- What Fiera Real Estate found that Canada’s commercial real estate market is showing positive signs of a revival
- Why Sales activity was at its highest level of activity nationally since 2022
- What next Demand for industrial and multifamily properties remains strong
Canada’s beleaguered commercial real estate market appears to be rebounding, Fiera Real Estate said in a market update.
The property investment company found that as of the second quarter of the year, Canadian property transactions had surged to $14.5bn in overall investment – the highest quarterly output since the second quarter of 2022. Industrial property sales led the way with $4.5bn, while multifamily transactions reached its highest amount in nine quarters, racking up $3.5bn in sales across the country.
The increase in transaction activity suggests that Canada’s commercial property market is set for a revival in the coming months, as interventionist measures, such as rate cuts, initiated by the Bank of Canada to combat inflation appear to be working, the company said.
“As conditions continue to stabilize, this performance signals renewed strength and marks the beginning of a promising recovery cycle for Canadian investors and market players alike,” Fiera said in the update.
While no property sales figures were released for Q3, Fiera found promising signs during the quarter as available industrial space ticked up to 0.3% nationally, well below historic averages. About 1.9m sq ft of industrial space was absorbed into the market, fueled by the completion of new properties that were delivered pre-leased.
While net-asking industrial rents dropped by 3.8% during Q3, and sale valuations also dipped by 2.8% year-over-year, Fiera found those averages were still ahead of levels seen in the sector prior to the pandemic, suggesting long term resiliency for the Canadian industrial sector. Toronto and Vancouver continued to see the most robust industrial property activity, while secondary markets such as Halifax and London, Ont. showed signs of growth in their rental markets.
Fiera also found exceptionally low vacancy rates and a tight market for multi-residential rental properties. Identified were affordability and high mortgage costs as factors fueling demand and pushing occupants toward renting rather than property ownership, along with a lack of options in Toronto, Vancouver and Calgary markets for purpose-built rental.
Retail continued to face challenging headwinds such as price increases and lower discretionary spending by consumers amid an overall economic slowdown. Still, Fiera sees positive impacts for leasing, fueled by population growth and low vacancies that have resulted in retail rents rising by 3% year-over-year.
Office continued to struggle however during Q3, with the national vacancy rate rising to nearly 19%, a slight increase of 0.1% quarter-over-quarter.
