Markets to watch in 2019


“The affordability issue is not going away.”


With net immigration into the Greater Toronto Area (GTA) hitting a 15-year high and pent-up demand for housing, Toronto edged out Vancouver as the top market to watch this year. According to the CBoC, the local construction sector is on track to record its 10th straight year of growth in 2019, with GDP growth forecast to reach 2.4% in 2018 and 2.3% in 2019.

Respondents also ranked Toronto’s housing prospects first among all 10 markets. Efforts by Ottawa and Queen’s Park to cool the residential market, combined with rising interest rates and high consumer debt, could still put another brake on prices. But strong drivers of demand remain indisputable. The region is also feeling the effects of demographic shifts. Millennials have begun to compete with baby boomers for real estate, and over the next decade, almost 700,000 first-time buyers will target the GTA or Hamilton markets, according to a May 2018 report sponsored by the Ontario Real Estate Association.

Due to little relief on the supply side, several interviewees expected Toronto land costs to hit Vancouver levels before long. “The next 12 months will be a buyer’s market, and then we’ll start to move back to a seller’s market and prices will ramp up to new highs,” one interviewee said. Townhouses were also considered a best bet, appealing to entry-level buyers. And although there’s rising concern about the sheer number of new condo projects, multi-family demand will remain strong.

On the whole, Toronto is looking strong across all real estate sectors. The vacancy rate for downtown office space sank to 3.4% at the end of June 2018, and supply is likely to get even tighter as we approach the 2020–21 delivery dates for new construction. “The depth of demand for office space in Toronto has taken everyone by surprise,” one interviewee said, fuelled by a tight market and strong leasing activity from the technology industry. Similarly, in the industrial sector, strong momentum and a lack of space will continue to push developers to increase supply to meet rising demand.


“Time to be cautious and opportunistic.”


Vancouver’s economy is forecast to grow 2.3% in 2019 after seeing 2.9% growth in 2018. Overall, the region’s real estate fundamentals look good, and even after years of price increases, interviewees said “Vancouver continues to defy gravity” in terms of commercial investment prospects. But the market may yet come back to earth, with interviewees noting they’re being more cautious and selective when looking at new opportunities to invest or develop.

Single-family sales are cooling in the face of high prices, rising interest rates, tougher mortgage rules and a series of cooling measures being implemented by the BC government. These include an increase in the foreign-buyers’ tax to 20%, an empty homes tax equal to 1% of a vacant property’s assessed taxable value and an increase in property tax rates for homes assessed above $3 million. Sales of condos and townhomes have slowed, and the market is treating them with more caution. There continues to be a huge need for rental accommodations, especially with rising affordability concerns. A number of interviewees believe municipalities are still not taking the right steps to encourage builders to add rental stock to the market. Despite that, Vancouver was only second to Montreal when it came to the number of rental units under construction in 2017. It has also had the largest percentage increase in the number of rental units under construction over the past decade.

The city will continue to see strong absorption rates for office space, with the total office vacancy rate hitting 5.1% in Q2 2018, down from 6.8% in Q2 2017. Competition for Class A space will intensify as space reaches historic lows and new supply isn’t completed until 2021–22. In the meantime, we expect more tenants to look to the suburbs, with one interviewee saying they “see more opportunity for growth out in the Fraser Valley than in Vancouver.”

Investors remain cautious as the retail landscape continues to absorb the impact of online shopping. Investment in mall retail continues as large investors focus on turning urban malls into mixed-use communities. For example, a well-established shopping centre is being reshaped into a retail, office and residential redevelopment, including mid-rise and social housing.

On the industrial front, warehousing and fulfillment property will continue to be a top performer. There’s little industrial land to be found, and landlords are holding onto what they have or redeveloping old assets to meet changing demands.


“The Quebec market has been a popular target for investors and developers after years of suppressed demand.”


Montreal’s economic growth is forecast to reach 2.2% in 2018 and 1.9% in 2019 after posting a 17-year high in 2017 of 3.7%, according to the CBoC. New construction continues to change the dynamic of Montreal’s central business districts and skyline.

The pace of residential construction increased last year and should remain healthy through 2019. Despite many condo projects under construction, builders are still trying to keep up with eager buyers. What’s more, the market continues to look affordable against the backdrop of relatively expensive prices in other regions, including Vancouver and Toronto, but it may start to face similar concerns as supply tightens. “Affordability is something to be considered moving forward,” one interviewee said.

The office market is considered stable. Major commercial developments include a new banking headquarters, which, when completed in 2022, will be the tallest tower built in Montreal in more than 25 years. Industrial assets continue to be in demand; a shortage of vacant land on the island of Montreal is forcing large companies to relocate to areas where they can acquire more space.

There’s still high demand for shopping experiences, especially when it comes to boutique and high-street retail. The key to success is for retailers to evolve with trends and buyers’ needs. And for those that continue to be challenged, one interviewee said there’s “still opportunity to create a great experience and turn around this sector.”


