Recently appointed as president of Savills Canada, Ruth Fischer brings a fresh perspective to the firm’s expansion strategy across key Canadian markets. Green Street News sat down with Fischer to delve into where she sees the greatest opportunities unfolding.
From Savills’ perspective, which Canadian markets present the most promising growth and value-creation opportunities?
Because we are scaling in the Canadian market, it feels like the sky’s the limit and every market has exciting opportunities on which we can capitalize. Particularly in the major markets in Canada: Vancouver, Calgary and Edmonton, Toronto, and Montreal.
“Savills views the Canadian expansion strategy with a huge amount of excitement and a lot of energy and momentum”
We are looking to grow our office leasing services in Montreal, our industrial and office leasing capabilities in Toronto, grow our capital markets sector, and establish a presence in Vancouver because it’s a market in which we don’t have a presence today.
And from an investor and occupier perspective?
There are opportunities to be had in every market across Canada, as we can see from the foreign direct investment pouring into Canada. Despite the economic environment we’re seeing globally, Canada is a place that attracts capital. We’ve got a stable economy and government, growth opportunities, and an expanding population.
We’re seeing all the elements that underpin a solid economy in our major markets. Covid notwithstanding, we saw some interesting structural shifts. Halifax and Calgary were net benefactors of Covid. Halifax has outpaced historic averages in terms of investment because of migration to that city. There are exciting opportunities in all those markets. It’s about finding those advisors and the niches in which the investor or occupier is looking to grow and matching the opportunities on the ground.
“Industrial has been the darling over the last few years due to the massive demand created by the pandemic and the acceleration we saw pre-pandemic as e-commerce penetrated Canada, which had been lagging behind the U.S. and Europe”
Industrial has been the darling over the last few years due to the massive demand created by the pandemic and the acceleration we saw pre-pandemic as e-commerce penetrated Canada, which had been lagging behind the U.S. and Europe. Until Q3 of last year, it was the asset class for which everybody was hankering. The interest rate environment and commensurate moderation of demand for space has halted that quite substantially. This is also seen through echoes in the consumer markets as demand slowed because of the economic environment.
Demand may have been slightly overinflated in many markets because industrial users were taking on perhaps a little more than they needed. There was the whole “just in time” versus “just in case” situation that was happening with industrial occupiers. We are now seeing a more stable absorption rate. I would say we were slightly below average at the end of Q4 2023 in terms of absorption of industrial space. In the short term, we will see the vacancy rate across Canada increase to approximately 4%, so I anticipate that going forward, we will go back to a more stable and balanced market where tenants have options and the landlords aren’t holding all the cards.
Multiresidential is a big area of opportunity with the housing crisis in Canada. But it’s complex because I would argue that the zoning and political environment are the major parts of the issue in terms of the provisioning of more housing.
Retail also bounced back at the end of last year. Q4 investment volumes in retail were strong. During the pandemic, the grocery-anchored centers were the sought-after assets, and we’ve seen some interesting mall trades across Canada. I think the repositioning of shopping centres and investment in them will be interesting to watch as interest rates stabilize.
So, how are you viewing your expansion strategy?
Savills views the Canadian expansion strategy with a huge amount of excitement and a lot of energy and momentum. Because we’ve got such an incredible history and platform out in the U.K., EMEA and Asia, and in the growing team in the U.S., momentum is carrying over to us into Canada. It is exciting when you’ve got the opportunity and the ability to boost strategy coupled with a leadership team that understands that Canada is a totally different market than the U.S.
It’s going to be about ensuring we’ve got the right talent and are building the right culture. We’re a nimble, entrepreneur-focused organization, and it’s incredibly important to me that we put in the right pieces, because that will lead to a virtuous cycle of iterative success. Having our brokers and strategists across the country aligned, collaborating and ensuring they can share best practices and client support will be a massive focus for me because that will be one of the major differentiators between Savills and our competitors.
Can you discuss any recent transactions or projects demonstrating Savills’ expertise and value proposition to investors in the Canadian market?
We have activity with one of Canada’s largest telecom companies, facilitating rightsizing in some cities and leveraging our network and relationships in regions where the larger brokerages lack a presence. We are facilitating several industrial transactions across Canada. Savills in the U.S. has a very strong life sciences presence, and so in Toronto, we’re helping one of the largest life sciences organizations with their leasing, including identifying discrepancies and initiating cost analysis for their portfolio.
We are maintaining a real client focus in the retail sector because we do have a strong retail practice out of Toronto. Retail leasing has stabilized, and we have seen a significant amount of success at Royal Bank Plaza. We are strategizing on rollouts across Canada for retailers who are looking to come in. We did an expansion of 40,000 sq ft in Edmonton for engineering services firm Worley, which is a good story because anything that isn’t a downsizing story makes me happy.
As interest rates and financing conditions evolve, how should investors adjust their strategies for acquiring and managing real estate assets?
There’s that famous Warren Buffett quote, that it’s wise to “be fearful when others are greedy and to be greedy only when others are fearful.” And these have been times with quite a lot of fear. But in truth, I think it depends on the investor’s profile. As interest rates come down, liquidity will come back with a better match between what the vendors are willing to sell for and what the purchasers are willing to buy for.
That has been a substantial problem within the last few years: the disconnect between vendors’ expectations and purchasers’ ability to obtain. That’s why we saw so many periods over the last four years where there was a lockup where nothing was trading. We should see more activity as the year progresses.
“Canada is such a diverse and interesting market, and investors or occupiers can look at a range of solutions to deliver on whatever their ultimate business outcomes need to be”
In terms of the underlying appeal of assets, I also think that the investor avoidance of the office asset class will continue to evolve. The work-from-home experiment has fizzled — I won’t say failed — but there is no question that most people do not want a remote-first workplace. So, there are going to be opportunities when it comes to office investment.
But in the dynamic Canadian markets, all the asset classes do have opportunities for investors: multiresidential, senior housing, student housing, retail and industrial. Canada is such a diverse and interesting market, and investors or occupiers can look at a range of solutions to deliver on whatever their ultimate business outcomes need to be.
The occupier and the investor are different but are inextricably interlinked in the market. Making sure that we are keyed into the broader economic environment in which our occupiers are operating is key to forecasting and predicting what the needs will be in the future.
All the new Canadians who are arriving need places to live, work and play. We need to understand where they’re going, why they’re going there and what their Canadian experience is going to be. It’s a wonderful time to be in Canada, a wonderful time to be in real estate and a wonderful time to be at Savills.
