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Reports forecast CRE trends in Canada, major cities: AY – Real Estate News EXchange



The Avison Young 2020 Forecast for Canada examines CRE trends across the country. (Courtesy Avison Young)

Canada’s commercial real estate market should continue to benefit from the country’s “solid economic fundamentals and a stable economy,” according to Avison Young’s Global 2020 Real Estate Forecast reports released this week.


“Though uncertainty remains on the minds of occupiers and investors in the extended financial and real estate cycles, fundamentals will continue to outweigh fear, at least in the near term,” says the global real estate services firm in its Canadian executive summary.

The Canadian reports include a national overview of trends and sector outlooks, as well as separate forecasts for nine of the country’s largest urban markets. Combined, they contain 54 pages of analysis and insights by sector, trend and city.

Calling Canada “the envy of G7 countries during the prolonged financial and commercial real estate cycles,” the national report cites a series of factors for its relatively buoyant 2020 outlook.

Canada’s CRE trends for 2020

The country:

* will continue to grow its knowledge-based economy;

* is experiencing significant population growth which drives activity in several CRE and real estate sectors;

* remains a magnet for industrial and commerce growth;

* and continue to draw strong interest from investors, primarily in the gateway cities such as Toronto, Vancouver and Montreal.

Among the potential concerns cited in the report are geopolitical uncertainties and trade issues, housing affordability in major cities, and high household debt levels.

It also notes the labour market, which has been a “catalyst for the property markets” might be losing steam as a driver for continued growth.

On a nationwide basis, Canada’s office sector saw significant tightening in 2019, with vacancy down 140 bps to 9.9 per cent, a trend expected to continue on a “modest” basis in 2020.

Leasing rates remained highest in Vancouver ($52.75 average asking rates per square foot) and Toronto ($43.02). The nationwide average was $32.36.

Booming industrial sector

The industrial sector continues to boom, with a national vacancy rate of just 2.3 per cent which is forecast to dip to 2.1 per cent this year. This dip could come despite a pipeline of 22.2 million square feet under construction, which would add about one per cent to the national inventory.

Retail remains “anything but stable” and an area of caution, the Avison Young report says. The combination of “bricks and clicks” retailing is causing a continuing transformation, and in major cities skyrocketing taxes (due to reassessments) are severely impacting some retailers.

“However, not all is doom and gloom as retailers and landlords continue to invest heavily in their assets and in analytics to enrich the customer experience,” the report says.

A continuing influx of international retailers is also buoying the sector. 

Avison Young also provided 2020 forecasts for nine major Canadian cities. Here are highlights for each, working roughly west to east:


Office and industrial vacancy rates will remain at record lows. In the office sector, rents will achieve “record highs” with no significant new space coming on stream until about 2022.

The trend toward industrial strata is expected to accelerate due to low interest rates, high land costs and rising lease rates. Most space coming on stream is pre-leased or pre-sold, so vacancy rates will not ease 

Overall CRE investment is forecast to accelerate.


The city’s GDP growth is forecast to reach two per cent in 2020, but  depends on “tangible progress” in new oil pipeline construction.

The office sector could top 24 per cent vacancy, after a two per cent rise to almost 23 per cent in 2019.

Industrial remains strong with six million square feet added in 2018-’19. If absorption continues, driven by ecommerce and distribution centres, new construction could be in the offing.

Retail big-box openings declined due to the uncertainty, but as Calgary’s population grows, local service-based retail has not kept pace.


A diverse economy will continue to shrink downtown office vacancy, even if the new UCP government executes plans to reduce spending by 2.8 per cent. If class-B and C office conversions continue, and oil pipeline construction accelerates, it will aid that trend.

Interestingly, Alberta has the most retail cannabis stores open since legalization, a benefit to retail leasing.

On the investment side, “smaller strip centres” are in demand, while core grocery-anchored product is scarce. There is also “unquenchable” demand for modern industrial buildings and high-rise multires.


The city is being hit by a double whammy: “Declines in prices for crude oil, natural gas, potash and uranium and China’s temporary ban on imports of canola and soybeans are impacting the provincial economy.”

After a 110 bps decline in 2019, government and business cuts could push office vacancies above 13 per cent in 2020. Industrial construction will slow due to reduced demand and leasing rates, but retail has remained stable with strong activity in the cannabis and liquor sectors.


A reputation as one of Canada’s most stable markets is expected to continue in 2020. Significant office and retail construction continues, but interestingly vacancy and rents are forecast to increase in both sectors in 2020.

Retail is being driven by the arrival of numerous new U.S. chains.

Industrial construction remains strong, but absorption is also strong leading to a forecast 2.5 per cent reduction in vacancy rates.


