The world’s commercial real estate market is in a state of flux as the current investment cycle nears its final stage.
The change in demand, the growth of technology, and the low-interest environment are all contributing to the changing dynamics according to a new report from Avison Young.
In Canada specifically, the market is largely healthy, supported by a strong economy. But here too there are challenges for CRE.
"Despite the favourable market conditions, there is a sense that we are late in the cycle and a slowdown is inevitable," comments Bill Argeropoulos, Principal, Practice Leader, Research (Canada) for Avison Young. "The commercial real estate sector is having to re-evaluate challenges and opportunities in a technologically transforming world – a world that Canada appears to be making a concerted effort to lead, rather than follow."
For offices, there is an east-west divide with the overall nationwide vacancy rate set to reach 12.2% by the end of this year. However, Edmonton and Calgary’s tougher market means that the east will end 2018 with a vacancy rate above 16% while the west will be nearer 10%.
Winnipeg, Toronto, Regina and Vancouver will be among the 10 lowest office vacancy rates in North America. Toronto is one of North America’s most active office development markets.
For industrial, demand will keep the vacancy rate below 4% during 2018. Vancouver, Toronto, Winnipeg and Ottawa while be joined by Waterloo among the 10 markets with the lowest vacancy rates in North America.
Meanwhile, retail’s trends will continue with stores trying to balance e-commerce demands with physical stores.
"Contrary to widespread belief, bricks-and-mortar retail is not going away, but is in the process of transforming and adapting to serve customers in the wake of technological advancement. E-commerce is growing faster than in-store sales, but still represents a small fraction of all retail sales in Canada,” added Argeropoulos.
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