Search this blog:
Follow Avison Young:

Friday, April 24, 2015

Foreign Investment in Industrial Assets Levels-Off, SteadyDemand and Higher Pricing Ahead

by Erik Foster (Chicago)

Foreign investment in the U.S. industrial real estate sector remained historically high, yet dropped to a more sustainable level in 2014, following a very solid 2013.  A new report by our National Industrial Capital Markets Group shows investment in corporate distribution spaces and other industrial assets totaling $2.4 billion in 2014, down from a record level $3.1 billion in 2013, but close to the $2.51 billion in 2012. 

Among the top buyers in 2014 were: Canada ($677.7 million); Norway ($450 million); Bahrain ($193 million); Germany ($187.8 million); and Mexico ($177.2 million). By the end of 2014, foreign investors had purchased 185 industrial properties in key markets across the country, a decrease from 213 in 2013. Among the top markets in 2014 were: Chicago, IL ($178.3 million); Jacksonville, FL ($137.7 million); Greenville, S.C. ($133 million); San Francisco’s East Bay area ($119.7 million) and Cleveland, OH ($92.2 million).

The report was based on an analysis of data from Real Capital Analytics from 2007 through March of 2015. Please contact me directly to obtain a copy.

Foreign investors have been on a buying spree for several years in the U.S. and the trend will continue, especially in light of geopolitical issues and waning European and Asian economies. Investors continue to see the U.S. as a safe haven.  They recognize that there are opportunities to buy stable assets that can provide stronger, and more dependable, yields than those found in their own or other foreign countries. The decrease in volume in 2014 is not a surprise, as we move toward a more stabilized investment volume that likely will be sustained for years to come; the first quarter of 2015 showed similar sales volume and signs that activity will remain strong.  In fact, we believe that there will continue to be more platform and entity acquisitions in the days ahead too, very similar to GIC and their recent purchase of IndCor.

Among the key trends to watch in the second quarter of 2015 and beyond are:

  • Canada will continue to be at the top of the list of foreign investors acquiring US industrial assets, but Canadian buying power has diminished partly due to decreased vacation in its currency.  Asian buyers will be high on the list as well, continuing their recent strong interest levels in this property sector.
  • Leasing fundamentals will continue to improve, creating tangible rent growth and continued positive absorption in mosts markets across the country.
  • A lack of supply will continue to push investment pricing higher, new spec construction will not come online fast enough to meet demand in most markets.
  • Demand for corporate distribution space and other industrial assets will remain steady for the foreseeable future due to the stability and long term growth in this sector.


Tuesday, April 14, 2015

Pricing Carbon: Implications for the Real Estate Industry, Part 2 in a Series

by Amy Erixon, Toronto

According to the United Nations Environment Program (UNEP) Sustainable Buildings and Climate Initiative, buildings are responsible for over 40% of global energy use and 30% of the Greenhouse Gas Emissions.   They further estimated that buildings consume 30% of all global raw materials and 25% of earth’s water.   In urban areas the percentages are much higher.  For example, according to the Province of British Colombia, 54% of the carbon footprint of Vancouver is from building emissions.   

Mandatory carbon reporting, currently required in approximately 30 US municipalities and 2 Canadian Provinces is expected to become far more widespread in the years ahead.  Most northeast and west coast states have definitive carbon emission limits in place as do Quebec, Nova Scotia, Alberta and British Columbia.  As a result, and as a matter of good corporate governance, many best-in-class owners, tenants and developers already report on their portfolios to a benchmarking system and may include these results in their annual reports in compliance with the Global Reporting Initiative.   What used to be a "nice to have" is shortly becoming a "need to do".  

Last week President Barack Obama signed an executive order expanding the greenhouse gas emission controls to cover more US industries, including real estate.  In Canada, the Province of Ontario announced it would begin implementing a Carbon Cap and Trade program, joining the states of California, Oregon and Washington and the Province of Quebec in a unified carbon marketplace known as the Western Climate Initiative.  Cap and Trade was originally introduced in the 1990 US Clean Air Act.  It is a regulatory system that is meant to reduce certain kinds of emissions and pollution and to provide companies with a profit incentive to reduce their pollution levels faster than their peers. Under a cap-and-trade program, a limit (or "cap") on certain types of emissions or pollution is set, and governments and companies are permitted to sell (or "trade") the unused portion of their limits to other companies that are struggling to comply.  (Definition from www.investopedia.com)  In the US, cap and trade is being hailed as a "private sector" solution, although it does require set up of a regulatory entity to oversee and enforce.   

Ontario believes taking this step will increase the likelihood of achieving its commitment to a 20% reduction in Greenhouse Gas Emissions from 1990 levels by the year 2020.   Details of the program are to be developed over the course of the year and will likely have profound potential implications for builders, owners and occupants of real estate.  Step one is likely to be mandatory reporting.   Step 2 will be the debate over where to set the caps.  


