Demand for industrial and multi-unit residential “unprecedented” in Q1 in Hamilton-Niagara – RE/MAX

RE/MAX is reporting that demand for industrial, multi-unit residential—particularly purpose-built rentals— and farmland was unprecedented in the first quarter of 2022, with values hitting record levels, while retail and office are starting to show signs of growth in multiple markets.

With North American stock markets dangerously close to correction, bricks and mortar properties continue to resonate with institutional and private investors, particularly those who are personally vested, across almost every commercial asset class in major Canadian centres, according to the results of the RE/MAX Canada 2022 Commercial Real Estate Report, which examined 12 major Canadian centres from Metro Vancouver to St. John’s. Highlights of the report include:

• 92 per cent of markets surveyed (11/12) reported extremely tight market conditions for industrial product in the first quarter of 2022. Newfoundland-Labrador was the only outlier.
• 67 per cent of markets surveyed (8/12) found challenges leasing industrial space. Included in the mix were Vancouver, Edmonton, Calgary, Winnipeg, Ottawa, the Greater Toronto Area, Hamilton-Burlington-Niagara and London. Some realtors are recommending tenants start their search for new premises at least 18 months before their current leases come up for renegotiation.
• While demand for overall office space in the core remains relatively soft in 92 per cent of markets (11/12) across the country, Metro Vancouver continues to buck the trend.
• Suburban office space continues to prove exceptionally resilient in 67 per cent of markets surveyed (8/12). Those markets include Vancouver, Calgary, Saskatoon, Winnipeg, Hamilton-Burlington-Niagara, Ottawa, Halifax[1]Dartmouth and Newfoundland-Labrador.
• Development land remained sought after (industrial/residential) in 67 per cent of markets surveyed (8/12) including Vancouver, Calgary, Regina, Saskatoon, Winnipeg, Ottawa, the Greater Toronto Area and Halifax-Dartmouth.
• End users are encountering challenges in terms of expanding their businesses due to land constraints/shortages, with specific mentions of this noted in Vancouver, the Greater Toronto Area and Regina.
• Retail is on the rebound in 75 per cent of major Canadian markets (9/12), with strong emphasis on prime locations in neighbourhood microcosms. The trend has been identified in Vancouver, Edmonton, Calgary, Saskatoon, Regina, Winnipeg, Hamilton-Burlington-Niagara, Toronto and Ottawa.

Investors flocked to ‘bricks and mortar’ as hedge against inflation in 2022’s first quarter as demand for commercial properties soars nationwide amidst economic expansion and stock market volatility, according to RE/MAX® Canada Brokers

“The overall strength of the Canadian economy continues to propel massive expansion in commercial markets across the country in 2022,” says Christopher Alexander, President, RE/MAX Canada. “What began as heightened demand for industrial space to accommodate a growing e-commerce platform during the pandemic has blossomed into a full-blown distribution and logistics network that encompasses millions of square feet in markets across the country. Recent volatility in the stock markets has also prompted a shift to greater investment in the commercial segment as investors look to real estate as a hedge against inflation.”

Given the current shortage of land/space, developers and end users looking to build, have become increasingly creative in 58 per cent of markets surveyed (7/12), including Metro Vancouver, Edmonton, Regina, Saskatoon, Winnipeg, London, and the Greater Toronto Area

“Land development is pushing city boundaries in major centres and municipalities are scrambling to accommodate residential and industrial intensification,” says Alexander. “At present the process is painfully slow in most centres, even where land is already serviced. Given the on-going likelihood of demand, policy that helps availability or fast-tracking of approvals would certainly be a boon to the market.”

The RE/MAX Canada 2022 Commercial Real Estate Report also identified a growing trend in infill land assembly that targets retail storefront/strip retail malls in mature areas for mixed-use developments by institutional and private investors. These new developments almost always have a residential housing component on top, often purpose-built rentals or condominiums, given the shortage and need for greater densification.

While retail is making a comeback in prime neighbourhoods, the return of foot traffic should have a positive impact on the market moving forward. Revitalization of older retail spaces and malls is underway to enhance the shopper experience and influence the return to in-person shopping. This, in turn, is attracting tenants.

The sector is expected to continue to strengthen as markets move past former pandemic constraints and more favourable conditions emerge to support retail growth. RE/MAX Canada has also found that cannabis outlets are largely over-represented in most major Canadian centres.