We talked last month about how the office space market is down, but the outlook remains positive. With news of vaccines ready to ship, employees are likely even closer to going back to the office.
However, the office space market did suffer and one hero throughout COVID in commercial real estate has been the industrial market, especially warehouse space.
As retail locations temporarily shut down, it’s no surprise that consumers quickly shifted their dollars to e-commerce. What is shocking is how fast and how much they spent online. The gains in e-commerce occurred despite a record decline in overall retail sales.
When COVID was in full swing, retail sales dipped to $33.9 billion in April 2020, a 26.4 per cent decrease from April the previous year. E-commerce sales, however, increased 123.59 per cent in April year-over-year.
E-commerce drives industrial gains
With all those e-commerce sales, there had to be resources available to manage and store the inventory. That is where the industrial market stepped in.
“The Canadian industrial market hasn’t missed a beat. In fact, it has unprecedented momentum and is truly the rock star of the commercial real estate world right now,” said CBRE Canada vice-chairman Paul Morassutti.
“Investors, tenants and developers recognize that e-commerce and logistics demands are here to stay and they’re making big forward-looking industrial commitments.”
Owners of retail centres are evaluating the future of retail as well.
“Owners are now looking at retail centres and saying, ‘I can convert some of this into warehousing and lease it to industrial tenants’,” said CBRE executive vice-president Matt Brown.
“Given where industrial lease rates are at and how valuable the buildings themselves are, industrial development could soon be seen as a viable alternative to preconceived highest and best uses in certain cases.”
Case in point is Amazon’s expansion of fulfillment centres and delivery stations in Ontario.
Amazon’s Canadian growth
Amazon Canada confirmed it is building two new fulfillment centres in Hamilton and Ajax and five new delivery stations in Kitchener, Stoney Creek, Vaughan, Etobicoke and Scarborough.
These expansions will bring Amazon Canada’s total to 10 fulfillment centres in Ontario and 16 in Canada.
“We’re thrilled to continue expanding our operations in Ontario with our newest fulfillment centres in Hamilton and Ajax,” said Sumegha Kumar, director, Canadian customer fulfillment operations, Amazon Canada.
“We’ve had great success with the talented workforce in Ontario and we look forward to creating an additional 2,500 full-time jobs.”
As jobs return and people head back to work, overall retail sales are likely to improve. What’s yet to be seen is if the e-commerce trend will become the new normal or if in-store sales will return to pre-COVID numbers.
It’s likely e-commerce will level off slightly but remain high as consumers have embraced online shopping convenience and ease.
The industrial real estate market is certainly an important one to keep tabs on to see what it will do next.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