Demand from occupiers and investors still exceeds supply, especially for industrial, multifamily and office space.”

Office vacancy is at 2.2 per cent downtown, and the 10 million square feet under construction is largely committed, so leasing rates are expected to continue to rise.

There is 20 million square feet of industrial under construction, but that is insufficient to meet current rising demand levels and with vacancy already at a historic low of 0.7 per cent, rates are forecast to continue rising.

Tax hikes are hitting some segments of Toronto’s robust retail sector, though a strong mixed-use development trend means a continuation of both (moderately) increased vacancy and rising leasing rates.


The city-wide office market is seeing positive net absorption, driven largely by its thriving tech sector.

Industrial leasing rates remain among the highest in Canada, with little new product on the horizon.

A series of mixed-use developments on existing shopping centre sites is creating new live-work-play environments, while several purpose-built rental developments will boost lagging apartment supply.

Ottawa continues “attracting more than its fair share of investor interest for all classes of investment-grade assets.”


After years of decline in office vacancy to about 10.5 per cent, the sector is expected to stabilize somewhat in 2020.

So is office investment activity, which hit $1.6 billion in 2019. Employers continue to face challenges finding skilled employees, with the city’s unemployment rate down to 5.7 per cent.

A lack of modern industrial facilities with ceiling heights above 30 feet will continue to impact that sector, as land for new development also remains on the Island of Montreal.

Retail leasing rates are forecast to continue their climb, though vacancy might also rise as construction activity levels off.


Manfacturing and construction continue to fuel a mini-boom, driven by population and job growth.

The downtown office market continues to struggle with 20 per cent vacancy, but industrial remains strong (down 100 bps in 2019 to 8.3 per cent vacancy).

Office absorption could improve due to growth in financial, insurance, real estate and tech (life sciences, energy, clean tech and IT).

Numerous multires projects, combined with a new convention centre and the Queen’s Marque mixed-use project, see the downtown dotted with cranes.

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Why 20-year-olds should live with their parents, and a real estate recovery: This week's top real estate stories – The Globe and Mail



Open this photo in gallery:

This 2,100-square-foot Toronto penthouse combined two

Here are The Globe and Mail’s top housing and real estate stories this week, with the lowest mortgage rates available in Canada today, commentary from our mortgage expert and one home worth a look.

‘Live with your parents’ is becoming common financial advice for young adults

Living with your parents as a young adult used to be a subject of shame and ridicule. But amid sky-high housing costs, rooming with your parents in your mid- to late 20s can be the key to getting ahead financially. Erica Alini looked at the average rent for a one-bedroom apartment in 11 Canadian cities and calculated how much a new graduate could set aside by living rent-free until 2030. In several – not all – cities, those savings would be enough for a down payment. See below how the numbers stack up in five cities, and read Alini’s story for the rest.

Toronto’s real estate recovery was in full swing in May

Toronto’s housing market recovered further in May, with sales and home prices climbing for the fourth consecutive month, writes Rachelle Younglai. The shortage of properties for sale fuelled competition among buyers, increasing the home price index by 1.6 per cent to $1,164,400 from April to May, according to the Toronto Regional Real Estate Board. Although new listings increased by 10 per cent, the volume was about 50 per cent below the 10-year average for May.


This week’s mortgage rates: The latest pop in rates could (slightly) cool the market

In the past few weeks, the lowest nationally-available fixed mortgage rates have shot up by 20 to 35 basis points, writes Robert McLister. If the Bank of Canada scares the market into thinking it’ll get more aggressive with rate hikes, yields – and fixed rates – could climb a bit further. The moment of truth comes Wednesday when the central bank releases its next policy statement.

How renter rights vary in Canada’s most populous provinces

Skyrocketing rents, low supply and little oversight from landlord and tenant boards: The situation is getting desperate for many renters, writes Salmaan Farooqui. Renters in some cities sometimes choose to live in neglected homes to avoid renovictions and moving costs. Farooqui compiled a list of tips around rental laws across five of Canada’s most populous provinces.

Home of the week: A family-friendly Toronto uptown condo

  • Home of the Week, 1 Belsize Drive, PH 09,

    1 of 17

1 Belsize Drive, PH 09, Toronto

When the family currently selling this space originally moved in, going from a house to a condo, they asked the developer if they could buy two units and combine them. The developer agreed, for a fee. The now-2,100-square-foot penthouse has three bedrooms, a den, three full bathrooms and a powder room. The primary bedroom is isolated on one side of the unit while the children’s bedrooms are down the hall on the other side of the kitchen. The home features three outdoor patios, one off of the children’s bedrooms, an outdoor eating space off of the kitchen, and a more shaded terrace off of the primary bedroom. The building has saunas, a gym on the main floor and a party room.

