Gleaning insight into the trends and future of commercial real estate investment, NAIOP welcomed an expert panel to its September breakfast meeting. Moderated by Tony Quattrin of CBRE, Greg Spafford, Andrew Tong, and Darren Wong brought decades of wisdom and experience to the discussion. Here, they discuss their approach moving forward, the future of REITS, and their outlook on office space.
Greg Spafford is the Managing Director and Senior Portfolio Manager for Manulife Canadian Real Estate Funds responsible for strategy, acquisitions, execution and overall portfolio management.
Andrew Tong is the Senior Vice President of Investments for Concert Properties and is responsible for leading the strategic planning and key operational activities of Concert’s income portfolio across Canada.
Darren Wong is the Director of Investments with Peterson Investments and is responsible for their real estate investment strategy and acquisition process, including income property and development land.
Using Past Investment Success to Predict the Future
Whether bullish or bearish when it comes to commercial real estate investing, each panellist spoke to their experience, providing a measure of assured success. Spafford, acknowledging the challenge that is real estate investing, wouldn’t consider himself ‘bullish’ per se, but recognized that real estate that’s “well-managed” will provide good steady returns. Tong, quick to say he’s ‘bullish’ on the ”right” real estate, shared, “We exist to know the difference between what will make money and what won’t. So, yes, we are bullish, but on the right real estate.” And, Wong, who operates in private equity isn’t bullish when it comes to Vancouver, but is bullish when it comes to the right product. “To be competitive, we might look for deals that are a bit more complicated or have bit more hair on them, or we’ll look for off-market opportunities like Toronto, Dallas, LA, Chicago, Denver.”
The Future of the REIT
Offering a potentially ominous sign for the future of REITs, Tony Quattrin, asked the panel their thoughts on headlines like the sale of Michael Coopers Global REIT. Seeing an opportunity for private equity, Wong views selling opportunities as potential buying opportunities, noting, “...as they sell off some of their real estate, private equity can move in.” Tong, acknowledging the cyclical nature of REITs and their 25-year longevity, shared, “I don’t see them disappearing, but they may consolidate and internalize.” Since REITs are more like equities, their nature is equally volatile, according to Spafford, “REITs will be back...they’ll get stability again.”
With Vacancy Rates Less Than 3%, Is Office A Good Choice?
Sharing the consensus that not all office space is necessarily good office space, Tong shared the strength of “patient capital,” and waiting for opportunities. “If the building is changing or the area is changing, for us, that’s winner,'' he said. Wong, considering opportunities outside of Vancouver, is buying in Toronto and Orange County, where Spafford evaluates the ways he can compete with new buildings. “We consider how to compete with new buildings that are coming up, and one way to do that is by looking for historic character - places that can be edgy co-working space. We like office, but we do need to have that angle to make money.”