Canadian Commercial Real Estate Remains Robust - RE/MAX Report

By Ketki Saxena

Investing.com -- A recent report on Canadian commercial retail trends indicates an "upswing in demand," with the retail and industrial sectors demonstrating resilience despite ongoing challenges faced by office spaces, as per a report from RE/MAX Canada. 

RE/MAX Canada President Christopher Alexander stated that their organization's 2023 Commercial Property Report, published Thursday, reveals several positive indicators characterizing Canada's commercial real estate market. He added, "The momentum is building, with some pent-up demand evident. The fundamentals underpinning the market squarely supporting ongoing commercial activity in the year ahead."

The report analyzed trends across twelve Canadian cities during Q1 of 2023 and identified potential areas where joint commercial and residential developments could address the country's housing shortage. Industrial real estate, including warehouses and distribution centers, emerged as one of the strongest asset classes with consistent sales and lease activities nationwide.

In response to increasing property prices in Ontario and British Columbia, investors are turning to provinces offering more affordable options. This "spillover of demand" has led to a rise in industrial real estate sales within Edmonton, Calgary, St. John’s Halifax, Saskatoon.

Retail centers also experienced robust activity across 92% of markets studied in the report. Consequently, landlords have been heavily investing into major shopping malls throughout Canada.

Meanwhile, the report notes that the office sector  "the country’s most lackluster segment," with little hope of reverting to pre-pandemic norms. Although employment growth could facilitate some recovery, a shift in culture towards work-life balance makes it unlikely for the office sector to return to pre-pandemic occupancy levels.

The RE/MAX report found that hybrid work's rise has caused struggles "in markets across the country." Companies are trying various strategies, such as adding a more social component to office life or reducing their physical footprints.

An increasing number of cities are considering converting unused office space into residential housing units. The report mentioned conversion activity in six out of twelve surveyed cities and cited examples like Calgary's subsidy program for office-to-residential conversions and targeted buildings for conversion in Halifax, Ottawa, London, Toronto, and Winnipeg.