New report from RE/MAX Canada shows rebounding interest from major players in the CRE investment space
Canadian commercial real estate (CRE) investors started 2023 with caution but there are signs that things could change over the coming months.
A new report from RE/MAX Canada reveals a change in sentiment and the return of some major players to the market, which could spark a “significant upswing” in demand in the second half of the year.
"Although activity has come off peak levels reported in the first quarter of 2022, demand for commercial real estate remains relatively healthy in most major centres," says Christopher Alexander, president of RE/MAX Canada.
He added that the tight market is already pushing up asset prices and this should continue to be the case through the rest of 2023.
“A shortage of available inventory across various asset classes continues to place upward pressure on commercial values and lease rates, especially within the industrial sector,” he said.
Industrial strength
The Canadian CRE sector continues to be led by industrial with all 12 of the markets analyzed reporting strong sales and lease activity, but other segments are also performing well.
Land sales remain solid, despite higher interest rates and construction costs, with acreage zoned industrial, multi-family and retail most sought-after in major Canadian centres.
Despite economic challenges and the ongoing rise of ecommerce, retail remains robust with almost 92% of markets reporting solid activity in retail nodes and shopping centres.
Offices struggle but have a future
Offices continue to show weaker activity as employers wrestle with hybrid work models, particularly in the downtown core. But the repurposing of office space to residential should help drive demand longer term.
“The conversion programs now underway ensure that our city centres remain vibrant in the future, restoring vital foot traffic that is the lifeblood of the country's core urban areas,” said Alexander. “The retrofit and renovation activity not only brings desperately needed residential product online, but it also supports the surrounding retail shops and restaurants, transit systems, and the overall health of our downtown neighbourhoods."
However, red tape is hampering efforts to expediate this transition from offices to homes.
Overall, Alexander sees positive signs for the Canadian commercial real estate market in the near future.
“The momentum is building, with some pent-up demand evident. The fundamentals underpinning the market squarely supporting ongoing commercial activity in the year ahead," he concluded.
