CBRE 2018 Market Trends Report Summary

Mar 20, 2018

Last month, CBRE released their 2018 Market Outlook for the Canadian Real Estate Sector. Here, we provide a brief overview.

The report positions 2018 as a “year in which context might be as important as the facts and figures upon which forecasts are built.” and we couldn’t agree more. Last year, Canada set numerous commercial real estate records, such as the lowest vacancy rates in North America, and the highest commercial real estate investment volume in the country’s history ($43.1 billion).

But while Canadian real estate continues to demonstrate notable trends, could this year be the third consecutive year of all-time record investment? Some key trends we took from this report were as follows:

Commercial Real Estate:

  • Investment to increase further despite possible setbacks such as stricter underwriting
  • Office sale prices likely to produce new records, most notably in Toronto and Vancouver

Residential Real Estate 

  • The continuation of low vacancies and high rental rates in our major cities
  • Landlords beginning to embrace big data, and use statistics to define new real estate strategies

Land Development:

  • Speculative construction to surge as low vacancies and rising rental rates spur growth
  • Land sales will continue to set new price records as the market gears up for this new construction cycle

 

This demand for real estate in Canada comes from multiple sources; the American dream has shifted north, and from employment opportunities to investment, Canada is in high demand.

One of the most interesting elements of the 2018 Market Outlook report is the economic predictions - or more accurately, non-predictions. CBRE asserts that while there are risks to any economic growth, especially one in the midst of the third longest period of economic expansion in history, there may be new realities to contend with. These new realities may provide a buffer to any economic shocks, and cause factors that once would have changed the course of our economy to have much more muted effects.

Rising interest rates will no doubt give cause for concern to some investors and landlords, and stricter underwriting is certainly likely this year, however increased costs should be offset by higher rental rates. Opportunity still exists in the sector, pronounced by the purchase of Vancouver's Pure Industrial Real Estate Trust by Blackstone at the beginning of the year.

“Canada is a leading destination for capital, businesses and immigrants, which is diversifying the economy, bolstering property fundamentals and providing a buffer to the spate of economic and geopolitical risks that exist. The rules of the game are changing and so too must our expectations for market cycles, technological implementation, built form and business processes. “ - CBRE 2018 Market Outlook

The report also highlights key trends in Toronto; asserting that commercial real estate will continue to be a relatively safe investment in the city this year with a growing global reputation and economic stability causing it to be the destination of choice for all kinds of institutional capital. The government investment into STEM research, and large infrastructure developments across the city also support the growth in demand, adding to the demand for industrial real estate, and causing the vacancy rate to hit a record low of 2.2% across the GTA. To combat this, Toronto has now entered a new development cycle with a total of 5.1 million sq. ft of office space under construction to keep up with tenant demand.

Multi-family units are also predicted to continue to rise and put pressure on Toronto’s already low vacancy rate, and dedicated housing for seniors in urban centres will now be prioritized in development decisions to accommodate the exponential target market growth predicted in the next decade.

For more detailed insights on the 2018 market outlook, as well as a breakdown of key trends in Vancouver, Calgary, Edmonton, Winnipeg, Ottawa, London, Waterloo, Montreal and Halifax we recommend reading the full report.

 

 

 

 

 


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