Canada’s industrial sector will be buoyant next year with continued vacancy lows in major markets.
Using Q2-2019 statistics gathered by CBRE, PwC forecasts warehousing and fulfillment to be the industrial sector’s main drivers. While the national vacancy rate was 3.1%, it was 2.1% in Vancouver and 1.5% in Toronto. As a result, rents are surging, especially in Toronto, Vancouver, Ottawa and Montreal. PwC forecasts Calgary to show promise in 2020, but it noted that land scarcity upon which to build industrial properties could impede meaningful gains in that city’s sector.
The Canadian office sector is another area of vitality, especially the ones located in downtown urban cores. With continued economic growth, especially in the technology sector, the optimism doesn’t seem misplaced. The national vacancy rate during the second quarter of this year was 10.5%, and while there’s substantial office construction, many units are already preleased.
Co-working arrangements have disrupted the sector and driven demand. While that’s good news, industry players are still trying to figure out how to respondent to it—some are willing to work with larger companies in the co-working space to emulate their efforts, however, even that has its set of challenges because co-work spaces operate on short-term leases, which don’t add much to the properties’ valuations.
The outlook for the retail sector isn’t as rosy. Brick and mortar retail has been upended by e-commerce and that the trend has showed nary a sign of abating. Outlet centres, regional malls and power centres are ranked at the bottom of PwC’s commercial real estate development prospects. But these spaces won’t disappear; they will evolve. Some operators are leasing space to co-working companies and others are redeveloping their properties to include community services and even residential uses.