In its recent report on Canada's commercial real estate, RE/MAX said the sector is set for an upswing in demand. The first three months of the year were characterized by cautious investment activity. RE/MAX noted a shift in sentiment — rising demand and the reentry of dominant players into the market. The report, which examines 12 major markets, found considerable resilience despite unfavorable market conditions. According to the company's president Christopher Alexander, a number of encouraging indicators characterized Canada's commercial real estate market. He added that the momentum is building, driven by some pent-up demand. Industrial real estate outperformed other asset classes, with strong sales and lease activity in all the markets. The property value increase in British Columbia and Ontario forced investors and end-users to expand their search for distribution and warehousing facilities to other nearby provinces with affordable pricing. This demand resulted in strengthened sales of industrial products in Edmonton, Calgary, Regina, Saskatoon, London-St.Thomas, Halifax, and St.John's. According to Altus Group, the industrial asset class experienced high demand. The national availability rate was below 3% in the first quarter, increasing only by 0.1% YoY. As a result, rents increased by 20%-30%. A strong demand for last-mile distribution increased the demand for warehouse space.
Despite the high-interest rates and construction costs, land sales continue to remain strong. Industrial, multi-family, and retail-zoned land were in demand in all major markets. Retail is another asset class that has surprised experts after the rise of e-commerce in recent years. 11 out of the 12 markets reported strong activity in retail nodes and shopping centers. As expected, the office sector continues to struggle as employers and employees are still trying to figure out the right number of in-office workdays. Companies are turning to highly amenitized buildings to incentive employees to return to work. There have been conflicting views on converting old, unused office buildings into residential buildings. However, 50% of the markets reported growth in conversion activity. Alexander noted that the commercial office market is experiencing a transformational shift after the pandemic. He added that downtown cores that were deeply impacted by restrictions are yet to come back to life in many markets. The market is witnessing the return of REITs with a strong demand for industrial, retail, and multi-family. The report said conditions are favorable for investment, especially in multi-family properties, as the country's population is expanding at a record rate. Statistics Canada's data show that Canada's population was a little less than 40 million in Jan. 2023, the highest annual population growth. |
