bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

GRADE A office space in Canada is about one eighth the cost of equivalent accommodation in Hongkong, according to Philip Smith, vice-president investment for Richard Ellis Canada.

  Historically high office vacancy rates in Canada and the bankruptcy of high profile developers such as Olympia and York had created ''a fantastic investment opportunity for Hongkong buyers to extend their range beyond their preferred hotel market'', saidMr Smith during a visit to the territory last week.

  ''There is hardly any liquidity at all in North America and this means commercial property is now trading at prices we haven't seen for many years,'' he said.

  The contrast is stark.

  While office space in 9 Queen's Road Central is trading at about HK$10,000 per square foot, the equivalent standard of accommodation in Canada is fetching about HK$1,200.

  ''The likely capital appreciation from a very low base is potentially huge,'' he said.

  The single most important objective of most of Canada's leading developers at present was to create liquidity within their portfolios by means of asset sales, fresh injections of equity capital or debt restructuring, said Mr Smith.

  ''Bramalea, Cadillac Fairview, Trizec Corporation and Marathon Realty are just a few of the well known major developers that are in this position,'' he said.

  Simultaneously, most banks and life insurance companies were seeking to reduce their exposure to commercial real estate.

  They were not renewing mortgages and not providing financing on any office buildings, retail shopping centres, industrial buildings or hotels.

  Canadian pension funds, which had traditionally been under-invested in real estate, had bought into this market but had now switched their focus away from office buildings and into retail investments.

  This left foreign buyers with a unique opportunity, Mr Smith said.

  Attractive initial yields, frequently in excess of 10 per cent, were now available for well-leased office projects, he said.

  At the same time that yields have increased, net operating incomes have fallen, resulting in a substantial decline in capital values.

  This also affords opportunities to potential investors as rental rates have become more realistic.

  They now offer greater potential from an economic recovery and limited scope for further declines.

  Other factors point to a more positive future for Canadian real estate. Only 1.5 million sq ft of new office supply will be added in Canada's major markets this year.

  As a result of this lack of supply, combined with improving demand, vacancy rates in most markets are stabilising.

  Since sublease space is also declining as a proportion of the vacancy total, it is anticipated that rental rates will also begin to improve.

  Canadian office transactions normally involve whole building deals, since strata title sales are almost unheard of there.

  Buildings priced below C$5 million (about HK$30 million) were generating better yields than those in excess of C$20 million, Mr Smith said.

  This could represent an ideal situation for Hongkong's private investors, most of whom are cash buyers.

  The 1985 Investment Canada Act reversed the country's previous policy and switched to a pro-foreign investment stance.

  Mr Smith said that, to the best of his knowledge, since then only two out of many thousands of foreign applications to purchase property had been turned down.

  Certain conditions apply and there is some variation across the provinces.

  Generally, an overseas investor putting between C$150,000 and C$250,000 into an active job creating programme that was to the overall benefit of Canada should have no difficulties, said Mr Smith.

    Such investments also contributed significantly to the chances of gaining a Canadian passport, he added.



Bargains in Canada for HK buyers