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Wednesday, September 28, 2011

Why U.S. housing is weak, and why Canadians care

A moribund housing market is dragging on an already weak U.S. economy, and causing ripples across the border here in Canada.

This week, two key numbers will likely show that U.S. housing is still an incredibly weak spot, with no significant improvements in sight. On Monday new home sales figures are expected to show a fourth consecutive fall in transactions in August, to an annualized number of around 295,000, not far from the low of 278,000 set in August, 2010.

On Tuesday, the S&P Case-Shiller index will give an indication of how strong home prices are across major centres in the U.S. – and that’s not likely to be a pretty sight either. House prices have bounced up and down in recent months, but they are dramatically lower than 2006 highs, languishing at roughly the levels of 2003.

The weak housing market is partly a hangover from an era of overbuilding and buying driven by low interest rates, which was followed by a price collapse and mass foreclosures.

But it is also a function of a struggling economy. With unemployment so high, fewer people can afford to buy homes, even at discounted prices. And with the value of existing homes dropping, many people feel poorer and cut back their spending – thus dampening any economy recovery.

“The housing market is weak because the economy is weak [but] the economy is weak because the housing market is weak,” said Paul Dales, senior U.S. economist at Capital Economics, which projects no sustained home price increases in the United States until 2014 at the earliest.

Consumers are particularly uneasy about the longer-term outlook, said Peter Buchanan, senior economist at CIBC World Markets. “If you are concerned about how much you are going to be making six months down the road, or whether you are going to have a job, that is going to make you particularly unlikely to make a longer-term commitment [such as] purchasing a house.”

Even some recent housing numbers that look positive – existing home sales showed a 7.7-per-cent jump in August – also have a negative hue. A huge proportion of those sales, 31 per cent, represents distressed properties that were sold at a discount.

The weakness in the U.S. housing market has both direct and indirect impact on Canada’s economy, said Peter Hall, chief economist at Export Development Canada, because so many of our exports are linked to the amount of building that goes on south of the border.

While the lumber industry is hit the hardest, the depressed U.S. housing market will affect a broad range of Canadian exporters, Mr. Hall said. “You need base metals to build a house, you need a lot of wood, you need asphalt shingles. These are things that Canada supplies raw materials for.”

Canadian companies also make goods that feed into supply chains for higher-value products, such as appliances, fixtures, carpeting and flooring, he added. “The housing market permeates many different sections of the economy.”

Mr. Hall points out that the U.S. housing market has been in distress now for years, since the low-rate excesses and overbuilding became apparent around 2006. Far too many houses were built in the early years of the decade, when rising prices created the illusion that housing was a great investments. The crash, when it came, helped fuel the 2008 recession.

Unfortunately there is no sign of any short-term recovery in the housing market. Mr. Hall projects a real turnaround won’t come for at least another year. “The U.S. economy, broadly speaking, is not going to get back on its feet until the housing market is in better shape,” he said. “Housing is always a leading indicator of economic activity.”

- reprinted from the Globe and Mail online edition

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Thursday, September 15, 2011

Banks lowering some Canadian mortgage rates

TORONTO - Some Canadian mortgage rates are going down as of Thursday.

TD Canada Trust (TSX:TD) was the first major bank to announce a change, with its five-year closed mortgage rate falling 15 one-hundredths to 5.24 per cent.

Royal Bank (TSX:RBC) and Bank of Montreal ()TSX:BMO) will drop their five-year closed mortgage rate by 20 one-hundreds to 5.19 per cent.

Most of the banks' other rates remain unchanged but BMo is also dropping its four-year closed rates by 20 one-hundredths to 4.79 per cent.

(re-printed from the Winnipeg Free Press Online Edition)

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Tuesday, September 13, 2011

What happens when you lose an Anchor Tenant?

This article was reprinted from the Globe and Mail this morning. If you are, or are considering investing in commercial property, this article provides a unique perspective...

When Blockbuster Canada announced last week that it would close its remaining stores across the country, landlords were put on notice that millions of square feet of retail space would flood into the market.

More than 250 stores will close by the end of the year – nearly 150 had closed previously when the company went into receivership in May – and in total, the chain will vacate two million square feet of space.

Finding a tenant for at least one Blockbuster location, in Port Alberni, B.C., has posed challenges, said Doug LePatourel, a broker and vice-president at Colliers International’s Vancouver division.

“I'm optimistic, but we have done some marketing for the last few months and it is vacant,” said Mr. LePatourel. “We've been talking about putting some temporary shop in there, like a dollar store at a much reduced rent. There is also a possibility of splitting the space.”

The unusual size of Blockbuster stores could create problems in softer markets, said Drew Keddy, vice-president, Canada, at Colliers.

