CanEquity Blog on Commercial Mortgages

As more Canadians heed the warning against over-borrowing in the face of low interest and mortgage rates, big banks are beginning to feel the pinch.

Over the last few years, as the housing market expanded and more people took out home loans, big banks saw their rate of growth increase considerably. Even through the first quarter of this year, banks enjoyed strong earnings. New regulations governing the Canadian Mortgage and Housing Corporation coupled with dire predictions of a housing bust from ministers and financial executives have curbed consumer borrowing, however, and most of the country's major institutions are expected to report significantly lower earnings during the second quarter.

While activity at the big banks may be tempering due to stricter rules on mortgage insurance from CMHC, secondary lenders and mortgage brokers may see their market share heating up. A recent market trend analysis from the Financial Post indicated some of the big banks may be getting out of the mortgage broker game as lending restrictions tighten. This could be good news for Canadians hoping to get a home loan without the hassle of dealing with a big bank.

Canada's housing market has been on an upward trajectory for the past few years, with no real end in sight. In Ottawa, bank leaders and financial regulators are at loggerheads over the best course to take to avoid a serious meltdown. Among commercial real estate professionals, however, attitudes and outlooks are good.

The results of the Second Quarter 2012 Canadian Real Estate Sentiment Survey from the Real Property Association of Canada indicated most commercial real estate leaders see continued growth in the sector over the coming year, which will plateau sometime around the fourth quarter. The Overall Real Estate Sentiment Index climbed two points in the second quarter to land at 63 out of a possible 100. Anything over 50 signifies a positive trend, anything below 50 a negative trend. This marks the 11th consecutive survey in which results reflect a positive outlook. Continue reading »

As the American economy continues its climb out of recession, more Canadian financial experts are gaining confidence in their southern neighbors. Still, any slips stateside could carry significant consequences for Canada.

Canadian optimism in the U.S. market was recently measured by the Canadian Institute of Chartered Accountants, along with the Royal Bank of Canada. The agencies found just 22 percent of chartered accountants feel the United States is likely to fall back into a recession, down from nearly two thirds over the previous two quarters. Positive views on the Canadian economy rose during that time as well, with 32 percent now reporting confidence at home.

Still, fears abound. Roughly 63 percent say continued economic calamity in America would negatively impact their business, and 43 percent see the United States as the biggest hurdle to continued Canadian growth. Continue reading »

A small piece of land in Toronto may be the focal point of Canada's housing bubble, as the site being used as a parking lot and police impound near Lake Ontario will soon become a 75-story glass building that will become the nation's third tallest condo tower, according to a recent report from Bloomberg.

The condo tower, Ten York, will add to Toronto's skyscrapers, which have made the city home to the largest number of high rises under construction of any other city in North America and nearly three times as many as New York, the news source stated.

“Condo construction has always been rather prone to boom and bust cycles, and this one seems particularly strong,” Sheryl King, an economist with Bank of America Merrill Lynch in Toronto, told the news source. “Builders seem to overestimate how much demand is going to be out there, and that’s when you tend to see some abrupt pull-back.” Continue reading »

The Toronto Real Estate Board Commercial Division Members recently reported there was a total of 464,008 square feet of total leased commercial space in January 2012.

This is a 41 percent decline from the total square feet of leased commercial space in January 2011. In addition, industrial space made up for 86 percent of of the total square footage leased, which was a 46 percent drop on a year-over-year basis.

"Firms in the GTA industrial sector have a very cautious outlook right now," said Larry Purchase, commercial division chair. "While the prospects for the United States economy are looking more positive, there continues to be substantial concern surrounding economic recession in Europe and what the implications could be for the global economy." Continue reading »

The Bank of Canada recently announced it expects to keep its key lending rate unchanged until March, and some economists say its decision is a stronger sign for home sales than business investment.

According to a Bloomberg report, BoC governor Mark Carney has repeatedly urged Canadian companies to increase investments and productivity, despite acknowledging a weak global economy will slow business growth.

"For the bank to be exhorting businesses to go out there and spend at a time when the bank itself admits the global environment is quite uncertain, I think it's being a bit disingenuous," Mark Chandler, head of fixed-income strategy at Royal Bank's Capital Markets, told the source. Continue reading »

Several financial experts predict Canada's economy will experience limited growth this year, and many businesses appear to agree.

According to the Bank of Canada's quarterly Business Outlook survey, 41 percent of Canadian businesses expect less sales volume during the next 12 months, while 37 percent project a sales increase. The survey demonstrates a shift in confidence among companies, as the results mark the first instance since early 2009 that more businesses were more pessimistic about their immediate future than optimistic.

"Responses to the winter survey suggest that the global economic outlook and concerns about demand continue to weigh on firms’ expectations for business activity," the report said. Continue reading »

Toronto's housing market remained strong in 2011 as prices increased, condo construction skyrocketed and demand remained stable, but the commercial real estate market didn't enjoy nearly the same success.

According to a recent Toronto Real Estate Board report, 3.6 million square feet of commercial space was leased through the Toronto MLS system during the fourth quarter of 2011, a 3.5 percent drop compared to the same period of 2010. Additionally, commercial property sales totaled 209 in the fourth quarter, down 13.6 percent from the previous year.

While commercial real estate demand declined, the amount of industrial space leased rose 8 percent over last year and accounted for 79 percent of all leased space in the fourth quarter. Continue reading »

With global economic uncertainty continuing to influence Canadian businesses' financial decisions, experts predict a reduced demand for office space.

According to a recent Cushman & Wakefield report, office space demand will slow during the first half of next year, however, suburban and central office demand will recharge towards the completion of 2012.

"As the number of deals in progress slows, driven by uncertain global economic news and the related fall in business and consumer confidence, the capacity to meet demand for new space in most major markets will create a serious shortage of central inventory in the second half of 2012 and beyond," says Pierre Bergevin, president and CEO of C&W Canada. Continue reading »

Calgary's economy is booming as job prospects are among Canada's best and the residential housing market remains strong, and a recent study revealed commercial real estate is now skyrocketing.

According to the Calgary Herald, the report by RealNet Canada states there were 90 commercial transactions of more than $1 million in Calgary during the third quarter this year, a 45 percent increase from the previous quarter.

"The increase in transaction activity within the land markets and within the city core points to the Greater Calgary commercial real estate market being poised for a well-balanced growth pattern throughout all asset classes," said Paul Richter, national research manager for RealNet, as reported by the news source. Continue reading »