Canada’s Commercial Real Estate Seeing Healthy Gains Nationwide
The commercial real estate market across Canada had a dynamic first half in 2012 and the expectations are that market will continue to thrive into the better part of 2013. The Re/Max Commercial Investor Report was just released this past Wednesday. It revealed healthy sales and price volumes in most markets from the first of January through the end of June. Those Canadian markets included in the study were Halifax-Dartmouth, Ottawa, Greater Toronto, London, Ontario, Winnipeg, Regina, Edmonton, Calgary and Greater Vancouver.
The Re/Max report came out just after another study by the Canadian Real Estate Association, or CREA, which painted the residential market in a much different light. September numbers did show sales increased 2.5 percent over this past August, but were down by 15.1 percent from September of 2011.
The prediction by CREA is that sales numbers in the residential market are expected to be down from levels seen throughout the fourth quarter of 2011. Reasons cited included a less than stellar economic picture and the last round of tightening the mortgage rules. CREA noted that it is more difficult for first time homebuyers to secure financing with the new rules. Others are taking a second look at how much money they really can afford to spend on a home, which is one of the intentions of the changing the mortgage requirements.
Why Are Investors Interested?
But the still low interest rates are attracting investors from within Canada and other countries to purchase commercial real estate, whether it is an apartment or condo building or a strip mall that can be leased for retail space. The strong economy within Canada is also a major part of that attraction. For the last few years, private investors have been particularly interested in entry level investments, such as small store fronts in urban or suburban areas, small office buildings or multi-unit residential buildings.
Gurinder Sandhu, with Re/Max Ontario-Atlantic Canada, noted that the commercial market in Canada took the lead in bouncing back from the doldrums of the recessionary period. That also meant an increase in building starts for that sector, bringing about healthy numbers in 2011 and even better ones in 2012. Sandhu noted that this building spree came about partially because sellers were tending to hold on to their investments, waiting until they could get more out of those investments. The favorable interest rates along with an iffy stock market also led investors towards the real estate market. The demand for investments is still increasing, meaning that prices are also remaining strong.
Result of That Interest
The number of investors, with either large or small bankrolls, looking for commercial space has resulted in a number of markets in Re/Max study receiving incidents of multiple offers. Edmonton, Winnipeg and all major markets in the eastern provinces were included in this lot. Investors are hungry for tangible investments that have the potential to provide income streams in the long term, and they are finding that commercial real estate fills that bill quite nicely. Also a plus is that the market is expected to be a top performer through much of 2013.
Saskatchewan and Alberta are strong economic markets, and that is reflected in their sales increases in the commercial market. Halifax-Darmouth is benefiting from the recently granted military contract, valued at $25 billion, awarded to Halifax Shipyard. At present, Western Canada is seeing a shortage of industrial product, while in the southern part of Ontario; the market is balancing out after experiencing a moderate oversupply.
The United States, as well as other foreign markets, are finding Canada a welcoming haven for retailers and are snapping up commercial space across the country. Some of the brands that are making their mark on the Canadian landscape include Marshalls, J. Crew, Target and Nordstrom. Retailers are either setting up shop in existing mega-malls or investing in their own space.