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20161110 1 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 - 10 th 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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2016-­‐11-­‐10  

1  

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

2016-­‐11-­‐10  

2  

Market Sentiment

3

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

2016-­‐11-­‐10  

3  

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

2016-­‐11-­‐10  

4  

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

8

2016-­‐11-­‐10  

5  

Trends reflect market sentiment

9

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

10

Urban mixed-use developments

Emerging Trends in Real Estate 2017

2016-­‐11-­‐10  

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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

2016-­‐11-­‐10  

7  

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

14

1 2 3 4 5

Not important Limited importance Average importance Important Great importance

Emerging Trends in Real Estate 2017 survey

2016-­‐11-­‐10  

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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

15 Emerging Trends in Real Estate 2017 survey

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

2016-­‐11-­‐10  

9  

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

17 Emerging Trends in Real Estate 2017 survey

Property Type Outlook

18

2016-­‐11-­‐10  

10  

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

19 Emerging Trends in Real Estate 2017 survey

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

20 Emerging Trends in Real Estate 2017 survey

2016-­‐11-­‐10  

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2017 expected best bets

21

Industrial property

Senior housing/retirement homes

Emerging Trends in Real Estate 2017

Markets to watch

22

2016-­‐11-­‐10  

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Markets to watch 2017 markets to watch

23

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

24

2016-­‐11-­‐10  

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© 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 www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

Thank you!


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