What do you think is the asking price for this house?

a. $1.5-million

b. $2.5-million

c. $3.5-million

d. $4.5-million

a. The asking price is $3.5-million.

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‘All hell is going to break loose’: Property titan and Shark Tank star Barbara Corcoran says Elon Musk is right about commercial office space



If you’re a commercial property giant, Shark Tank star Barbara Corcoran has some bad news for you: The market is going to get much worse before it gets any better.

In fact, it’s going to be a “bloodbath.”

Corcoran echoed the sentiments of Tesla CEO and Twitter owner, Elon Musk, who earlier this week tweeted: “Commercial real estate is melting down fast.”

Speaking to Fox Business’s The Claman Countdown this week, Corcoran—who sold her New York real estate brokerage for $66 million in 2001—said there isn’t enough confidence in the commercial property market post-pandemic.


Despite mandates from big businesses like Google, Amazon, and most recently Meta, swaths of office blocks across the U.S. are still lying partially empty.

According to data from security provider Kastle the average occupancy of offices across America is at just under 50%—with the New York metropolitan area seeing some of the lowest rates of tenancy.

“No one really believes it’s going to turn the corner,” Corcoran said. “People are staying home. Our best office buildings in Midtown Manhattan are 50% occupied, and in most major cities or in secondary cities, we have a 20% vacancy rate. No one wants to take that chance.”

She added that with turbulent economic times ahead she expects to see more businesses defaulting on their loans or mortgages—an issue which will trickle back to regional banks.

Corcoran’s theory is in line with the data: UBS said in April it expects to see more defaults on real estate loans as a result of an expected credit crunch.

“I don’t see that turning around,” the Shark Tank star said. “I think it’s going to be a bit of a bloodbath before it gets better.”

It’s a crisis Elon Musk has sounded the alarm on multiple times—his warning earlier this week, in response to Craft Ventures founder David Sacks highlighting the level of debt about to mature in the sector, was just the latest.

In March the SpaceX founder responded to a tweet about real estate debt with: “This is by far the most serious looming issue. Mortgages, too.”



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Vancouver-area home sales rebounded in May, real estate board says



The Real Estate Board of Greater Vancouver (REBGV) says May home sales increased 15.7 per cent compared to the same month a year ago as average prices also rose.

“Our forecast projected prices to be up modestly in 2023 by about two per cent at year-end,” said Andrew Lis, REBGV’s director of economics and data analytics, in a news release.

“Instead, Metro Vancouver home prices are already up about six per cent or more across all home types at the midway point of the year.”

The composite benchmark price for all residential properties in Metro Vancouver was $1,188,000 last month, down 5.6 per cent from May 2022 but up 1.3 per cent from April.


There were 3,411 residential home sales in the region in May 2023, which is a 1.4 per cent decline from the 10-year seasonal average but nearly 500 more sales compared to units that moved in May 2022.

By comparison, in April, home sales slid 16.5 per cent compared to the same month in 2022.

Still, as of April of this year, the number of listings remained low compared to other years, meaning consumer demand is pushing up prices.

There were 5,661 detached, attached and apartment properties newly listed for sale in Metro Vancouver in May 2023, an 11.5 per cent decrease compared to the 6,397 homes listed in May 2022 and 4.3 per cent below the 10-year seasonal average, said the REBGV.

More buyers than sellers

“You don’t have to squint to see the reason prices continue to increase,” said Lis. “The fundamental issue remains that there are more buyers relative to the number of willing sellers in the market.

“This is keeping the number of resale homes available in short supply.”

A graphic from the Real Estate Board of Greater Vancouver showing homes sales activity for May 2023.
A graphic from the Real Estate Board of Greater Vancouver showing homes sales activity for May 2023. (REBGV)

The board said that mortgage rates, elevated after eight consecutive hikes were carried out, also continue to hold back market activity.

REBGV ideas to improve affordability

The May numbers released by the REBGV on Friday come a day after it announced a series of recommendations it made to a provincial legislative committee that seek to improve housing affordability in B.C.

The REBGV’s proposal includes recommendations for an overhaul of the Property Transfer Tax (PTT), which it says has not changed in 36 years.

It wants the PTT removed on any home, new or resale, worth less than $750,000.

Currently, the tax rate is one per cent of the fair market value up to and including $200,000, two per cent for homes above $200,000 and three per cent for homes worth more than $2 million.

Other recommendations include changes to the proposed anti-flipping tax and convincing the federal government to exempt new not-for-profit rental developments from paying GST.


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