Friday, September 25, 2009

Canadian Real Estate Executive Market Condition and Employment Survey

Rutherford International’s will be distributing the results of its Market Condition and Employment Survey - Third Quarter 2009 through its newsletter next week. To receive a copy of the complete survey, Rutherford International blog readers should go to our Home Page at http://www.rutherfordinternational.com and register on our Newsletter link, or via the REmatrix.com Commercial Real Estate Portal at http://www.rematrix.com/newsletter/rematrixnewlet-registration.html

The survey was designed to provide a third quarter snapshot of senior executive opinion on the state of their industry during the latter month of July and early August 2009. The questionnaire was directed to the top and first-tier executives within the Owner/Developer/Lender/Service sectors of Canada’s commercial real estate industry.

Segmented by sector, opinion was measured on the following:
a) Fundamentals for acquisition, disposition and financing for the next two years;
b) Employment demand within the industry in 2010;
c) Functional changes likely to take place within respondents’ organizations over 2010;
d) Critical human resource priorities within respondents’ organizations;
e) Economic factors shaping their opinion.

Two survey reports are available. First, a comprehensive sector-based analysis for respondents and second, a general overview for the industry at large. Some of the questions and excerpts of our analysis are highlighted below.

Excerpts:1. Fundamentals for acquisition and disposition in 2009 through to 2011/04.The results suggest the vendors’ lack of market cycle certainty in 2010 with the pricing gap between ‘buyer’ and ‘vendor’ expectations continuing well into 2010. "There is a perception that lenders are afraid to foreclose, which is keeping sellers hopes high."

2. Fundamentals for financing and refinancing in 2009 through to 2011/04.Lender" respondents were more inclined to choose "Favorable" for both ‘financing’ and ‘refinancing’ in 2009 and 2010; however they were less sure of conditions in 2011. We believe their uncertainty for 2011 is due to ....

3. Based on current economic climate, employment opportunities in the commercial real estate sector will:
Be limited to modest growth in leasing, accounting, asset and property management. Vacancy will be primarily due to normal attrition and voluntary turnover with general, employment opportunities within the industry remaining "static" well into 2010. If recovery is in the offing, it will be a "jobless" recovery. The impact of retirements, "geared back" or semi-retirement life/work styles, and the incoming "baby boom echo" or "double cohort" offspring entering lower middle management positions should be evident by 2012.

E: Key Findings – By Sector with Commentary
(This information is available in the survey results reserved for respondents.)

F:Commentary Excerpts
"Appraising Back to the Future"In terms of acquisition and disposition, aggressive valuations have been blamed for contributing to the variance between "Buyers" and "Vendors."

"I’ll Have a Bromo with that Denominator Effect"
It is also assumed that an increase in the equity markets will result in ameliorating the ‘denominator effect’ leading to a return of institutional capital to the real estate market for Class AAA and AA assets.

"Sitting on a Picket Fence can Hurt!"It’s a bit of high stakes game that’s being played in some shops – ante up with house stakes – ‘Check’ when able – and enter 2010 with a plan to make fine adjustments and seek quick opportunity plays; but in general – mark time until the industry completes its de-leveraging.

"Retaining your Walking Assets"The predicted demographic labour supply bust, which all industry and government sectors are currently experiencing – and self evident by respondents concerns over ....

"Forward to the Future"The worrisome trend that emerged from the analysis is that respondents appear to place little importance .....

"Peter’s Principle Exposed"We purposely referenced the term "effective" to emphasize a human resource reality that generally becomes evident in recessionary markets after a long wave rise in the economy.

"Economic Recovery and Generational Knowledge Transfer"Good managers are the product of acquiring "tacit" knowledge, ....

In general, anyone under 45 today wasn’t in a position of management and leadership during the last major recession .....

"Best Case – Leveraging Brand & Grabbing Talent on Waivers"Companies that prepare for recovery ......

"Worst Case - A Dead Cat Bounce"Lenders are less sure about the fundamentals for real estate in 2011 then that of the Broker and Owner respondents....

It would seem to us that the ability to think laterally, to problem solve creatively; to sort out the winners and losers when identifying tenants for "blend & extend" negotiations (or to inoculate an asset’s mix with a good balance of recession and high interest rate resistant tenants); or to squeeze out additional "Net Operating Income" or negotiate financial workouts will be long-term and valued skills in our industry going forward.