Fourth Quarter 2010 REALpac / FPL Canadian Real Estate Sentiment Survey

As Canada's most comprehensive measure of senior executives' confidence in the Canadian commercial real estate industry, the Q4 2010 survey captured the thoughts of 55 leading real estate executives, including CEOs, Presidents, Board Members, and other leading executives from a broad set of real estate sectors including owners and asset managers, financial services providers, and building operators and related service providers. Survey respondents represent income producing real estate including office buildings, retail shopping centres, industrial buildings, hotels, multi-family residential (apartment buildings), and seniors residences. This quarterly economic survey serves as a gauge of senior real estate executives' confidence in financial and real estate markets in Canada. The REALpac/FPL Canadian Real Estate Sentiment Survey measures executives' current and future outlook in three areas including overall real estate conditions, real estate asset values, and availability of capital. Three Sentiment Indices comprise the survey including a Current Conditions, Future Conditions and Overall Conditions Index. The "REALpac/FPL Canadian Real Estate Sentiment Survey" is directly comparable to the "Real Estate Roundtable Sentiment Survey" in the U.S. (also conducted by FPL Associates, using an identical methodology).

Topline Findings

The Overall Sentiment Index dropped again slightly as respondent concern about market conditions increased; however, the overall trend is still positive. In regard to the Index itself, anything over a score of "50" indicates a positive trajectory. It's important to note that there are some indexes that measure where you are today, and some that measure trajectory; are things getting better or are things getting worse. The REALpac/FPL index is of the trajectory type. Therefore, anything over "50" is indicating that people think markets are improving. For Canada, the Index weighs in at "67", both for the current conditions and the future conditions, and of course, for the average of the two. What this basically says is that Canada is perceived to be on a relatively stable trajectory in regard to overall market conditions. Respondents think that market conditions are a little better than they were 12 months ago, and they think things are going to be a little better 12 months from now. Market conditions are not getting worse, but they're not really trending up. Respondents are expecting the same modest improvement to continue, and this applies to both the US and Canada. However, the market in Canada has matured a little more than the US. According to Michael Brooks, CEO of REALpac, "There's not as much room for improvement in Canada as there is in the US. The trend is not as steep toward improvement, since we were at a higher level to begin with."

In regard to the perspectives on real estate market conditions, while recovery continues, some worry that fundamentals may not support continued market improvement. There was talk about a "double dip" earlier in the year. However it's worth noting that very few respondents believe that this will happen at this point. As one respondent noted, "there is significant strength in both underlying fundamentals and capital flows across all real estate sectors."

Values for high quality assets continue to trend upwards, though some respondents worry that increases may be unsustainable. A significantly larger group of respondents are starting to see an improvement in prices that we haven't necessarily seen recently. Asset values are perceived to be trending up at a greater rate. One of the things that has come out during the interviews, in both Canada and the US, is the trend toward a bifurcated market, wherein the Class A institutional assets are trading at a significant premium to the B and C's. "People who were observing significant increases in prices are often talking about and perhaps competing for Class A assets", said Brooks.

Debt capital availability continues to be a bright spot for the Canadian market. If one looks at availability of debt one year from now in Canada, the sentiment of respondents reveals a very healthy debt situation. "What we heard, in talking to respondents, was that the debt environment in Canada is healthy and underwriting remains reasonable. The Canadian market is quite healthy and the survey showed that people are expecting it to stay that way, which is a terrific sign", said Jonas Bordo, Senior Director at FPL Advisory Group. The difference between Canada and the US is dramatic. "In the US, we still see enormous room for improvement on the debt side," added Bordo.

Like debt, equity capital is seen as broadly available now, even for smaller, less established players. When the data from one year ago is examined, versus today, there is a sense that things are much better, and looking forward a year, people don't expect too much change and indeed, a modest improvement. What we're seeing is a very healthy equity market in Canada and some may say that it's actually overheating because of the capital access that the REITs have in particular. The same cannot be said about the US debt market.

To download a copy of the report, go to

About the Real Property Association of Canada

REALpac is Canada's premier industry association for investment real property leaders. Our mission is to collectively influence public policy, to educate government and the public, and to ensure stable and beneficial real estate capital and property markets in Canada.

REALpac Members currently own in excess of $150 Billion CAD in real estate assets located in the major centres across Canada. Members include real estate investment trusts, publicly traded and large private companies, banks, brokerages, crown corporations, investment dealers, life companies, lenders, and pension funds. For more information, please visit us at

About FPL Advisory Group

FPL Advisory Group ("FPL") is a family of companies focused on providing highly specialized advisory services to the real estate and related operating and financial services industries. Through our complementary practice areas, we work with our clients to develop the right talent, leadership, structure, and strategies for success in today's intensely competitive marketplace.

FPL is comprised of two primary operating companies that work together to serve a common client base. Ferguson Partners provides executive, director, and professional search services.  FPL Associates provides a range of specialized consulting and finance-related services in the areas of compensation, management consulting, executive onboarding, and succession planning. The firm is headquartered in Chicago and maintains offices in London, New York, San Francisco, and Tokyo. For more information, please visit


Mike Kandil

Mike Kandil

CENTURY 21 Bravo Realty
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