More Real Estate & Related Predictions for 2017

Last week we made a few real estate and related predictions about 2017.  This week we will take a crack at a few more.  So without further ado…

New Construction of Rental Units

With the vacancy rate dropping again last year to a minuscule 2.9%, conditions are ripe for new construction of multi-family units.  Very little has been built in our area since the 70s.  Combine that with some incentives being offered, like no development fees in the downtown core area, and investment is sure to show up.

The Residential Vacancy Rate Flattens Out

After topping out north of 15% back in the recession of 2008-09, the local vacancy rate has continued to plummet in the last 7-8 years all the way to 2.9% in 2016.  As the law of small numbers would dictate, additional improvement will be small from here.  Combine that with an increased number of sales of condos and homes to investors and new construction coming online, the supply of rental units should increase to flatten excess demand.

New Construction Of Industrial Space

The vacancy rate for quality industrial space has really plummeted to near zero levels locally.  Suppliers are worried that they don’t have the floor space to produce enough to meet contracts.  The market might finally be ripe for a wave of new buildings being built.  Increases in rent prices are almost at the point to justify new construction costs for landlords.

Office Shows Modest Improvement But Still Too Much Supply

With the local economy being much improved, demand for office space is getting better everyday.  Having said that, there is still too much supply in the market.  We expect to sop up some of that inventory, but not materially so.

Windsor-Essex Real Estate Market Continues to Get Positive Media Exposure

Last year was the first year where local and national media really started to notice the renaissance going on in our local real estate market.  General inquires for real estate are rolling in everyday.  With continued migration, immigration and a buoyant local economy, things look rosy for 2017 and therefore we should see continued positive media.

There are some more predictions for 2017.  Hopefully we get some of them right!  Do you agree or disagree with any of them?

Dear Santa: Our Real Estate Wish List for 2017

Can you believe it's Christmas this weekend already? Wow, the fall really flew by. Hopefully you are staying warm out there as our area has really gotten an unseasonably cold and snowy start to the winter.  Anyways, in honour of everyone’s favourite present-bearing, cookie-eating jolly fellow, we present our real estate wish list for a prosperous 2017.

Continued Economic Growth
2016 was a great year for our local economy.  A strong economy is the backbone of a healthy real estate market.  Things look primed to continue in 2017 and hopefully that rings true.

Continued Migration To The Windsor Area
Without a doubt, the local real estate market has gotten a boost from retirees moving here for the low real estate prices and warmer climate.  We are also seeing a return of people who went out west (Alberta) for jobs and are returning after our local economy is creating jobs again.  More immigrants are also choosing the area as opposed to the large centres (GTA, Calgary) for the same reasons.  Hopefully this trend continues for 2017 and beyond.

More Industrial Inventory
The industrial market started 2016 very tight and only got tighter as the year went along.  Everyone seems to need more space for the contracts they have and they’ll have to start turning away work due to not having the space to produce.  The area seems ripe now for new construction of industrial buildings.  This ties into our next wish…

More Serviced Industrial Land
Continuing the theme of industrial space shortage, the only way to meet the current demand seems to be to build more buildings.  The problem is we don’t have much in the way of serviced industrial land that is “shovel ready”.  This is a complicated problem that involves city zoning, planning, servicing, etc and needs to be discussed.  Companies could start skipping over the area as a potential destination for their plant due to not being able to get the facilities they need.

Local Employers Successfully Filling More Open Positions
Everyday we deal with business owners.  The most common complaint we hear is, “I can’t find or keep staff”.  Across all industries and all sizes, this seems to be a consistent problem.  This, like the previous wish, is a complicated problem. We need to do a better job producing workers as a city and country that matches the needs of employers.  Some of this could be solved by wish number two, but not entirely.  This isn’t a problem specific to this area but seems to be striking in an area that went through a long period of high unemployment.  The future of our economy depends on this getting figured out.

