Photo © Cezar Web Design. Photo courtesy Colliers International.

A fast recovery is expected in the Canadian real estate market, and sustainable buildings will be important purchases to investors, according to a Colliers International survey.

Canadian real estate investors are forecasting a fast recovery, and are willing to pay a premium for sustainable buildings, according to the Colliers International "2010 Global Investor Sentiment Survey."

"Canada seems to find itself in a situation where we did not get dramatically over-extended on new developments or high leverage," Milton Lamb, Canadian national investment team chair for Colliers International, told Construction Canada Online. "The result has been a short period with very little activity in leasing or sales due to a lack of confidence. This confidence started to return in the fourth quarter of 2009, allowing both tenants and investors to make long-term commitments."

More than 240 major real estate investors (including 26 large Canadian institutional property investors) were surveyed. They found a strong outlook for domestic investments, and two out of three investors (65 per cent) indicated they are considering further acquisitions over the next year.

The majority (85 per cent) of Canadian respondents who indicated acquisition plans intend to focus on the domestic market, especially in locations such as Toronto (27.8 per cent), Vancouver and Montreal (16.7 per cent each), Edmonton (14.8 per cent), and Calgary (11.1 per cent).

"On a risk-adjusted basis, Canadian investors still see Canada as a preferred investment destination that offers a higher return on investment (ROI) compared to the United States, in part because of the turmoil that still lingers south of the border," said Lamb.

However, Canadian investors are not only looking for buying opportunities, but they are also looking to divest under-performing or non-core assets (54 per cent).

Additional highlights of the report include:
• nearly three out of four (73 per cent) Canadian investors feel access to capital became easier over the past year;
• 54 per cent say the movement toward easier access to debt will continue;
• 58 per cent of respondents believe the borrowing cost will climb over the next year;
• investors expect to see rents continually declining, hitting bottom at the beginning of 2011;
• 50 per cent of Canadian respondents—most institutional—are willing to pay a premium for sustainable buildings, compared to 30 per cent of U.S. investors; and
• 62 per cent of those who would pay for sustainability are driven by the economics of lower costs, better tenant retention, greater valuation on such buildings, premiums on leases, and the demand/requirement coming from tenants' own strategy of shifting to sustainability and the fundamental economics behind those decisions.