Commercial Real Estate Market in Canada - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Commercial Real Estate Market in Canada - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Canadian economy witnessed significant improvement in 2019, with a GDP growth of nearly 3.7%. Although Canada's property market witnessed deflation in 2018, the commercial real estate market rebounded in 2019.The country is witnessing a rising demand for commercial properties, especially in areas, like Toronto and the province of British Columbia. In the Canadian office market, there was a rise in the investment sales activity at a record pace in 2019. Even the tightest office markets are standardizing 10-year lease terms with top pricing. This is encouraging office lease renewals, and occupiers are also looking toward expanding their office spaces. Hotels and apartments are also experiencing unprecedented demand, and owners of these properties have a similar advantage when it comes to pricing. Occupancy and per room profit are each at or near their all-time highs, with profit figures growing rapidly. Likewise, in the multifamily sector, purpose-built apartment vacancy rates averaged 2.4% nationally in 2018, and all major cities are witnessing a decline in the occupancy rates.Low vacancy rents, rising rents, and increasing construction activity, particularly in gateway markets, like Toronto and Vancouver, are anticipated to increase the demand for commercial real estate in Canada. Additionally, technological changes, tech business growth, and tech talent are some of the dominant factors driving demand across all commercial real estate sectors.

Key Market TrendsIncreased demand for commercial office spaces in the country

The office vacancies reduced in all Canadian markets, reducing the average office occupancy rate to nearly 11.9% in 2018. The office space under construction in the country nearly doubled in 2018 to more than 22 million square feet in cities, like Toronto and Vancouver. There is a high shortage of office spaces especially in Toronto due to rising demand from tech companies.

There are majorly three types of tenants that are increasing the demand for commercial properties, namely coworking companies, technology companies, and logistics/distribution firms. These sectors have expanded rapidly off late and are having a significant impact on the real estate market. Coworking is likely to continue as a strong driver of the office market and accounts for a significant portion of the Canadian office footprint.

Strong growth in multifamily sector to drive demand

The multifamily sector has the ability to generate consistent cash flows, and Canada is currently witnessing strong growth in this sector. Performance drivers, such as growing population, rising homeownership costs, and lack of rental supply, are becoming increasingly popular in many markets across the country, giving a boost to the multifamily assets.

Canada’s population grew by 1.1% per year from 2009 to 2018 and is expected to continue expanding at a rate of 0.9% over the next four years. Much of this momentum is fueled by immigration because, unlike other global leaders, Canada remains supportive of immigration as an economic imperative. The national investment volumes for multifamily assets have also been increasing rapidly, and it touched nearly USD 8.3 billion in 2018. All these factors are anticipated to increase the demand for the multifamily sector in the country.

Competitive Landscape

The Canadian commercial real estate market is fragmented with the presence of local as well as few international players. The Canadian commercial real estate market is attracting a lot of investments supported by an increasing number of real estate acquisitions as well as an increase in new property builders. Some of the leading players in the Canada commercial real estate market include Onni Group, WestBank Corp, Amacon, and Maxwell Realty.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

Companies Mentioned

IBM Corporation
Oracle Corporation
Internap Corporation
Packet Inc. (An Equinix Inc. Company)
Scaleway Inc.
Amazon Web Services Inc
Rackspace Inc.
CenturyLink, Inc.
LightEdge Solutions, Inc

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