Well, that does it for our posts for the year.  Hopefully you’ve been good! What’s on your wish list for Santa?

Love Is In The Air - Market Segments Clients Love

With Valentine’s Day just this past weekend, love is definitely in the air. After a weekend of blowing your budget on your significant other, our investor clients are thinking of ways they can reverse some of the damage by making a solid investment.

In honour of Hershey’s favourite holiday, we have a list of some of the market segments our clients are loving in 2016:

1. Industrial – During the downturn of 2008-09, the manufacturing sector was especially hard hit, with several of the large automakers on the brink of bankruptcy. The restructuring that went along with that has brought about the rebound of the last several years. This year we are looking at a record year for auto sales and the roll out of many new cars. This is all translating into super low supply of buildings, increasing rents and the start of a new construction cycle. We see continued upward pressure on prices and rental rates as new construction costs are prohibitive compared to resale in many cases.
2. Multifamily – The demand for yield with today’s near zero percent interest rates has fueled unprecedented demand for multifamily investment properties. This demand has far outstripped supply and prices have rose and cap rates have fallen. With continuing low supply and high demand we see this trend persisting and further downward pressure on cap rates. In our market specifically of Windsor ON, we still have a cap rate discrepancy with larger markets in Canada and we see that continuing to narrow.
3. Retail Plazas – Stable, long life assets such as these have always had plenty of investor interest and with cap rate compression this has increased demand. Cap Rates on Retail Plazas are still significantly higher than multifamily and as such we see a narrowing of this spread as plaza prices continue to rise.
4. Small Turn Key Office Space – Office space units of 1500-2000’ with good existing buildouts are in high demand in our market and landlord’s with these vacancies are sure to benefit. Office tenant’s seem to be doing more with less square footage these days and smaller spaces such as this are more marketable.
5. Townhouses & Condos – With our previous discussion about the aging population, demand from downsizing baby boomer has been buoyant in the townhome & condo market. Millennial buyers have also had a preference to this segment of property. New construction of townhomes have been booming and a new wave of condo construction has begun. We see this trend continuing as demographics continue to support it.

These are the segments being shown the love in our market. Where is the love in yours?

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Russel Lalovich
russel@lalovichrealestate.com
Office: (519) 966-0444
Cell: (519) 995-5620

Growing Trends for 2016 Real Estate - The Low Loonie

In case you haven’t noticed, the Canadian dollar has been spending most the last 2 years dropping like a rock, as oil prices have plunged from over $100/barrel to recently under $30/barrel. The “Loonie” has spent much of the last decade around parity with the US Dollar or a $1.00 exchange rate.

This month the exchange rate has fallen all the way to under $0.70. This has been a painful adjustment for certain participants in the Canadian economy, especially considering the speed of this decline. This currency decline also has ramifications for the Canadian real estate markets, which we expect to see play out in 2016:

1. Canadian assets are on sale to Americans and other international markets. Although Canadian home prices are at all time highs in many markets, they are suddenly a lot cheaper to buyers in stronger currencies. This would seem to indicate strong interest from international investors this year looking to stretch their investment dollars.
2. Canadians investing in American investment properties or vacation properties should slow markedly or even grind to a halt. With the ‘Loonie’s” strength over the last decade, we have seen huge investment south of the border, especially during their real estate market correction in 2007-10. These dollars will surely see some repatriation and investment within Canada should look more attractive domestically, further increasing demand.
3. Material costs for renovations and new home or building construction will increase. Many of the materials used in construction in Canada are imported from the US and these costs will be increasing this year. Expect sticker shock on new construction costs.
4. The Canadian tourism sector should see a good year. Expect Americans to vacation more north of the border with their increased purchasing power. Also expect less Canadians to vacation south of the border and travel more domestically. This will translate into a good year for hotels, resorts, casinos, etc. This effect could be considerably strong in border towns and could also spill down into retail sales from American shoppers.
5. Manufacturing will look more efficient in Canada. We expect the Canadian industrial to benefit from the low “loonie” and increase production. Therefore we see increased absorption in the industrial market and as the vacancy rate really tightens, new construction in the industrial market.

