Most Canadians have a general idea that the commercial real estate industry plays an important role in the country’s economy. The profusion of construction cranes that continue to dot cityscapes from coast to coast are a testament to the resiliency of the economy since the 2008 recession and the industry’s role as a growth leader.
What the average Canadian, and even commercial real estate insiders lack, however, is a sophisticated understanding of just how critical the industry is to the nation’s economy.
That prompted the Real Property Association of Canada (REALpac) – an executive organization with a mandate to be Canada’s most influential voice in the real property investment industry industry – and the NAIOP Research Foundation to commission a study to measure that contribution.
The results of the study are staggering. As a top-line number, the CRE sector produces $63.3 billion in annual economic activity and $32.4 billion in net contribution to the country’s GDP; attracts $21.6 billion worth of capital investment; and churns out $12.5 billion in corporate profits for companies, pension funds and insurance companies.
“Even we were taken by surprise by how large an impact the industry has on the economy,” said Stephen Taylor, chairman of REALpac and president and chief operating officer of Morguard Investments Ltd. (image top left)
“We commissioned this report to measure our impact: how much of the country’s GDP is driven by real estate activity, how many people do we employ, how much tax revenue is generated by the industry,” said the REALpac chairman. “It was those sorts of questions that prompted us to commission Altus Group to carry out the study.”
The REALpac-NAIOP study (The Contribution of the Commercial Real Estate Sector to the Canadian Economy) illustrates that the CRE sector’s benefits are felt throughout the economy. The industry supports 340,000 jobs across the country, generates $18.1 billion in personal income and contributes $7.2 billion in personal and corporate income tax revenues. (Figures for the study come from 2011 economic data).
A low profile
Despite commercial real estate’s prominent economic role, the industry is often overlooked by government and policy makers, spurring the study, explained Taylor.
“We do not actually blow our own horn very much as an important contributor to the economy. With this study, the industry is saying we are a very important sector of the economy and we should be getting acknowledgement for that. Real estate tends to be the forgotten man in the economy compared to sectors such as automotive or energy.”
The 76-page study addresses the fact that even though millions of Canadians live and work in buildings constructed and operated by the CRE industry, its value and contributions are often overlooked or taken for granted.
Gaining a better understanding of the magnitude of the economic contributions goes beyond mere bragging rights.
The data is critical for policy makers at the federal and provincial levels of government and municipal planners and politicians in order for them to make informed decisions.
As well, investors, tenants and the multitude of Canadian companies within this important sector will be better able to see how their businesses and decisions affect the sector and how they are interconnected.
The CRE Economic Contribution study is intended to be part of a series of research initiatives from REALpac on its own or in partnership with other organizations in the industry or in academia. “Other areas that we are looking at, such as sustainability or investment performance, you will see much more research coming from us in the future,” said Taylor.
‘‘Part of the immediate benefit of this particular research is to illustrate that real estate is a voice that should be listened to.”
CRE needs to be heard
Rapid growth in many Canadian cities and municipalities since the 2008 recession has created major infrastructure demands and challenges, which should not be tackled without the expertise of the CRE sector, noted Taylor.
“There are a number of major policy issues that are being debated right now. One of the most notable is the issue of building a comprehensive transportation network with the Greater Toronto and Hamilton area. How does it work and how does it get funded?
“We are saying we are an important player in this, we are actually building the buildings that allow the cities to take shape. The infrastructure system that supports cities is crucially important to us and we are a voice that ought to be at the table.”
Highlighting the critical economic contribution of commercial real estate through research is part of REALpac’s core mandate to produce thought leadership for the industry.
REALpac’s triple mandate
“Thought leadership, as evidenced by this study, is one of three major thrusts from the association,” said the REALpac chairman. “We want to do excellent work on the research side when it comes to the Canadian economy, city building, environmental issues and sustainability as well as on investment and finance.”
In addition, REALpac is focused on the area of leadership development in the CRE industry. That effort takes the form of training and development courses geared toward the advancement of younger practitioners in the industry. That effort extends to senior and C-suite members of the industry in the form of learning and networking events.
The third plank of REALpac’s mandate centres on government relations. That effort includes acting as the voice of the industry and striving to inform and influence policy makers at the federal, provincial and municipal levels.
REALpac is an exclusive, executive organization whose vision is to be Canada’s most influential voice in the real property investment industry. Our mission is to bring together Canada’s real property investment leaders to collectively influence public policy, to educate government and the public, to ensure stable and beneficial real estate property and capital markets and to promote the performance of the Real Property sector in Canada. For more information please visit www.realpac.ca