The next real estate cycle will be defined by the rise of Walkable Urban Places (WalkUPs) and the fall of sprawl development according to a report from George Washington University.
This is an interesting trend. Â Is the rent too high in downtown Calgary? Â
Imperial Oil is on the move. Now Canadian Pacific Railway. The big question is who is next to make the jump from downtown Calgary as prices escalate and tenants look for better rents away from the core.
â€œYou add them together and you get 1.2 million square feet and thatâ€™s a big chunk,â€ said Ross Moore , head of research with CB Richard Ellis Canada, in referring to the two companies. â€œThere is a limit to how high you can push rents.â€
Imperial announced in September it would move its downtown office to a 20-acre site away from the downtown with five low-rise buildings and 800,000 square feet. Then last week CP Rail said it would move its employees as part of a cost-cutting plan.
â€œEverybody is focused on costs and real estate is obviously part of your costs,â€ said Mr. Moore, who wonders whether the trend will curtail some of the planned development expected to go ahead shortly. â€œThey all have to be having second thoughts.â€
Third quarter statistics from CB Richard Ellis show rents overall in Calgaryâ€™s downtown core climbed 4.4% from just three months before to $26.79 per square foot per year, making it one of the most expensive places in North America. The vacancy rate for what is considered a AA building is a scant 0.5% which has pushed rates up.
Of course the answer is no as it is market driven. Â CPR is cutting costs and Imperial Oil has it’s own strategic reasons to move to a very large campus but it is extremely interesting to see how expensive rent is in downtown Calgary. Â
The total non institutional civilian labor force (Americans 16 years and older who are not in a institution -criminal, mental, or other types of facilities- or an active military duty) is reported as 238.889 million. Of these, we see:
- Employed: 139.206 million people (58.3% of labor force)
- Unemployed: 14.485 million people (6.1% of labor force)
Obviously, that can’t be the total picture, we’re only at 64.4%. This is why:
- Part time employed for economic reasons: 8.931 million people. This concerns people who want a full-time job but can’t get one.
- Part time employed for non-economic reasons: 18.184 million people. Non-economic reasons include school or training, retirement or Social Security limits on earnings, but also childcare problems and family or personal obligations.
But the by far largest category "missing" from both the Employed and Unemployed statistics is the "Not In Labor Force": 85.2 Million people.
The BLS definition states: "Not in the labor force (NILF). A person who did not work last week, was not temporarily absent from a job, did not actively look for work in the previous 4 weeks, or looked but was unavailable for work during the reference week; in other words, a person who was neither employed nor unemployed." (Clearly, this does include lot of unemployed people).
To summarize: 108.616 million people in America are either unemployed, underemployed or "Not in the labor force". This represents 45.5% of working age Americans.
What does this mean? Is 47% of the workforce working full time jobs enough to pay for the rest of the countries entitlements? Especially as Baby Boomers retire and smaller generations take on that burden? Forget the United States as a country, look at the numbers locally. Even in Saskatoon, much of our expected growth will come from seniors retiring into our cities. Projections for school age kids is to remain flat or show small growth in the city.
This will increase health costs, increase the need for public transit (not a bad thing), and may put some downward pressure on the real estate market (will seniorâ€™s want single detached homes or as we see in the transformation of Market Mall from sleepy mall into a mega city, will they want condos and assisted seniorâ€™s living?). I know health is a federal/provincial responsibility but money that is spent on healthcare is money that isnâ€™t available for other programs. Of course with a larger percentage of Saskatoonâ€™s citizens not paying the income tax they once were, what does that do for the coffers in Regina and Ottawa?
Politicians speak in terms of unemployment but more and more I am starting to think that employment numbers are more important. Not only for those that are seeking work but for their contributions to the fair and just society that we call home. Now one of the ways to balance this out is to increase immigration to Canada. I know that has come with itâ€™s own difficulties but Canada isnâ€™t a melting pot, it is a â€œcommunity of communitiesâ€ and outside of Quebec, we donâ€™t struggle with the nationalistic feelings that other countries have (outside of a two week window every year when the World Junior Hockey Championships are on). I am obviously biased having married an immigrant to Canada but for me, a more diverse Saskatoon could be a great side effect of an aging population.
Plus, increased immigration to Saskatoon would mean more trips to the region by Jason Kenney as he stumped for their votes.
Is commercial real estate the next big bubble in the United States?
â€œThere is a large overhang (empty space) of commercial real estate that will take years to absorb. In addition there are $1.3 trillion in commercial mortgage notes coming due in the next 3-4 years but only $800 million in debt capacity for these loans.
Wall Street will likely experience another crash in 2013-2014 unless something is done. Traditional loans on commercial buildings used to go through banks. Then in 2003-2004, Wall Street learned they could securitize loans and act as banks or alternative lending institutions.
This led to strong competition for loans, more people bought buildings and the balloon expanded. But then it popped, values have plummeted and remain way down. Most of these loans were made with ten year notes. So unless things improve dramatically in the next few years, when the notes come due, they will be foreclosed, values will drop again.
CBC Marketplace exposes what goes on behind the scenes at the Rich Dad, Poor Dad seminars being offered across Canada. This is what they found.
Marketplace also discovered that claims by at least one trainer were exaggerated. The trainer said he made millions on a mobile home park in Saskatchewan â€” a park that turned out to be non-existent.
Bob Aaron, a Toronto real estate lawyer, said workshops like these are not only a waste of people’s money, they’re also teaching people techniques that normally don’t work.
For instance, Mousseau told people who are interested in buying real estate to simply start knocking on doors and asking homeowners if they want to sell.
Aaron, who’s handled thousands of real estate files, said some of Mousseau’s claims were just plain unusual, including his advice that if you buy 10 condos, a developer will give you two for free.
"Theyâ€™re not going to give you two for free," Aaron said. "Iâ€™ve never seen that happen.
According to CBC, the company that offers the course, Tigrent Learning has been offering get-rich workshops for more than 10 years, and has a history of run-ins with regulators and unhappy customers.
Slate has reviewed the book here.
Rich Dad‘s running theme is that you’ll never get rich by chasing a higher salaryâ€”apparently the Protestant work ethic is for suckers. What you need to do is "concentrate your efforts on only buying income-generating assets." Such as? It turns out that whenever Kiyosaki offers an example from his life, it almost invariably involves real-estate speculation. (It’s hard to judge the veracity of his not-very-specific claims on this front, and as far as I can tell, press scrutiny of Kiyosaki to date has been limited to bland interviews or face-value restatements of his book’s themes. I did come across a long and withering critique by a real-estate writer named John T. Reed. He questions, among other things, whether Rich Dad even exists.) Not surprisingly, the sunny cover blurbs make no mention of flipping distressed properties for big bucks, since even the least sophisticated book buyer would tend to be skeptical about yet another run at this familiar get-rich-quick scheme.