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REALpac CEO Says Supply is Tight in Canada

12/09/2013 | By Sarah Borchersen-Keto

Michael Brooks, who’s returning to the position of CEO with the Real Property Association of Canada (REALpac), joined REIT.com for a video interview at REITWorld 2013: NAREIT’s Annual Convention for All Things REIT at the San Francisco Marriott Marquis.

Brooks, who takes over as REALpac CEO at the beginning of 2014, was asked about the major issues currently facing the Canadian commercial real estate market.  He observed that a shortage of supply persists in Canada: “There’s still a lot of money chasing most product types in most metropolitan areas, so people who want to grow their portfolios will have a difficult time winning all of the bids that they may be involved in.”

Asked whether tight supply conditions are likely to ease, Brooks said the outlook depends on the direction of long-term interest rates in Canada. He mentioned that supply is very constrained both on the regulatory and lending side. Owners and developers are also adding to the low supply by their general unwillingness to build on spec, he added.

“There’s a fair amount of discipline on the supply side that will prevent us from oversupplying a market, and so, hence, we tend to undersupply,” Brooks said.

Brooks was also questioned on the medium- to long-term issues he will face in his second stint as CEO. He replied that a lot of time will likely be spent on the operations side of REALpac’s real estate company businesses.

Brooks observed that significant change has occurred at the city level in Canada as densification has resulted in more mixed-use projects. Many REALpac members, Brooks noted, are organized vertically, concentrating on specific sectors such as office or retail.  However, the trend in cities is for those separate uses to be combined on a single site. The result, according to Brooks, is that REALpac companies have had to add new disciplines and extra staff to deal with these changes. “Equipping our members to deal with that new reality will be important,” he said.

Energy and sustainability issues will also continue be important, Brooks added. “I think all of our members will have to keep going up that learning curve going forward,” he said.

Meanwhile, Brooks noted that Canadian REITs have recently begun to look abroad and are following the examples set by pension funds in becoming more global in focus.