Some are signalling the end of the global commercial real estate boom – and Canada is expected to be the hardest-hit country.
“The global real estate industry has had a tremendous run,” Avison Young CEO Mark Rose said in a release. “It has been more than six years since the Great Recession. During the steady climb back up, interest rates continued to decline, central banks unleashed quantitative easing, employment recovered, and economies rebounded. The post-recession years have marked a period of rebuilding balance sheets and personal wealth, and relative peace in much of the Western world. The financial and real estate markets appear stable as we begin 2016, but variables now surfacing could undermine short-term prosperity. The year ahead seems to be the waning days of a prosperous cycle – perhaps even a cyclical top in liquidity, pricing and transaction velocity.”
Last year was a strong one for commercial real estate, but Avison Young predicts 2016 will be anything but – especially in Canada.
“The end of the commodities super cycle, uneven employment growth, disruptive technologies, e-commerce and workplace strategies ... are testing Canada’s otherwise stable commercial real estate sector,” said Bill Argeropoulos, principal and research practice leader for Avison Young. “After entering and exiting a technical recession in 2015, Canada’s economy will endure another volatile year in 2016, leading to disparities in regional performance.”
Argeropoulos said the weakened economy that prevailed in 2015 will continue to do so this year. That means a shift toward co-working spaces and mobile workforces as companies cut down on costs and try to attract younger employees who value such working arrangements.
“The retail sector is something of a chameleon, constantly adapting and transforming as a result of market forces,” Argeropoulos added. “Omni-channel retail is growing exponentially, with retailers streamlining and providing better deals as pricing trumps brand loyalty and fickle customers comparison-shop instantly using apps. Meanwhile, brick-and-mortar stakeholders are leveraging their geographical reach to remain competitive.
“On the industrial front, an established and expanding distribution and logistics driven industry and a sustained US recovery will provide upside, and a low Canadian dollar will fuel exports and boost a smaller, but more productive, manufacturing sector.”