“For the first time in a number of years, we are seeing a bit of a divergence between the strength of property fundamentals and investment activity,” said Paul Morassutti, executive managing director of CBRE, speaking at a market outlook breakfast in Toronto yesterday.
“The buyer pool remains deep as a range of investors continue to pursue commercial property purchases across the country, but there is no doubt that vacancy and rental rates are under pressure in Alberta, particularly in the office market.
“It remains to be seen whether low oil prices will impact confidence, job growth, and demand for housing and commercial space in other parts of the country. Thus far, there have been limited repercussions outside of Alberta.”
The trends that Morassutti sees in the Canadian commercial real estate market in 2015 include:
- Investment capital will be readily available and cheaper than ever, with investor interest shifting to quality assets in Central Canada.
- Do not expect fire sale pricing in Alberta. However, liquidity will be impacted and investment property transactions curtailed.
- Retailers will pursue seamless omni-channel strategies that will force power centres and malls to deliver what online shopping cannot.
- Suburban markets should not be overlooked. Transit-oriented development and selective intensification will not be limited to downtown cores.
- Do not be surprised by the rise of unexpected economic or geopolitical events. Uncertainty and rapid change have been the norm since the recession.
“In terms of tenant demand and rental rates, whether we are talking about office, industrial or multifamily properties, much of the country is posting solid numbers,” continued Morassuitti. “And we should not be surprised when Alberta acts like the cyclical market that it is.
“In 2015, I think we’ll see some of the questions around the Canadian retail market put aside. Retail is a dynamic property type.
"We’ll see a number of new successful retailers enter Canada, while retail innovations force bricks and mortar locations, as well supporting industrial logistics operations, to evolve.”
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Record investor demand for commercial property is indicative of long-term confidence in Canadian commercial real estate, according to CBRE, but what’s in store for Alberta?