Property type outlook
From the various classes of commercial real estate to the housing market, the impacts of changing customer habits and expectations are reverberating across the property types.
Industrial real estate
The industrial property market as a whole is very healthy, with a low national vacancy rate and particularly tight conditions in Vancouver and the Greater Toronto Area. Rental rates have also been on the rise, and while new supply is in the works in many Canadian cities, high demand is expected to keep industrial markets tight for the time being.
Purpose-built rental housing
Demographic and economic trends continue to move the dial in favour of purpose-built rental housing in Canada. Many baby boomers looking to downsize are choosing to rent, as are some millennials who find it an attractive and potentially more affordable alternative to buying a home. Government actions that are suppressing demand on the home ownership side are pushing even more people to the rental market.
Office buildings continue to be a healthy area of the market, with survey respondents rating downtown properties fifth for development prospects in 2020. Canada’s continued gains in employment and the fast-growing technology industry have been positive for the office sector. Despite the healthy market overall, changing workplace practices are having a significant impact on office properties.
In a year that saw announcements of yet more closings of well-known names in the retail sector, it’s not surprising that the subdued sentiment continues for that area of the Canadian real estate market. But the rise of e-commerce doesn’t necessarily mean the end of a brick-and-mortar presence.
As the affordability conversation continues, the market for single-family housing has come under pressure. Survey respondents reflected the impact of the affordability issue, rating the investment and development prospects of moderately priced single-family housing well above higher-end products.
Condos have continued to dominate new-home construction in Canada. But survey respondents are lukewarm on condos, rating development prospects as fair for 2020. Many demographic factors are favourable, but the price gap between condos and single-family homes has been narrowing, particularly with factors like the mortgage stress test limiting demand for more expensive types of housing.