Emerging Trends in Real Estate 2017 Playing for Advantage, Guarding the Flank. ULI/PwC Annual Real Estate Outlook November 16, 2016

Transcription

1 Emerging Trends in Real Estate 2017 Playing for Advantage, Guarding the Flank ULI/PwC Annual Real Estate Outlook November 16, 2016

2 Emerging Trends in Real Estate 2017 Emerging Trends is the industry s most predictive forecast 38th annual outlook - 10 th anniversary for Canada outlook Based on over 500 interviews and 1,500 surveys of industry leaders interviews and 246 in Canada Sponsored jointly by PwC and the Urban Land Institute

3 Market Sentiment 3

4 Profitability expectations % US % 24.70% 16.80% 74.30% 81.30% abysmal to poor fair good to excellent abysmal to poor fair good to excellent Emerging Trends in Real Estate 2017 survey 4

5 Business prospects Abysmal Poor Fair Good Excellent Real estate owners Residential builders/developers Real estate equity investors Commercial real estate developers Real estate investment managers/advisors Real estate services Real estate lenders Real estate security investors Emerging Trends in Real Estate 2017 survey 5

6 How would you describe the 2017 real estate market? Here is what 900 respondents said Measured Treacherous Uncertain Content Competitive Troublesome Opportunity Growing Risky Confusing Cautious Frenzy Neutral Overheated Emerging Trends in Real Estate

7 Underwriting criteria adjust to the environment Debt Equity Less rigorous 8.9% 30.2% Less rigorous 11.0% 30.7% Remain the same 47.3% 52.2% Remain the same 62.3% 52.8% More rigorous 43.8% 17.6% More rigorous 26.7% 16.5% 0% 10% 20% 30% 40% 50% 60% 0% 20% 40% 60% 80% Emerging Trends in Real Estate

8 Emerging Trends 8

9 Trends reflect market sentiment Affordability on the Decline Technology Disruptors Hold a Competitive Advantage Ongoing Oil and Gas Woes More than mixed use, it s about building communities Renting for the Long Term Global Uncertainties Weigh on the Mind Waiting for Deals 9

10 More than mixed use, it s about building communities ü Focus on mixed use communities rather than stand alone mixed use builidings ü Tenants are demanding dynamic neighborhoods that combine residential, retail, commercial and public spaces ü Can lead to partnerships between experts in different components 10

11 2017 expected best bets Urban mixed-use developments Emerging Trends in Real Estate

12 Affordability on the decline 2016 Forecast price-to-income ratio Vancouver Toronto Canada Montreal Saskatoon Edmonton Calgary Ottawa Halifax Winnipeg Quebec City TD Economics, Regional Housing Report August

13 Renting for the long term 000s of households 14,000 12,000 10,000 8,000 6,000 4,000 2, Renters Owners Canada Mortgage and Housing Corporation 13

14 2017 expected best bets Purpose-built multifamily rentals Emerging Trends in Real Estate

15 Technology disruptors hold a competitive advantage Not important Limited importance Average importance Important Great importance Impact on location decision Labor availability Rent Technology readiness Labor Cost Connectivity Proximity to customers Flexibility Emerging Trends in Real Estate 2017 survey 15

16 Global uncertainties weigh on the mind No importance Little importance Moderate importance Considerable importance Great importance Economic/financial issues Job and income growth Interest rates and cost of capital Macroeconomic issues Income inequality Taxes and regulation Global economic Growth Social/political issues Terrorism/war / epidemics Social inequality Qualified labor availability Government budget issues (local/state/ Immigration Education (cost and availability) Real estate / development issues Land and construction costs Capital availability Infrastructure Housing cost and availability Sustainability Water regulation Wellness health features Sharing economy 2.71 Political landscape 2.77 Extreme weather Emerging Trends in Real Estate 2017 survey 16

17 Ongoing oil and gas woes Energy consumption will rebound, but will prices? World energy consumption, (quadrillion Btu) (f) 2030 (f) 2040 (f) Non-OECD OECD US Energy Information Administration 17

18 Waiting for deals Debt capital for acquisition Equity capital for investment Oversupplied 23% 52% Oversupplied 59% 68% In balance 62% 38% In balance 31% 26% Undersupplied 14% 11% Undersupplied 11% 6% 0% 20% 40% 60% 80% 0% 20% 40% 60% 80% Emerging Trends in Real Estate 2017 survey 18

19 Property Type Outlook 19

20 Investment outlook Abysmal Poor Fair Good Excellent Major sectors Top subsectors for 2017 Industrial/distribution Fulfillment 3.73 Multifamily Single family Age restricted housing/ Multifamily 3.71 Hotels Urban/high street retail 3.70 Office Medical Office 3.60 Retail Midscale hotels Emerging Trends in Real Estate 2017 survey 20

21 Development outlook Abysmal Poor Fair Good Excellent Major sectors Top subsectors for 2017 Industrial/distribution Warehouse 3.96 Multifamily Single family Urban/high street retail 3.71 Hotels Age restricted housing/ Multifamily 3.71 Office Medical Office 3.50 Retail Economy hotels Emerging Trends in Real Estate 2017 survey 21

22 2017 expected best bets Industrial property Senior housing/ retirement homes Emerging Trends in Real Estate

23 Markets to watch 23

24 Markets to watch 2017 markets to watch Vancouver Toronto Montreal Ottawa Saskatoon Winnipeg Halifax Edmonton Calgary Emerging Trends in Real Estate 2017 survey 24

25 2017 expected best bets Industrial property Purpose-built multifamily rentals Urban mixed-use developments Senior housing/ retirement homes Emerging Trends in Real Estate

26 2017 US Emerging Trends Summary Top trends Ø Are real estate cycles moderating? Ø Optionality Ø Housing affordability Ø Shortage of construction labor Ø Civic minded development Ø Technology enhancements Markets & Property Sectors Ø 18-hour cities continue to attract interest Ø Focus continues to move toward neighborhoods Ø Niche subsectors attract more interest as investors look for yield Expected best bets Ø Providing capital in the middle of the stack Ø Take advantage of adjacency Ø Implement new construction technology Ø Solve the last mile e-commerce equation 26

27 Thank you! 2016 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.