These are some of the effects we expect to see from the lower exchange rate in 2016. What are the effects you are seeing?

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Russel Lalovich
russel@lalovichrealestate.com
Office: (519) 966-0444
Cell: (519) 995-5620

Self Due Diligence - Which Real Estate Is For You?

Industry professionals love to promote the fact that investing in income properties is a legitimate way to wealth creation. It can not only provide an income stream, but capital appreciation as property values grow over time. The types and categories can include – residential (both single & multi –family), commercial buildings/strip centers (retail & office), mixed use (commercial & residential), industrial buildings (production & warehouse types), and even land that generates income (agricultural & solar farm).

As you consider the various categories, you also need to assess the type that not only best fits your objectives but best SUITS YOU. Investment property markets are littered with acquisitions which have ‘gone bad’, often times because the investor did not do sufficient SELF DUE DILIGENCE.

Some key questions to consider include:

• Am I more interested in residential or commercial/ industrial properties?
• Locational / neighbourhood criteria?
• Do you intend to be ‘hands on’, or will you require a property manager?
• Can you accept cash flow/return declines in the operation of the property?
• Are you in a position to re-capitalize a property if circumstances change?
• What are the risk factors which you cannot accept?
• How can you best limit any liability?
• What are the market expectations? The read of the current market?
• Is liquidity an issue if you need to sell quickly?
• Type of financing required and initial cash (downpayment) capability?

Any investment comes with its share of risk and income properties are no different. Good preliminary planning - starts with an honest assessment of YOU, your objectives, capabilities, comfort zone and so on. Once that’s figured out, it’s time to move on to the market in a direction that fits best.

Always looking to network with investors and other professionals in the broker community. We’d welcome your comments and feedback. And as always, would be pleased to discuss the opportunities here in Windsor-Essex!

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Mark Lalovich
mark@lalovichrealestate.com
Office: (519) 966-0444
Cell: (519) 259-5434

Windsor's Moving Up Against The Big Boys - New Series

Source: National Post

Great way to kick off our new series, COMMERCIAL PROPERTIES  – WINDSOR FOCUS.  

Real Estate was hit hard during the 2007-2010 period, but since 2010 we have seen major moves across all sectors of our real estate market. 

via National Post

Just to highlight a few key areas –

* Multi family vacancy rates are down below 4% (from 12% back in 2010)
* Industrial lease rates on a per ft. basis (have increased 70-80 % since 2010)
* Industrial building sales on a per ft. basis  (have increased similarly)
* Residential sales activity (both new and resale) are turning over at unprecedented rates
* Commercial Property interest and sales are in a significant growth phase given strong demand
* Out-of-town investment into the Windsor market is at record levels

What is the take away? 

Windsor’s market offers a great upside for investors / developers / landlords and owner-occupants looking to acquire good (aka sound) real estate value.  Cap. rates are more attractive than other major Canadian markets, competitive financing terms are available, a good mix of products exist, and many new developments are either under way or on the horizon. The population is once again growing and the economic issues of 5-6 years ago are now in the rear view mirror.

The Windsor Market is still in the ‘early innings’ and it is really just starting to make its move. Whether you are local or from outside of the area, give us a call and let us put our commercial expertise to work for you in Windsor – Essex.

We love feedback so don't be shy about letting us know your thoughts and where we agree/disagree! Intellectual discussion is always welcome. 

We are rolling out a new BLOG series, COMMERCIAL PROPERTIES – WINDSOR FOCUS, and we look forward to all your comments as we move through the last quarter of 2015. 

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Mark Lalovich
mark@lalovichrealestate.com
Office: (519) 966-0444
Cell: (519) 259-5434