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Canary takes flight for Drone Delivery Canada

Commercial real estate poised for renewed upswing

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by Emily AtkinsJune 16, 2023

Canada’s commercial real estate sector is poised for an upswing in the second half of the year, new research has found.

While caution characterized investment activity in the first three months of 2023, sentiment is shifting in Canada’s commercial real estate sector. Positive indicators have emerged, led by rising demand and the re-entry of major players to the marketplace, suggesting a significant upswing in demand may be in the cards for the back half of the year, according to a report released by RE/MAX Canada.

The RE/MAX 2023 Commercial Property Reportexamined 12 commercial real estate markets from Greater Vancouver to Newfoundland-Labrador in the first quarter of 2023 and found considerable resilience despite a commercial real estate landscape that continues to evolve post-pandemic.

Industrial real estate continued to outperform almost every other asset class, with all markets reporting strong sales and lease activity. With both property and lease values climbing, investors and end users in British Columbia and Ontario have extended their search perimeter for distribution and warehousing facilities to neighbouring provinces with more affordable pricing.

A spillover of demand from these provinces and key markets have bolstered sales of industrial product in Edmonton, Calgary, Regina, Saskatoon, London-St. Thomas, Halifax and St. John’s. While demand has softened from peak levels reported in 2022 in most Canadian markets, inventory levels remain extraordinarily low, given the headwinds the industry has encountered.

Land sales remain solid, despite higher interest rates and construction costs, with acreage zoned industrial, multi-family and retail most sought-after in major Canadian centres. Approvals in place have been a critical component in bringing deals to fruition, given the lengthy approval process that exists in most markets.

Red tape and development fees have been a barrier in all types of new construction. Vendor take-back mortgages have also re-emerged in several markets as sellers work with buyers to close the deal.

Retail continues to be surprisingly robust, given the growth of online sales in recent years, with almost 92 percent of markets (11/12) reporting solid activity in retail nodes and shopping centres. From storefront on major arteries to strip plazas and shopping malls, the bricks and mortar experience is resonating with today’s consumers.

Investment dollars have been pouring into major shopping malls across the country as landlords seek to enhance the shopping experience. Landlords are also cashing in the live-work-shop phenomenon, with the number of residential applications on commercially zoned property growing across the country.

“Although activity has come off peak levels reported in the first quarter of 2022, demand for commercial real estate remains relatively healthy in most major centres,” said Christopher Alexander, president of RE/MAX Canada.

“Owner-users and tenants have stepped up to fill in some of the gaps created by the pullback from Real Estate Investment Trusts (REITs) in the second half of 2022 and early 2023. Several markets, including Edmonton, Calgary, Regina and Saskatoon, experienced strong activity in the first quarter of the year, despite challenging market conditions. A shortage of available inventory across various asset classes continues to place upward pressure on commercial values and lease rates, especially within the industrial sector. Prices remain buoyant as a result with further escalation anticipated as momentum improves heading into the latter half of the year.”

Vancouver area

Industrial remains the top performing sector in Greater Vancouver with vacancy rates under one per cent. Consistent demand exists for warehousing and distribution space throughout the GVA, with conditionals tightest in suburban areas outside Vancouver Proper in Richmond, Delta, Burnaby and Langley.

Real Estate Investment Trusts (REITs) are slowly coming back to the market, as evidenced by the purchase of two industrial properties earlier this year by Crestpoint Real Estate Investments. The purchase included six buildings representing over 190,000 square feet in Burnaby as well as the 428,000-square-foot Coaster Heights Distribution Centre in Surrey’s Campbell Heights Industrial Park. Strata industrial product has also experienced an uptick in demand this year, with some upward pressure on values.

Availability rates for industrial space have edged higher, at 2.1 per cent in the first quarter of 2023, compared to the same period in 2022, but are still amongst the lowest in the country at present, according to data from the Altus Group. The greater influx of space in the market has yet to impact lease rates, which have risen by double-digits (almost 20%) year-over-year to $22 net per square foot on average. Prospective tenants are exercising patience in their decision-making as a result, while existing tenants are looking to achieve greater efficiencies by reducing their footprints.


Commercial investment in the Edmonton region posted one of its strongest first quarters in recent history, with overall sales volume rising close to $800 million and sales nearing 200, according to data available from The Network. Industrial and land were the top performing asset classes in terms of dollar volume, up 76 percent and 45 percent respectively in the first three months of the year, compared to the same period in 2022, followed by multi-family, retail and office.

Momentum continues to ramp up in the industrial sector as logistics, warehousing and distribution tenancies spillover from the Lower Mainland and Toronto. Large organizations such as Amazon and Home Depot have been drawn to the region’s affordable price point for land, its young, educated labour force, and favourable provincial tax structure and incentive programs.

Last September, the city was named the centre of Western Canada’s new hydrogen economy, with construction well underway on Air Products’ new $1.6 billion hydrogen facility. New business has also been pulled to the region, with Delta, BC’s English Bay Blending and Fine Chocolates recently announcing their decision to relocate and expand in Stony Plain, Alberta. The company will invest approximately $30 million in the construction of a 120,000-square-foot food and manufacturing facility later this year, creating 70 permanent positions.


Industrial remains by far the strongest sector in the Greater Toronto Area’s (GTA) , with vacancy rates still under one per cent. The shift from manufacturing to warehousing and distribution that was accelerated during the pandemic will remain the top usage for industrial space. Large transactions continue to occur in the GTA, as evidenced by the recent sale of a $70 million tract of land.

Lack of availability continues to hamper activity in the industrial sector, with both sales and leasing opportunities few and far between. While availability rates from Altus Group show improvement over the first quarter of 2022, at just two percent in Q1 2023, levels in the GTA are still the lowest in the country. Shortages exist in large industrial units for both lease and sale in the 5,000- to 20,000-square-foot range. Demand continues to outpace supply, even for smaller-sized units between 2,000 and 5,000 square feet with loading docks.


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