of Rofo.com in San Francisco. The company is taking a unique approach to improving the commercial real estate process for smaller tenants.

They launched a beta version earlier this summer with commercial listings content throughout 100 cities in the Bay Area.  They’ve also created an articles section covering many topics related to the leasing and move process for a business.  There’s also a social networking aspect of the site where tenants can easily connect with service providers through the site.

Right now visitors to the site can easily do searches for San Francisco for example and also post their own office space needs to receive new space ideas from the broker and landlord community.  Users can read property reviews or provide their own, compare their rent with the Rofometer and connect with others who can share valuable information.  Rofo brings in photos, maps and lists neighborhood amenities as well as provides reviews for each listing to help Rofo members evaluate spaces.  Yelp reviews are also integrated into each search listing to provide even more in-depth information.

Rofo expanded its service to all of Northern California recently and is eyeing Southern California in the coming months.

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Top 10 Tips for Office Leasing

Here’s a list of commercial real estate tips I have used in the past with clients… FYI – number 10 is outdated as vacancy rates are currently very LOW!

1. Commencing the process too late

By failing to plan well in advance, you can find yourself in a poor negotiating position – the shorter the lead time, the fewer the options with which to leverage negotiations. Ideally, you should aim to have three to four suitable options on your shortlist, well ahead of your lease expiry.

2. Not having a clear real estate brief

It is imperative that you understand your company’s real estate needs, not just today but for the next few years. No doubt, you expect your business to evolve over this period. Ensure that your long term needs are being considered at the same time as your immediate requirements.

3. Focusing entirely on financial costs

Too often, business accommodation decisions are made based on bottom line costs. Consider the costs associated with attracting and retaining good staff as property costs are typically a distant number two to HR costs. If you lost 10% of your staff in a move, how much would it cost your business? Does your property profile send the right message to clients?

4. Failing to appoint a project leader

A single point of contact will ensure the right message gets out to the market and save time for all involved. Input from your Finance, HR and IT departments, plus the advice of lawyers, architects and project managers is required. Appoint someone in your organization to take control of this process. Ideally, this individual is not only well organized and a good communicator but has authority to sign off on major project stages.

5. Incorrectly estimating the space required

Workplace trends are revolutionizing the way people work and the space required to set up an office. Only begin to inspect premises once you have assessed your space requirements with the assistance of a workspace strategist/designer. This will ensure that you’re looking for the right amount of space and will allow you to drive cultural change via new ideas and advancements.

6. Not allowing time to make-good

Should you decide to move, you will probably be required to “make-good” on your current premises. This simply means returning your premises to its original condition. This can take considerable time and is a commitment often underestimated or overlooked by tenants. You don’t want to be paying a premium post-expiry rent while builders complete your make-good obligations.

7. Acting too slowly to secure the preferred option

Tenants often invest a considerable amount of time and effort going through the process of selecting a suitable accommodation option. Once your decision is made however, it is imperative to “lock it away” quickly. Landlords will continue to seek tenants for the space until a lease is signed and a bank guarantee secured.

8. Not conducting a test-fit

No two office buildings are the same. It is not possible to know how a particular option will accommodate your business until a “testfit” is conducted. If one premises can accommodate more staff than another in an equivalent amount of space, then your total rental cost is lowered. You won’t know how the options compare until you get a professional space planning perspective for both premises.

9. Failing to allow for growth space

You’re not in business to shrink. Most tenants expect their business to grow over the next five to seven years (equating to the approximate length of your lease). Flexible lease terms and a realistic space budget will give you the latitude you need to expand.

10. Not appreciating that the best opportunities are not always currently available

Though there are currently high vacancy rates in most major centres, there are sectors of every market that are very tight. If you require something very particular, you’ll have to allow plenty of time and be prepared to be very flexible in how the deal is put together. In some cases, you may have to be prepared to take on the risk of subleasing your own space or extend your current location to wait for a tenant to vacate that perfect location. A good property consultant will know what is becoming available and when – well before it is.

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