[TORONTO, ON] — Demand for commercial properties remained strong in major Canadian markets in the first half of the year and is expected to continue well into 2013, according to a new study released Wednesday by the realtor group Re/Max.
The Re/Max Commercial Investor Report found that almost all markets saw an increase in commercial sales and dollar volume over the six-month period ended June 30.
The report highlights trends in nine Canadian centres — Greater Vancouver, Calgary, Edmonton, Regina, Winnipeg, London, Ont., Greater Toronto, Ottawa and Halifax-Dartmouth.
The upbeat report on commercial real estate came just days after a report from the Canadian Real Estate Association pointed to a more lacklustre residential market.
CREA said that while September residential sales were up 2.5 per cent from August, they were down 15.1 per cent from a year ago and likely to remain below 2011 levels through the fourth quarter. It cited both tighter mortgage lending rules and an uncertain economy.
"While some first-time home buyers may no longer qualify for mortgage financing under the new rules, it is likely that many others are stepping back and reassessing how much house they can realistically afford, which is one of the things new mortgage rules were designed to do," CREA said.
Re/Max said both Canadian and foreign investors were behind the push in commercial real estate, snapping-up apartment buildings and small strip malls "given continuing low interest rates and a generally bullish tone for the Canadian economy".
Private investors, in particular, have gained a serious foothold in recent years, spurring demand for entry-level properties such as multi-unit residential, suburban and urban retail storefronts, and smaller office buildings, the report said.
"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," said Gurinder Sandhu, executive vice-president and regional director, Re/Max Ontario-Atlantic Canada.
Sandhu said that low interest rates, lacklustre returns on GICs and volatility in the stock market had renewed demand for commercial real estate at a time when sellers are holding on to 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," he said.
The reported found no shortage of investors, either large or small, in the commercial market. "Multiple offers were noted in six of the nine markets examined, including all major markets in the east, Winnipeg and Edmonton."
"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 Elton Ash, regional executive vice-president, Western Canada.
Re/Max said economic factors are at play in markets, with strong economies in Alberta and Saskatchewan boosting sales there and the $25-billion military shipbuilding contract awarded to Halifax Shipyard seen as major catalyst in the Halifax-Dartmouth area.
"A shortage of industrial product exists throughout Western Canada, as well as in Ottawa and Halifax-Dartmouth, while the market returns to more balanced conditions in southern Ontario following a period of moderate oversupply," it said.
Meanwhile, U.S. and multi-national retailers moving into the Canada market are fuelling "robust activity" in the retail segment from coast to coast.
"American brands such as Nordstrom, Target, J. Crew, Marshalls and numerous others have created a flurry of activity that is changing the Canadian real estate landscape," Re/Max said.
Re/Max is among Canada's leading real estate organizations, with nearly 18,900 sales associates at more than 720 independently-owned and operated offices in Canada.