“Being 5,000 to 6,000 square feet, that's a big space for smaller markets. And you can't fit a Shoppers Drug Mart or London Drugs in one of those stores, because they want 15,000 to 20,000 square feet,” he said. “It's going to cost some money to re-lease it, whether that's capital investment to optimize the space or just reduced rent to entice somebody to come and take it.”

The influx of empty Blockbuster properties won’t negatively affect the Canadian retail real estate market, said Steven Alikakos, senior vice-president of retail for DTZ Barnicke Canada. “We have a shortage of retail space. We need the space,” he said.

The fact that many Blockbuster properties are on a standalone “pad” site, away from the main shopping centre or strip mall, will make them desirable.

“There's a pent-up demand for the standalone pad sites like you see in the suburbs,” he said. “Six thousand [square feet] is a little bigger than what most chain restaurants are looking for, but what it does do is it allows you to slice them down the middle and divide them into two spaces, and then you've got two beautifully-sized, 3,000-square-foot pieces, which are very easy to lease.”

Mr. Alikakos says the space also could serve banks looking to expand. “You may have a bank that always wanted to get into the area because of the demographics, and this is a great opportunity,” he said.

Smaller landlords, however, may have more to lose from the Blockbuster closings, he said.

“It's the smaller landlords – the one-offs – who own a plaza and were lucky enough to get this triple-A covenant of Blockbuster, which gave them some oomph in their portfolio,” he said. “That may be replaced now with the same rent, but not as strong a covenant.”

John Crombie, senior managing director at Cushman & Wakefield in Toronto, also suggests fitness centres, yoga studios and breakfast restaurants as other replacement candidates.

Mr. Crombie points out that although two million square feet of retail space may sound substantial, it is a drop in the bucket – at of the end of last year, the inventory of retail space in the Greater Toronto Area alone was 223 million square feet.

More than 100 of the shuttered Blockbusters are in the GTA, and Mr. Crombie says the market could use the space.

“From 2008 to 2009, there was very little inventory added to the Toronto market,” he said. “In 2009, there was 12 million square feet added, which was a good amount of space. But we could use more, because we have just so much more demand.”

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Garamark Property Management is located in Winnipeg, Manitoba and successfully balances protecting the investment of an owner while retaining happy tenants.

Thursday, September 8, 2011

Bedbugs beware of this sniffing sleuth - Local business owner says detection dogs quick and accurate

While some dogs sniff out drugs, this one sniffs out bugs.

Patches and her owner, Valerie Arpin, are partners in The Winnipeg Dog, which offers a proactive canine bedbug detection service.

While many pest management companies have dogs on retention in Winnipeg, Arpin said most of them fly the animals in for jobs from other cities.

"As far as I know, she’s the first bedbug dog (based in Winnipeg)," said Arpin, who lives in St. Boniface
Arpin began operating her business in June, although Patches — who was trained at the Florida Canine Academy with master trainer Bill Whitstine — has more than 800 hours of training under her collar.

Much like a drug dog, Patches uses her nose to detect bedbugs and then signals to Arpin once the pests have been located by sitting and pointing with her nose.

The duo have sniffed out bedbugs in a number of Winnipeg location, including hotels and apartments.
They’ve also worked for the city, and partnered with Abell Pest Control in the West End.

Shaun Jeffrey, Abell’s branch manager for Manitoba, said it was his clients who initially requested the option of a dog for bedbug detection.

"Everyone wants a different option for their site, and Valerie provided a good option," he said.

While properly-trained humans can detect bedbugs much of the time, sometimes the situation calls for a different approach, Jeffrey explained.

"When there’s a large area to cover in a short time, fortunately a dog is more effective," he said.
Arpin agreed bedbug dogs are known for their speed and precision.

"They can do a standard hotel room in less than two minutes and are very accurate — 98% accurate," she said, adding bedbug detection dogs are used more frequently in larger cities like Toronto.

Arpin first became intrigued by canine bedbug detection about four years ago, as she watched a news report about an apartment block that had to be completely evacuated because of the pests.

A bedbug dog was brought in to help, and Arpin was enthralled.

"I just watched the dog in action, and I’ve always been a pet lover, and I just though ‘Wow’."

Her journey with Patches has been a long one; Arpin originally hoped to train her own dog for detection, but the staff at the Florida Canine Academy decided he didn’t have the right temperament.

Patches was found in an animal shelter in Florida, and Arpin said she’s taken a while to warm up to being loved.

"She wasn’t an affectionate dog when I first got her," Arpin recalled. "I think she didn’t know what it was like to be loved and cared for. She’s been bounced around the shelters most of her life."

Patches immediately took to bedbug detection, and Arpin said working with her furry colleague is a pleasure.

"When I’m working with her, I’m concentrated on her and I’m so impressed by what she can do," she said.

Reublished from the Winnipeg Free Press

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Garamark Property Management is located in Winnipeg, Manitoba and successfully balances protecting the investment of an owner while retaining happy tenants.
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