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The Canadian commercial real estate market was on fire in 2017 – but will 2018 bring more of the same?

Photo: James Bombales

Canada set a record for commercial real estate investment last year, making it one of the most successful commercial real estate markets in the world. But according to one company, 2018 could be even better.

According to a new report from CBRE Ltd., there were over $43.1 billion in commercial real estate investments last year, well over 2016’s $34.7 billion.

“Investors are not shying away from Canadian commercial real estate,” reads the report. “We have record low vacancy rates, record low unemployment, increasing institutional allocation to real estate and supportive immigration that fuels population growth.”

It’s those factors that could push the market to new heights in 2018, although the company does acknowledge that it will face new headwinds, including rising interest rates.

Currently, Toronto and Vancouver have office vacancy rates of 3.7 and 5 per cent — some of the lowest rates in North America. CBRE expects that that number will fall even further, a strong job market causes demand for space to surge.

The report also notes that demand is spilling over from Toronto and Vancouver to other markets such as London, Waterloo, Ottawa, Montreal and Halifax.

That forecast is supported by Morgaurd’s 2018 Canadian Economic Outlook and Fundamentals Research Report, which tapped Ottawa, Montreal and Calgary as potential commercial real estate hubs.

“A positive performance-driver outlook is indicative of continued progression in the Montreal retail sector over the near term,” reads the report. Meanwhile, Calgary is predicted to see increased activity as investors look for high-quality assets in a recovering market.

Finally Ottawa’s economic fundamentals will make it a market to watch this year.

“Sustained progress is forecast for the Greater Ottawa Area retail sector over the near term, in keeping with the recent trend,” reads the report. “The healthy fundamental outlook will attract considerable interest in this market on the part of investors.”

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