While Canada will remain a highly desirable destination for commercial real estate investment, occupier demand this year will be affected by a slowing global economy.
Even as the asset type remains among Canada’s most desirable and reliable in the long-term, any optimism should be tempered by the implications of decelerating global trade.
“With the real estate cycle slipping into its second decade, the uncertainty felt by many investors about whether current pricing is sustainable seems justified,” Avison Young stated in its 2020 Forecast released earlier this week.
“Real estate might be enjoying an extended period of popularity, but in large part this is due to the backdrop of economic weakness (hence low interest rates) and heightened political uncertainty across the globe – issues which also bring risks for the property sector.”
The trend towards static growth in consumer purchasing power is not helping matters.
“Productivity growth has been low and while unemployment levels have fallen sharply in many countries, inflation has not risen meaningfully.”
One bright spot is retail – ironically, since multiple observers have been warning of the property type’s demise amid the meteoric rise of online shopping.
“The impersonal and transaction-focused nature of e-commerce, while efficient and appealing to cost-focused customers, has left many shoppers seeking to re-engage with experiential retail in search of a renewed sense of community. This has sparked a renaissance of what it means to be a retailer in the age of online shopping,” Avison Young explained.
“A reimagining of what retail engagement means for consumers has returned us to the modern equivalent of the traditional town square, a central destination that intentionally blends uses including retail, workspace and leisure with residential space and accessible rapid transit options.”