Investors keen on commercial property

Vancouver's commercial real-estate sector is considered a great bet for investment, according to a survey released Tuesday by Colliers International.

The survey, which focuses on office, industrial and retail properties, also found that while Canadian institutional and private real-estate investors believe the market hasn't yet reached its lowest point, they're cautiously optimistic that a fast recovery will soon take shape.

While Colliers International's 2010 Global Investor Sentiment Survey found that Canadian real-estate investors favour Toronto as the top property investment city in the country, Vancouver and Montreal came in second.

"It's due to the fact that this market, largely because of geographic constraints, has always been able to maintain a reasonable balance between demand and supply of space," Kirk Kuester, managing director of Colliers International in Vancouver, said in an interview. "That translates into cash-flow security, which is what investors want.

"Vancouver is challenged by the ALR, the border, the mountains and the ocean, so it's challenged in terms of adding supply of real estate. [Investors] are not at risk of a market becoming oversupplied very quickly."

The survey found that 85 per cent of Canadian respondents who plan to acquire properties favour the domestic market, with Toronto coming in first at 27.8 per cent and Vancouver and Montreal tied for second at 16.7 per cent each. For Edmonton and Calgary it was 14.8 and 11.1 per cent respectively.

Kuester, who said Toronto came out on top because of its size, cited immigration as another reason for Vancouver's popularity with investors. "We have an amazing amount of immigrat-ion to this market, both domestic and international. That adds to the population and demand.

"And if [investors] need to divest, there will be a lineup of people in most instances."

The survey of more than 240 major real-estate investors around the world, including 26 large Canadian institutional property investors, also found that two-thirds of investors plan to expand acquisitions over the next year with a strong appetite for domestic properties.

Cameron Muir, director of the centre for urban economics and real estate at the University of B.C.'s Sauder School of Business, said in an interview that the survey bodes well for Vancouver.

"It says Vancouver, not surprisingly, is a strong investment market in Canada.

"But the most interesting thing is that Calgary isn't in the top three. In the commercial markets, there's a lot of concern for the vacancy market in Calgary."

Milton Lamb, chair, national investment team, with Colliers International in Canada, said in a statement: "On a risk adjusted basis, Canadian investors still see Canada as a preferred investment destination that offers a higher return on investment compared to the U.S., in part because of the turmoil that still lingers south of the border."

The survey concluded that Canadian investors are not just interested in buying opportunities, with 54 per cent looking to sell under-performing or non-core assets.

The survey found that 73 per cent of Canadian investors feel access to capital became easier over the past year, with most expecting that to continue but with higher borrowing costs; 50 per cent of Canadian investors would pay a premium for sustainable buildings; and rents are expected to decline and hit bottom at the beginning of 2011.

"Investors keen on Vancouver commercial property" prepared by Brian Morton/Vancouver Sun)