The country isn’t heading for a recession – but it will see slower growth this year, a University of British Columbia economist told a real estate industry gathering in Calgary last week.
“Our growth won’t be as great as it was last year, but we aren’t going to have a recession,” Dr. David Bond said at Colliers International’s Calgary real estate review.
Bond’s presentation preceded one by Rob McElhoes, senior research analyst for Colliers in Calgary, who took a bullish view of the real estate market.
Bond said Canada has had five quarters of growth at a five-per-cent annual rate. Continuing that growth would be like maintaining Olympian Donovan Bailey’s 100-metre sprint speed for four miles.
He also said growth in the United States this year will fall to three per cent from four per cent, with the Federal Reserve Board likely to cut interest rates this week and in March. Most U.S. growth will be in the second half of the year, he said. The slowing of growth will affect Canada, where we can expect 2.9-per-cent growth.
Canada now has declining unemployment and wage stability, which gives price stability. The jobless rate was over 11 per cent in 1994 and is now below seven per cent. The baby bust means there are fewer young, new entrants to the labour force and the participation rate is rising. A labour shortage will follow in 2008 as the Baby Boomer generation starts retiring, he said.
Last year’s wage increases averaged two per cent, with organized labour settlements at 2.6 per cent. Those figures aren’t inflationary, said Bond. Inflation was 3.1 per cent altogether, but only 1.9 per cent when food and energy cost increases are removed.
The energy price increase will work its way through the economy in about 10 months as a one-time event, he said.
Canada still has some inflationary pressure, but central bank Governor David Dodge might have to cut interest rates to match the Federal Reserve Board. Mortgage rates should keep going down and both short- and long-term interest rates will drop, said Bond, citing long-term bond yields in the market.
Consumer confidence is at an all-time high and free trade gave Canada access to the U.S. market, which was the largest and fastest-growing of the 1990s. The low value of the dollar relative to the U.S. currency keeps Canada competitive in trade, but our money is rising in relation to other currencies, he said.
McElhoes said that Calgary’s jobless rate is near economic full employment — and employment is a driver of real estate demand.
Diversification has changed the economy as well. In 1981, a total of 43.7 per cent of provincial revenue came from natural resources, a figure that now sits at 20.8 per cent. Oil provided 43 per cent of the natural resource revenue 10 years ago, but natural gas now provides 60 per cent, he said.
The Colliers market review said the engineering and energy sectors should lead demand for downtown offices in 2001. The leaders in 2000 were financial services and telecom companies.
The Colliers outlook also said rents will remain stable in the Beltline and suburban construction will increase this year to the tune of about 500,000 sq. ft.
Well known multi-family landlord Boardwalk Equities Ltd. reports record cash flow for the quarter ending Nov. 30.
Despite soaring utility costs, cash flow was $0.47 per share, up 88 per cent from the same period in 1999. Cash flow from operations was $23.3 million, compared to $12.3 million.
Boardwalk credited a strong economy in the company’s markets, especially Alberta. Boardwalk owns 25,000 suites in several cities.
Boardwalk trades as BEI on the Toronto and New York stock exchanges. It closed Friday up five cents at $10.70 in Toronto.
The year 2000 set a record for suburban office construction in Calgary at just over one million sq. ft. Net absorption was almost 950,000 sq. ft., says Mike Gigliuk, research director at CB Richard Ellis Alberta Ltd.
In the last three years, the inventory has gone up 20 per cent and the vacancy rate only three per cent. More than 390,000 sq. ft. of construction is already confirmed for completion this year, he adds.
The downtown office market should absorb 500,000 sq. ft. a year over the next two years unless there is a major slump, says CB Richard Ellis.
The firm puts the downtown office vacancy rate at 11.5 per cent in the fourth quarter of last year.
Mergers and acquisitions boosted the sub-lease market to its highest level since 1994.
One of Calgary’s biggest land developers is looking for new opportunities after a group of managers and outside investors bought control.
It’s a real opportunity to continue Genstar’s tradition of leadership in master planned communities, said James Hammermeister, regional vice-president of the company.
He is part of the group of managers who, along with outside investors, bought Genstar Development Co. Ltd. from a subsidiary of Imperial Tobacco Canada Ltd. The transaction concluded the sale of assets including Canada Trust and Shoppers Drug Mart Ltd.
The former owners sold the U.S. part of Genstar’s operations last year to the California teachers pension fund and its managing partner, the Newland Group of Companies, for $335 million. The management-led group has bought the Canadian part for $183 million, Hammermeister said.
The new outside investors have the same vision as management, including expanding the Calgary operations. After several years with an uncertain future, Genstar can retain its team of management, contractors, builders and consultants as it looks for new opportunities in the region, he said.
Genstar pioneered the golf course community and lake community ideas. Last year, it opened the city’s first e-community at Panorama Hills in north Calgary. Homes in the community are pre-wired for a range of electronic services and the community is served by its own intranet.
Other current Genstar neighbourhoods in the Calgary area are Coventry Hills, Lake Chaparral, Somerset, Evergreen Estates, Evergreen – another e-community – and Cimarron in Okotoks.
Genstar also has operations in Vancouver, Edmonton, Winnipeg and Toronto.
Web Watch:
www.bwalk.com
www.genstarcanada.com
www.genstarlandusa.com
www.colliers.com
www.cbrichardellis.ca
