It seems that the historically low interest rates and greater economic confidence in Canadian commercial real estate has proven to be a bit of a double-edged sword. The Globe and Mail reports, however, that this escalated demand is causing a serious supply shortage in the market. This has resulted in a deterioration of sales across all areas of commercial real estate, be it industrial, retail or office space.
The full effect of this can be felt across the country, as there have been reports of unsolicited offers by buyers on products and properties that are not even available yet. This has put a pressure on price, which are going up across all markets. This is the result of a strong economic performance: a rise in the GDP of 2.2 and 1.7% in the last two quarters, in combination with low interest rates. Sales were weak in approximately 73% of markets due to the huge demand and dwindling supply. The only exceptions to this were the markets in Hamilton-Burlington, St. John’s, Newfoundland and Calgary, which actually saw a slight increase in sales. REITs and pension funds have slowed down their investing a bit, while end users and small investors have helped boost demand to the point it is at now. The retail sector has flourished in particular, due to competition from USA markets and a rise in the construction of big box stores, outlets and plazas across the country.
Source: The Globe and Mail
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