Real Estate. MARKETS BECOMING ‘MORE COMPLEX’ Global forces affect local real estate GLOBAL FORCES increas- ingly will have a profound affect on the Canadian real estate and land development industry, says J. Chris Davis, president-Royal LePage Commercial Real Estate Services. **Consequently, forecasting future directions and conditions of Canadian real estate markets will become a more complex and dynamic undertaking,’’ notes Davis, a _ featured writer in the Royal LePage 1987 Market Survey. While numerous world forces will impact on Canada’s commercial! real estate markets, none will be more powerful than those imposed by economic forces spilling over from the United REAL ESTATE SCENE 1987 Upgrading to prove profitable “‘OPPORTUNIST’’ in- vestors with foresight and confidence will continue to Teap the rewards in Van- couver's commercial real estate investment market in 1987, according to a Royal LePage Commercial Real Estate Services specialist. Royal LePage’s Lorne Segal said these rewards will be realized through the upgrading and development of facilities to meet the needs of today’s consumers. As part of his comments to a breakfast meeting recently attended by local business people, Segal noted that the most sought after and popular investment in Vancouver will continue to be concrete high-rise apart- ment buildings. Key posi- tives for investors include a vacancy rate under 1! per investment . cent and rental rates which have increased 7-8 per cent in 1986. **Pension funds and in- stitutions are no longer in- terested in this management-intensive in- vestment and, for this reason, individuals and off- shore purchasers are com- peting for this type of pro- duct,’’ he said. OFFSHORE PURCHASERS “Both local and offshore purchasers wiil pay premiums for well-located apartment sites; for the first time in at least 10 years, the development community will be proceeding with at least four speculative concrete rental buildings in Van- couver in 1987.”’ Segal, explained that these decisions to proceed are ex- clusive of any tax driven consequences and are pro- jected to produce revenue of betweert $1.10 and $1.25 per sq. ft. STRONG DEMAND According to Segal, in- vestors also will continue to express strong demand for: — well-leased retail strip plazas — smaller shopping centres with a potential for upgrading — well-located and well- leased ir.dustrial facilities — some spec construction has commenced, with the emphasis on of- fice/showroom/service facil- ities to meet the demands of new technologies, computer companies and ser- vice-oriented uses. Looking ahead to 1987, Segal offered a number of TOM NIELSEN 986-9321 Professionalism & Expertise States, explains Davis. Most notable of these economic forces will be ongoing free trade discus- sions between Canada and the United States and the sweeping U.S. Tax Reform Act, recently passed into key predictions for the in- dustrial market: — industrial land costs will rise, particularly for sites located in close proximity to Vancouver proper — there will be an increased number of planned in- dustrial parks that will better meet the increasing needs of parking, employee amenities and structural requirements of today’s tenants — there will be a continuing trend to complete build-to- suit facilities to provide fa- cilities suitable for new pro- cesses and technologies — absorption of industrial space in 1987 should reach 1.6 million sq. ft., compared with the 1.1 million sq. ft. forecast for 1986 — there should be slight upward pressure on rental rates, most notably in the_ higher-end buildings. 13 - Friday, December 26, 1986 - North Shore News law, with most reforms scheduled to become effec- tive as of Jan. 1, 1987. SIGNIFICANT IN FLUENCE Because of the ‘bilateral nature’ of any free trade ar- rangement, Canada will have an opportunity to exert ‘significant influence’? over the ultimate pact, explains Davis. “As a result, impacts on Canada from free trade will be felt only well into the future, will be graduai, and hence, as in all gradual change, relatively evolu- tionary instead of revolu- tionary.’’ Conversely, the economics of investing in real estate in the United States have been “particularly and severely impacted by passage of the U.S. Tax Reform Act,’ adds Davis. Under the new Tax Reform Act, real estate in- vestment will have to com- pete virtually purely on economic grounds against alternative investment op- portunities. This is a radical departure from tax treat- ment enacted by the United States government in 1981, which, according to Davis, has turned out to be “far too ‘avorable for the long term health of the industry.”’ “Due to the sweeping } CONRAD SWANSON 986-9321 (Off.) 980-9733 (Res.) Member [MALS Medallion Club. nature of the tax reform, it is safe to forecast an immi- nent shakeout of major pro- portions, severely affecting major institutions and cor- porations, and lasting a number of years before a new stability enters the mar- ket based on the new rules of the game,” stresses Davis. Given the close economic ties that Canada has with the United States, it is inevitable that the Canadian real estate industry and markets will not be immune to the changes taking place south of the border. However, notes Davis, major Cana- dian developers, which number among the most powerful and most solidly capitalized players in the United States market, largely are well positioned to weather the shakeout. “The major Canadian developers have displayed the strength and = market acumen to work with lenders and acquire low-risk posi- tions in distressed situtions, with the result that they will continue to build portfolios of major office buildings at far less than replacement costs; they will emerge from this United States real estate recession larger and stronger than ever, well positioned to ride the upswing of the cycle as rental markets gradually strengthen,’’ forecasts Davis. 7 years service North Shore “BRAND NEW” — MAGNIFICENT UNSURPASSED VIEW & SOUTHERN EXPOSURE CITY — HARBOUR — ISLAND a British Properties — super custom plan loaded with windows and skylights to maximize view and sunny exposure — featuring 4 bdrms, sunken liv and family rm. 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