Record commercial real estate investments witnessed in Canada; may rub off positively on residential real estate

Canada’s real estate market is slowly but steadily improving and markets like Toronto and Montreal can be classified as hot property markets at present. These are real estate markets where there is abundant demand in spite of soaring prices and a flurry of projects under development. Even Vancouver has arrested the slide in property prices and is reviving steadily on the back of increasing investor and buyer demand alike. Several other property markets in Canada are also witnessing a steady revival which is a far cry from the nationwide slump observed over 1-2 years earlier.

Reports have now highlighted the record commercial real estate investments in Canada that may rub off positively on the residential real estate space as well. Studies forecast a whopping $50 billion of investments in commercial real estate for 2020 since immigration regulations and economic hurdles will be supporting the boom in the segment. The stronger economy is also creating newer challenges linked to supply levels and affordability aspects. Experts have also highlighted that total investments are slated to be higher by around $5 billion last year and approximately higher than the record levels in 2018 by a billion dollars.

Major aspects to be noted in this regard

There has been soaring commercial realty growth in Canada amidst lower vacancy rates in key markets. This has been majorly attributed to the preference for downtown locations amongst technology companies. Other strong aspects include major investments made in rental apartments with home affordability levels becoming tougher for several people in Canada. There has also been positive industrial growth spurred by soaring e-commerce demand for logistics centers. According to experts, Canada continues to present several advantages to buyers and investors which have fuelled growth in its commercial realty space.

Canada continues to possess multiple core fundamentals which have generated major positives over the long haul as per experts. These trends coupled with higher growth of the population and more stable governance and banking will help in steering the sector out of difficulties in case of a recession. There is more interest in the market which is spurring growth of rentals and limiting availability of industrial and office spaces. Rentals in the prime office space category have gone up by a whopping 20.9% in Vancouver for the 2018-19 period while they have increased by 14.2% for Montreal and 10.1% for Toronto. Industrial rentals have increased by approximately 12.3% throughout Canada. Experts have stated that rentals continue to make up a smaller portion of budgets across companies and do not yet put any major shackles on growth. Savings on costs of transportation in the industrial sector while operating from prime locations often offset higher rental costs as well.

Some other trends that you should know

Rental rates are also going up significantly for apartments across major locations with home ownership getting costlier. This has spurred investments in multifamily units in recent times and this sector may draw a sizable $11.9 billion in investments for 2020 as compared to $8.3 billion in the year 2018. The upward movement of rental rates in the residential segment is still exerting pressure on inequality of income as per reports.

Owing to lower affordability levels for homes, there are several people transforming into renters at least for a short while. This has led to higher investments flowing into residential spaces from investors who will eventually let these spaces out for earning high annual rental yields. As a result, the residential real estate sector in Canada will benefit greatly from the boom in commercial real estate since developers will be incentivized to come up with more residential projects for investors and end-users alike. This will equate to an increase in supply levels in proportion to demand and ultimately balance out property prices by a large extent.