According to news reports, Ontario decided against replicating the popular British Colombia model in part to avoid the optics of imposing a “tax” and in part to lend support to creation of a unified North American carbon trading marketplace.   As laid out in my February 3, 2015 blog on this topic, British Columbia puts a set “price” on carbon, and everyone pays the same rate per ton for it.  Proceeds from the tax are used to produce green energy and to offset taxes from other sources.  Critics of the carbon tax approach believe a tax alone may not be enough to achieve meaningful reductions in emissions, as well as opposition to taxes in general.  

The key criticisms of a cap and trade approach, which is far more widespread and more complicated to implement are more numerous: 1) that the limits are often set at different targets for different industries, providing flexibility where needed but detracting from the optics of fairness; 2) concern that providing a workaround for polluters rather than requiring better efficiency may also not result in reducing emissions, and will likely increase costs to consumers 3) an underdeveloped carbon marketplace could result in fluctuating prices which will not support development of green energy and could cause harm to affected companies and industries based on their scale and resources; and 4) need to create an oversight agency to promulgate regulations and enforce the system.   For a robust discussion of the merits and proponents of each approach see:  http://e360.yale.edu/feature/putting_a_price_on_carbon_an_emissions_cap_or_a_tax/2148/.




Tuesday, March 10, 2015

Avison Young named one of Canada’s Best Managed Companies four years in a row



By Mark E. Rose (Toronto)


Avison Young named one of Canada’s Best Managed Companies four years in a row


On behalf of our Principals, we are proud to announce that Avison Young – for the fourth consecutive year – has been named one of Canada’s Best Managed Companies.

In addition, for the first time, we became a Best Managed Gold standard winner in 2014 for excellence in business performance.


The program is sponsored by Deloitte, CIBC, National Post, Queens School of Business and MacKay CEO Forums. The announcement was made on March 10, 2015 in a special report in the National Post daily newspaper.

We are truly humbled and honoured to receive this award. By naming Avison Young as a Gold standard winner for 2014, Deloitte and its partners have independently confirmed our commitment to offer the highest possible level of service to clients.

This award also symbolizes the success of our unique Principal-led ownership structure, global growth strategy and collaborative culture, which emphasizes honesty and integrity. The award also reflects our strong desire to provide a talented and diverse workforce, and a sustainable business climate to produce superior long-term results for clients.

We want to thank our clients, partners and employees who have helped us build a different kind of commercial real estate organization, committed to delivering a better client experience – and better results.

As a company that was founded in Canada and now operates in 64 offices across North America and in Europe, we are especially proud that this is a Canadian award administered by some of the country’s most successful and highly regarded firms.

We will never forget those who have taken us to where we’ve gone – and whom we count on every day to reach our lofty new horizons.

Wednesday, February 18, 2015

2014 in Review: The Dallas Industrial Market

By: Greg Langston (Dallas)

This is the second post in our “2014 in Review” series. If you’d like to read the previous entry documenting the Dallas office real estate market, check back in the Avison Young blog archive.

Although we recently posted predictions for the future of the Dallas industrial real estate market, it’s equally important to look back and measure the year we just experienced. With strong leasing numbers, increased construction, and low vacancy rates, the Dallas industrial market had a decidedly strong year--one on par with the broad success of the Dallas commercial real estate market as a whole.

The most notable statistic for the Dallas industrial real estate market come in terms of construction. According to The Dallas Morning News, roughly 15.3 million sq-ft of industrial space were under construction during 2014--nearly double the amount under construction in 2013. What’s more, this impressive figure is the highest that the D-FW market has seen in over a decade.

These impressive construction numbers are balanced out by equally impressive vacancy rates. Vacancy rates remained relatively stable in 2014 at 5.8 percent--a solid number given the marked uptick in industrial construction over the course of the year. Similarly, according to the National Real Estate Investor, demand in the D-FW market is way up, which certainly bodes well for construction projects set to be completed over the next several years.

As touched on in a previous blog post, there is a bit of debate over how the market will fare over the coming years. On the surface, things remain positive: construction is on schedule, D-FW has a strong labor market, and businesses are increasingly interested in leasing industrial space. Regardless, demand is expected to remain steady or even fall slightly over 2015, which might place a damper on future construction opportunities as current projects come online.

Regardless, the industrial real estate market--as well as the Dallas real estate market as a whole--experienced a stellar 2014. With increased demand, low vacancy numbers, and a veritable boom in construction, the D-FW industrial market is widely considered one of the strongest in the country.


The postings on this site are those of the bloggers and do not necessarily represent the views or opinions of Avison Young.