TWO KEY WITNESSES TO THE REAL ESTATE MARKET RETIRE

Sylvain Leclair and Yves Godin, both of them executive vice-presidents, retired at the end of March 2023. After more than 30 years with the Altus Group, they look back at their careers and at changing trends they have noticed in the real estate market over the years.

Financial crisis, recession, real estate boom, rising interest rates… Over three decades, Sylvain Leclair and Yves Godin have seen a lot of water flow under the bridge and experienced the ups and downs of the industry. As they prepare to pass the torch, they agreed to stop for a moment and take a look back at the highlights of their careers.

A Passion For Real Estate

After starting his professional life in office automation for a national rail carrier, Sylvain Leclair developed a keen interest in real estate. "My parents worked in the industry, and as part of my Bachelor of Administration degree, I took a real estate financing course and found it fascinating. I decided to take the plunge and in 1988, I started as a technician with the firm LCB, which later became LCBA. I even took a pay cut compared to my previous job, because I absolutely wanted to work in this sector," he recalled. He then completed the training required to obtain the title of chartered appraiser and climbed the ladder at LCBA, where he became a partner in 1996. In 2000 he co-founded the Altus Group, which brings together several major Canadian commercial real estate firms.

After completing a Bachelor's degree in urban planning, Yves Godin decided to pursue a new path. "There was no work at the time, so I got a Bachelor's degree in administration, majoring in valuation," he said. In 1985, he started out as an intern appraiser with the firm Roy, Sanche, Gold & Associates, then obtained his title and climbed the ladder to become a partner in 1994. He joined the Altus Group after it purchased the firm in 2006.

WRITTEN BY EMMANUELLE GRIL

The two professionals moved up through the ranks of the organization to their current positions as executive vice-presidents. "We're both steady Eddies," noted Sylvain Leclair with a laugh. "Opportunities came up, but we chose to stay with the firm and help it grow." A sound decision, indeed. The firm is now at the top of the market and has become a global leader in software, data solutions and specialized services, integrating technology into the commercial real estate industry. "We have equipped ourselves to meet demand, to diversify and provide 360-degree service to our clients. Consequently, we are able to adapt to changing market conditions. If one sector is not doing well, another will grow in the meantime," he said. As proof of that growth, the number of employees has doubled, reaching a total of 130 in Montréal and 50 in Québec City.

"Our different divisions complement each other perfectly, and we have added services in order to be in synch with our clients, supporting them as they expand and develop," noted Yves Godin. He mentioned that there are more and more big players in the field, as well as a strong trend towards the internationalization of real estate with institutional clients.

"Altus has certainly contributed to education in real estate. Many professionals have passed through our doors; we are a very good school! Moreover, when our people leave to work for one of our clients we continue to work together. The ties are not broken," said Sylvain Leclair. "In the past each office kept information to itself, so we were unable to do any benchmarking. Now that information circulates, we have a comprehensive view of the industry and are able to make better decisions."

Ups And Downs

Sylvain Leclair mentioned that when he started in the industry in 1988, Canada was in the midst of a recession. "We had a long slow period where pickings were slim. Activity picked up in the decade from 1990 to 2000, and then it dropped again after the 9/11 attacks. Then came the financial crisis of 2008-2009,

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which hit hard," he recalled, pointing out that the industrial, office and even residential sectors sailed on very calm waters for many years before returning to growth mode about 10 years ago.

"The retail sector started to move in the 2000s. The malls transformed, becoming power centres, but then that diminished with the rise of e-commerce," explained Yves Godin. On the other hand, the industrial sector compensated for that shift with strong demand for warehousing, in particular. As a result, prices and rents have exploded in that sector. "It's risen phenomenally, something we've never seen before," said Mr. Godin.

The early 2000s were also characterized by the arrival of big players in the industry making multiple acquisitions by means of real estate investment trusts (REIT) and foreign portfolio investments (FPI). Pension funds also joined in the dance, integrating property assets into their portfolios.

Sylvain Leclair specified that the big players also purchased better quality assets. "In today's market, there are two types of investors: those who buy at a discount to reposition the asset and add value, and those who want to acquire a stable, sustainable asset with less risk."

Consequences Of The Pandemic

While the office sector had previously been doing very well, Covid-19 sounded the death knell for that robust advance. Remote work and hybrid work are here to stay, which will necessarily lead to a redistribution of spaces occupied by companies and institutions. While the effects are not fully felt now, they will emerge as organizations renew their leases.

"Forecasts indicate that availability will increase in downtown Montréal. We're going to see a new pattern of office occupancy, and it's probably going to even out over the long term. But I must admit that in my 35-year career, I've never seen such a shock in any segment of the real estate market," said Sylvain Leclair.

Yves Godin believes that a paradigm shift is underway in the downtown core, which must continue to exist despite the decline in office traffic. "To keep businesses alive, we'll have to think about other options. Building condominiums for example, or converting offices into housing so as to increase the number of residents in the area," he said. In other words, we need to be creative and explore new approaches.

The industrial sector has really had the wind in its sails over the past few years. However, Sylvain Leclair expects a shock once it is hit with the taxes generated by the new municipal assessment roll. "In Montréal, we can expect an annual tax increase of 15% from 2023 to 2025. It will be the same thing in Laval and on the South Shore." Those increases will certainly hurt the industry, and may even slow its growth.

What also emerged with the pandemic, noted Yves Godin, is a big discrepancy between different segments. "While some are doing very well, others are doing very poorly. There are big differences from one to the other, with major variances in value."

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Rapidly rising interest rates are also a game changer. "It's a real paradox. There is a high demand for housing, but the pro forma structures are no longer working because of rising rates. Under these conditions, developers have had to give up building, because otherwise they would have to charge rents that were too high," said Sylvain Leclair. Integrating ESG factors is an additional complication, something that the industry must take into account in its forecasts. It is a trend that could also drive up costs.

"The changes have hit extremely fast and hard. We've never seen such phenomena in years past," said Yves Godin who, like Sylvain Leclair, remains optimistic about the future.

While they obviously have real estate in their blood, the two executive vice-presidents plan to enjoy their retirement, especially since they're both young retirees. "I'm going to travel, spend time with my family. It will take a lot of pressure off my shoulders and I want to enjoy life's pleasures more," said Sylvain Leclair. Yves Godin also wants to travel, spend time with his loved ones, get back in shape, and carry out expansion and renovation projects. "I like to work manually, and now I will have time to do so," he said.