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Canadian commercial real estate hits highs as Calgary gains - CBRE

[MONTREAL] Canada's commercial real estate market hit a record C$11.16 billion (S$11.93 billion) in quarterly transaction volumes and is on track to reach new highs for the year, as investors' hunt for yield and gains in the oil-producing province of Alberta bolster activity, real estate services firm CBRE Limited said on Monday.

A recovery in oil prices and a few large transactions helped Calgary post its best third quarter in over two years with C$1.2 billion in investment and a rise in activity in the hard-hit, commodity-driven city, CBRE wrote in a report.

Hit by a two-and-a-half-year slump in the crude market, Canada's oil and gas industry is starting to show signs of cautious optimism as benchmark oil prices tick higher.

Some companies are increasing 2017 capital spending budgets, a couple of deferred oil sands projects are restarting and the drilling rig count in Western Canada is inching higher, albeit from very low levels.

Some investors are eyeing Calgary now in anticipation of higher oil prices down the road, Peter Senst, president of CBRE Canada Capital Markets, said in an interview. "Typically, you'll find that capital gets ahead of fundamentals," he said by phone. "That's really the Alberta story." Nationally, real estate transactions rose 87 per cent in Canada during the third quarter of 2016, compared with the same period in 2015, and were up 13 per cent compared with the second quarter of this year, according to the report.

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CBRE forecasts that real estate activity will exceed C$35 billion in 2016, setting a new Canadian record and marking the highest level since 2007, which generated C$32.1 billion in deals. "We're probably the only country in the world that will trade through our prior peak," said Senst, who is also expecting similar demand for Canadian real estate in 2017. "We've never seen anything quite like it. That kind of trend doesn't change overnight." Foreign capital, which totaled C$3 billion during the quarter, represented 41 percent of all transactions worth C$10 million and over, and was directed primarily at Canadian hotels.

Interest in hard assets such as real estate is being driven because government bond yields are at all-time lows and the stock market is trading on historically high price-earnings ratios, Senst said.


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