Highlights from the RE/MAX Canada story below:
Incentivized builders and developers respond to the call for multi-family purpose-built rentals
Strong population growth and housing supply issues have prompted a significant shift in the Canadian commercial real estate market as builders and developers adopt an “all-hands-on deck” approach to solving Canada’s housing shortage, according to a report released by RE/MAX Canada.
“The overwhelming need for shelter, combined with the Canada Mortgage and Housing Corporation’s (CMHC) Apartment Loan Program that has incentivized builders and developers with low interest rates, favourable terms, and 50-year amortization periods, have created the perfect storm in today’s high interest rate environment,” says RE/MAX Canada President Christopher Alexander. “Unfortunately, with Canada’s population surpassing 40 million people this year, even the current upswing in residential construction continues to fall short of the thousands of units required in most major markets.”
[Top 5] Commercial Real Estate Trends:
- Multi-family construction continues unabated across Canada. Purpose-built rentals are the primary focus in every major urban center analyzed, with student housing and seniors’ residences following in lockstep, thanks to the CMHC and the federal government’s decision to cancel the GST on new residential builds. Seven markets including Vancouver, Calgary, Regina, Winnipeg, London, Ottawa and Halifax had vacancy rates at or below 1.8 per cent in 2023, according to CMHC’s Rental Market Report released in January 2024.
- High-density & mixed-use development. With land being a finite product and continued population growth in major urban centers, many mall/strip plaza landlords have come to realize that the best use of their properties means increasing density. As a result, a greater number of malls and shopping centers are exploring a residential component, with a clear trend toward future mixed-use developments.
- Capital gains tax—the government giveth and taketh away. Smaller investors are particularly hard hit by the increase in the capital gains tax inclusion rate, from 50 per cent to just over 66 per cent, as outlined in the 2024 Budget announcement. While a handful of investors were scrambling to get their properties sold prior to the June 25 deadline, most pulled back on listing their properties for sale.
- Industrial real estate continues to experience strong demand across Canada, with tight inventory impacting several markets across the country (including Hamilton and the region spanning Halton to Niagara, Newfoundland–Labrador, Halifax Regional Municipality.) Despite an uptick in availability in many areas of the country due to an influx of new space, demand remains steady. End users are most active in the market, with warehousing, manufacturing and flex space most sought after. Affordability is a growing factor, especially in larger urban centers, prompting some businesses to consider industrial property on the outskirts of the city. In Vancouver, where large tracts of available industrial land are almost non-existent, some business owners are looking east to Alberta (rail access) and south to the US seaboard (access to ports).
- Bricks and mortar retail stores still hold their appeal, despite the huge e-commerce presence in markets across the country. Neighborhood retail is performing well, with busy retail avenues experiencing a shift from more traditional retailers selling goods such as clothing or jewelry to service-related retail, especially within the health and wellness industries and storefront medical offices. Many malls continue to expand and redevelop in an effort to perfect the tenant mix. Several markets are experiencing increased demand for daycare facilities, given significant population growth.
