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Commercial Real Estate Continues to Support Canadian Housing

18 October 2012

Just a few weeks ago we talked on this blog about commercial mortgages in Canada, and how they were helping to pour billions of dollars into the economy through taxes and revenues. Now, new stats have been published that continue to show just how well commercial real estate is doing in Canada.

The stats come from the Re/Max Commercial Investor Report that was released this week; and they show that not only did commercial real estate do well in Canada last year, but that the boom is expected to continue through 2013.

The report focused on nine major Canadian cities – Greater Vancouver, Calgary, Edmonton, Regina, Winnipeg, London, Greater Toronto, Ottawa, and Halifax-Dartmouth. Unfortunately, while the report does state that commercial real estate has been doing well across Canada, it gives no actual stats or figures to back that up. It does give several reasons for the boom though.

“Given the appetite for tangible investments with long-term revenue streams and potential for appreciation, commercial real estate has been gaining favour and is expected to be a top-performer well into the new year,” said Re/Max representative, Elton Ash. “Despite the enthusiasm, demand is unlikely to be satisfied while those same benefits are prompting owners/landlords to hold on to their properties, especially with the prospect of capital gains taxes down the road. It’s a push-pull situation, yet buyers are forging ahead, hoping to ride the wave of year-over-year double digit equity gains a little while longer.”

Yes, it’s investors that are flooding this commercial market, and there are a lot of them. So many in fact, that there’s a virtual waiting line of interested folks waiting to scoop up commercial properties; but often those properties never even make it to market before being purchased.

Immigration, in-migration, and foreign investors are all being contributed for the commercial buying spree, and they’re all needed. This influx of real estate activity is helping to support many of Canada’s hottest, and most worrisome, markets such as Toronto and Vancouver.

Gurinder Sandhu, Executive Vice President and Regional Director of Re/Max Ontario-Atlantic Canada says, “Canada’s commercial market has quickly shaken off the signs of recessionary sluggishness and roared back to life, with 2012 building on impressive gains reported in 2011. Today’s low interest rate environment, combined with lacklustre returns on GICs and volatility in the stock market, have renewed demand for commercial real estate at a time when sellers/landlords are holding onto their investments. With little product available in the market, upward pressure on pricing is expected to continue for the remainder of the year and into 2013.”

That’s indeed true. Sandhu continued on to say that with declining pension funds, people are also looking for other ways to “build their nest egg,” and so they’re “considering mainstream alternatives like commercial real estate.”

The shortage of inventory, and the influx of buyers on the market, are evidenced by the fact that many commercial properties in the cities that were studied had multiple bids on them. And a shortage of bidding wars in the residential market, more of these commercial deals are just what’s needed to help support the Canadian housing market.

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