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Emerging Trends in Real Estate 2017
Playing for Advantage, Guarding the Flank
ULI/PwC Annual Trends Event
November 4, 2016
Emerging Trends in Real Estate 2017
• Emerging Trends is the industry’s “most predictive forecast”
• 38th annual outlook - 10th anniversary for Canada outlook
• Based on over 500 interviews and 1,500 surveys of industry leaders - 115 interviews and 246 in Canada
• Sponsored jointly by PwC and the Urban Land Institute
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Market Sentiment
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Profitability expectations
1.00%
24.70%
74.30%
2017
abysmal to poor fair good to excellent
1.90%
16.80%
81.30%
US 2017
abysmal to poor fair good to excellent
4 Emerging Trends in Real Estate 2017 survey
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Business prospects
1.0 2.0 3.0 4.0 5.0
Real estate security investors
Real estate lenders
Real estate services
Real estate investment managers/advisors
Commercial real estate developers
Real estate equity investors
Residential builders/developers
Real estate owners
2017 2016
5
1 2 3 4 5 Abysmal Poor Fair Good Excellent
Emerging Trends in Real Estate 2017 survey
How would you describe the 2017 real estate market? Here is what 900 respondents said
6 Emerging Trends in Real Estate 2017
Competitive
Cautious
Growing Overheated Opportunity
Balanced
Neutral Frenzy
Troublesome
Measured Uncertain
Risky Confusing
Treacherous Content
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Underwriting criteria adjust to the environment
17.6%
52.2%
30.2%
43.8%
47.3%
8.9%
0% 10% 20% 30% 40% 50% 60%
More rigorous
Remain the same
Less rigorous
Debt
2017 2016
16.5%
52.8%
30.7%
26.7%
62.3%
11.0%
0% 10% 20% 30% 40% 50% 60% 70%
More rigorous
Remain the same
Less rigorous
Equity
2017 2016
7 Emerging Trends in Real Estate 2017
Emerging Trends
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Trends reflect market sentiment
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Ongoing Oil and Gas Woes
Technology Disruptors Hold a Competitive Advantage
Affordability on the Decline
Waiting for Deals
Global Uncertainties
Weigh on the Mind
Renting for the Long Term
Building communities
2017 expected best bets
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Urban mixed-use developments
Emerging Trends in Real Estate 2017
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Affordability on the decline
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0
Quebec City
Winnipeg
Halifax
Ottawa
Calgary
Edmonton
Saskatoon
Montreal
Canada
Toronto
Vancouver
2016 Forecast price-to-income ratio
11 TD Economics, Regional Housing Report – August 2016
Renting for the long term
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026 2031 2036
Renters Owners
12 Canada Mortgage and Housing Corporation
000s of households
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2017 expected best bets
13
Purpose-built multifamily rentals
Emerging Trends in Real Estate 2017
Technology disruptors hold a competitive advantage
3.49
3.61
3.82
3.89
3.98
3.99
4.20
1 2 3 4 5
Flexibility
Proximity to customers
Connectivity
Labor Cost
Technology readiness
Rent
Labor availability
Impact on location decision
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1 2 3 4 5
Not important Limited importance Average importance Important Great importance
Emerging Trends in Real Estate 2017 survey
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Global uncertainties weigh on the mind
2.71
3.32
3.66
3.66
3.7
3.95
4.32
1 2 3 4 5
Sharing economy
Global economic Growth
Taxes and regulation
Income inequality
Macroeconomic issues
Interest rates and cost of capital
Job and income growth
Economic/financial issues
2.77
2.81
3.20
3.33
3.48
3.54
3.72
1 2 3 4 5
Political landscape
Education (cost and availability)
Immigration
Government budget issues (local/state/
federal)
Qualified labor availability
Social inequality
Terrorism/war /epidemics
Social/political issues
2.47
2.63
2.99
3.2
3.87
3.91
3.99
4.3
1 2 3 4 5
Extreme weather
Wellness health features
Water regulation
Sustainability
Housing cost and availability
Infrastructure
Capital availability
Land and construction costs
Real estate /development issues
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1 2 3 4 5 No
importance Little
importance Moderate
importance Considerable importance
Great importance
Ongoing oil and gas woes
154.94 173.59 310.83 375.01
450.50 532.84 201.06
236.21
238.44 253.94
267.23
282.12
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
1990 2000 2012 2020 (f) 2030 (f) 2040 (f)
World energy consumption, 1990-2040 (quadrillion Btu)
Non-OECD OECD
Energy consumption will rebound, but will prices?
16 US Energy Information Administration
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Waiting for deals
11%
38%
52%
14%
62%
23%
0% 10% 20% 30% 40% 50% 60% 70%
Undersupplied
In balance
Oversupplied
Debt capital for acquisition
2017 2016
6%
26%
68%
11%
31%
59%
0% 20% 40% 60% 80%
Undersupplied
In balance
Oversupplied
Equity capital for investment
2017 2016
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Property Type Outlook
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Investment outlook
3.22
3.28
3.45
3.34
3.47
3.52
3.08
3.17
3.23
3.33
3.38
3.49
1 2 2 3 3 4 4 5 5
Retail
Office
Hotels
Single family
Multifamily
Industrial/distribution
Major sectors
2017 2016
3.37
3.60
3.70
3.71
3.73
1 2 3 4 5
Midscale hotels
Medical Office
Urban/high street retail
Age restricted housing/Multifamily
Fulfillment
Top subsectors for 2017
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Development outlook
2.76
2.98
3.31
3.47
3.49
3.65
2.56
2.85
2.89
3.23
3.32
3.57
1 2 3 4 5
Retail
Office
Hotels
Single family
Multifamily
Industrial/distribution
Major sectors
2017 2016
3.00
3.50
3.71
3.71
3.96
1 2 3 4 5
Economy hotels
Medical Office
Age restricted housing/Multifamily
Urban/high street retail
Warehouse
Top subsectors for 2017
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2017 expected best bets
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Industrial property
Senior housing/retirement homes
Emerging Trends in Real Estate 2017
Markets to watch
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Markets to watch 2017 markets to watch
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2012 2013 2014 2015 2016 2017
Vancouver 2 4 4 4 1 1
Toronto 1 3 5 3 2 2
Montreal 7 5 9 6 3 3
Ottawa 5 6 6 5 4 4
Saskatoon 6 7 3 8 5 5
Winnipeg 9 8 7 7 6 6
Halifax 8 9 8 9 8 7
Edmonton 4 2 2 2 7 8
Calgary 3 1 1 1 9 9
Emerging Trends in Real Estate 2017 survey
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
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