Latest Commercial Real Estate Market Trends in Canada – RE/MAX News

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We won’t blame you if the film Everything Everywhere All at Once immediately comes to mind when you think about Canada’s latest commercial real estate market trends. It’s an apt way to visualize the myriad of factors currently at play in the market and the sometimes messy, sudden and surprisingly exhilarating changes they’re invoking.

Key Factors Influencing Commercial Real Estate Market Trends in Canada

While there are many more storylines than these intertwining in the current commercial real estate market in Canada, the three we’ll focus on are:

Buy/sell, rent/lease residential &
commercials real estate properties.

  • High interest rates
  • Pandemic-induced reality shifts
  • REITs as proof of a rebound in progress

High Interest Rates

As Canadians are all too aware, Canada’s prime interest rate has soared from a paltry 2.7 per cent in March 2020 to an eyebrow-raising 7.2 per cent in just 20 months and now sits at its highest level for the past 22 years.

Multifamily Real Estate Reaps A Reward

While causing dread for single-family homeowners who hoped to cash in on high selling prices and low financing rates to up or downsize their dwellings, elation is more the mood for owners of multifamily real estate properties, who find themselves experiencing a near lowest vacancy rate for rental apartments over the same 22-year time frame, along with rents rapidly rising in response to restricted inventories.

Pandemic-Induced Reality Shifts

With everyone waiting to see if the Bank Of Canada will cut interest rates this year and the demand for housing In Canada still critically short of supply, pandemic-induced vacancies once thought to be disastrous for the office real estate sector may now be causing it to bounce back in vibrant new ways, and ride to the rescue on the residential front as it does. Think that’s a multiverse too weird to be believable? The latest commercial real estate market trends beg to differ.

Office Real Estate Gets a Boost from Its Make-Or-Break Moment

The office real estate sector in every major metropolitan area in Canada continues to struggle due to pandemic-induced trends toward remote and hybrid work, with the Q3 2023 national office vacancy rate for downtown locations estimated at 18.9%.

While the sector might seem down for the count, it’s possible that remote work has simply sped up a process of downtown rebirth that was already happening behind the scenes, albeit at a slower pace.

In order to change their reality and tap into new sets of hidden superpowers, characters in Everything Everywhere All at Once are required to do something “crazy” – and to entice employees to return to work, refill empty downtown office spaces and deliver new residential housing inventory – businesses, commercial real estate owners and governments are ready to oblige.

HR departments, landlords and architects who might never have met in the past are now working side-by-side to find affordable ways to offer commercial real estate amenities such as in-house daycare, outdoor social spaces and even concierge-like laundry and grocery services in an attempt to make commercial real estate office spaces as functional as home, so long commutes feel like their worth it for workers.

At the same time, governments under pressure to revitalize deserted downtowns and deliver new residential products have been working hard to cut red tape, reduce project approval timelines, amend zoning bylaws and even offer tax incentives to developers willing to convert office space into residential units. A recent effort in Calgary, which will eliminate an estimated one million square feet of empty office space and create 1,200 homes within the Calgary downtown core, is being applauded as an example of what fresh thinking can accomplish.

E-commerce is Behind Industrial Real Estate’s Top Performance

And while they may have abandoned the office, consumers have not abandoned their pandemic-driven online shopping habits. In fact, consumers’ continued use of e-commerce sites is a driving factor behind industrial real estate’s outperformance of almost every other asset class. And because consumer online appetites now include food, flowers and other perishable products, not only are private and public warehouses and distribution centres in high demand but their climate-controlled counterparts have also been invited to the party.

The result? Commercial real estate market trends indicate the national industrial real estate availability rate is now below three percent and at its lowest level in Canadian history.

Brick-And-Mortar Retail Is Happy to Be Back

Pent-up pandemic energy, plus the need to be outside and social again, is behind physical retail’s surprisingly robust showing in recent commercial real estate market trends. From storefronts on busy main streets to strip plazas and shopping malls, brick-and-mortar retail locations are staging a comeback.

Landlords of large retail complexes eager to fill their vacant storefronts are also getting in on the office retrofitting action, with investment dollars flowing into major shopping malls from coast to coast in order to create multi-use complexes that make it easy to live, work, play, shop and socialize within a single development.

Vancouver’s Oakridge Park Project aims to illustrate the concept’s potential by converting an already top-performing retail shopping centre into a cultural hub that includes multiple live music venues, a food hall with global offerings, a community centre with athletic facilities, meeting space and youth services, a library, a daycare centre, community gardens, residential towers, office space, retailer space and a ten-acre public park – all powered by sustainable energy systems designed to create 70 per cent less greenhouse gas emissions than a comparable project.

REITs As Proof of a Rebound in Progress

Many Canadian real estate investment trusts (REITs) decimated during the pandemic are already on the upswing and have the potential to produce pre-pandemic or even higher returns in the near future. Commercial real estate market trends indicate that REITs focusing on industrial, multifamily, retail and mixed-use city centre real estate are already seeing increased demand.

Commercial Real Estate’s Existential Crisis

Like Evelyn, in Everything Everywhere All at Once, after the pandemic, commercial real estate in Canada faced an existential crisis. But as Evelyn learned, it’s possible to pivot to new possibilities and eventually defeat dark forces. All that’s required is the ability to stay calm during the chaos, acquire lots of new skills and re-invent yourself by going all-in on audacious ideas.

Despite enduring a number of setbacks, recent commercial real estate market trends indicate that Canada’s industrial, retail and office real estate sectors have done just that and are poised for significant recoveries as a result.

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