“We need to dream a little bit bigger and be more ambitious.”


As its economy diversifies, Ottawa is contemplating a bigger future. Local survey respondents viewed their market positively, third only to Toronto and Vancouver. With a new light-rail transit system and a focus on intensification, construction can be found in every corner of the city. What’s more, the proposed 21-hectare LeBreton Flats redevelopment, which includes a new arena for the Ottawa Senators, has the potential to transform the city’s downtown. “The city is setting the stage,” one interviewee said. “Someone needs to just pick up the ball.” The abundance of opportunities had led to some new entrants into the Ottawa market, but pricing and availability mean developers need to be diligent and focus on where they can add value.

Ottawa is experiencing growth and stability, aided in part by an expanding civil service and a thriving tech sector. Interviewees expect the job market will continue to flourish, and this, coupled with new investor interest and a growing flow of buyers relocating from expensive urban centres, will drive demand for housing. This is driving sales in infill communities in the city’s core and in the suburbs. Faced with a large inventory of condo units, many developers have switched to rentals, with many units coming online in the next 24 months, almost doubling the supply in some areas. Even with this increase, respondents anticipated rents will stay at an all-time high.

Ottawa had an office vacancy rate of 9.1% in Q2 2018, and while the city is a government town, some focus has shifted to the tech space. Tech hotspots include Kanata and now the downtown core, where there has been a movement of companies adopting modern, open layouts near amenities in an effort to attract young talent. As a result, landlords have started to move away from long-term leases to shorter lease terms (i.e. between two and four years) with tech companies that want flexibility and redesigned spaces.

Quebec city

“Owners and managers alike are seeking a lot from their side to improve the customer experience.”

Quebec city

According to the CBoC, Quebec City’s economy is forecasted to grow 2.0% in 2019, and interviewees remain confident. One noted there was “a lot of competition” for assets compared to previous years, and another planned to make significant investments in the coming year to take advantage of increasing supply and opportunities.

When it comes to retail, there’s more optimism in Quebec City since the sector reportedly hasn’t felt the sting of e-commerce as strongly as in the rest of Canada. The region’s large shopping centres are doing well, and while interviewees were a little worried last year, they noted people in Quebec City continue to shop at their malls.

Residential construction spiked last year, powered by job growth and the expectation of a possible interest rate hike. In the year ahead, it’s anticipated that the market will settle and the pace of new housing starts will stabilize. Multi-family units, including rental units for seniors, will account for the bulk of new housing construction over the next year.

Supply and demand for office space is in balance, with interest in new Class A development. The need to innovate with co-working spaces and unique amenities is paramount, with one interviewee saying, “The office of tomorrow will be completely different.” Commercial construction is gaining momentum in this healthy environment. Development has begun on the first phase of the CHU de Québec-Université Laval hospital—a project valued at $1.9 billion—and Quebec City’s port authority has proposed an expansion that could prove beneficial over the medium term.

In industrial, there’s a persistent preoccupation with a lack of land, but multi-purpose industrial assets were considered by some as a best bet in 2019.



Winnipeg’s economy continues to perform well: GDP will grow 2.3% in 2018 and gain a further 2.1% in 2019, according to the CBoC. The city’s housing remains affordable by national standards, and inventory of all types of new homes has crept above the long-term averages, even as net migration inflows are strong by historical measures.

Construction will start this year on residences in a $400-million, four-tower downtown project, which will include office and retail space, a hotel and underground parking. Both of the office and retail towers are already under construction. In the industrial sector, sales remain strong, with several large deals occurring in the northwest and east ends of the city. But the southwest continues to struggle with both limited sales and leasing prospects.



The Saskatoon market is on the upswing. According to the CBoC, after posting 2.0% GDP growth in 2018, the region is forecast to grow by 2.3% in 2019. At the moment, the city is taking advantage of relatively strong economic conditions as it seeks to spur development. Local councillors hope that by approving $120 million for a bus rapid-transit system that will cross the city they’ll be able to foster development of mixed-use “transit villages” along the new corridors. Construction of the system could begin in 2019 and be completed within three years.

Saskatoon’s market for new homes remains slightly oversupplied, leaving builders still cautious in 2018 after significant declines in starts in 2015 and 2016. The amount of construction will likely decrease again this year, but a rebound is in the cards for 2019, according to the CBoC. In the city’s industrial market, rental activity is picking up after landlords acknowledged that current conditions demand lower net effective rental rates to attract and hold onto tenants.



Halifax is set to deliver a steady performance in the near term, with growth forecasts of 1.9% in 2018 and 1.8% in 2019, according to the CBoC. Halifax’s downtown has seen an unprecedented boom in recent years, and the city is working to redefine its core with a growth strategy that includes prioritizing people over cars.

While demand continues to be strong in the core for multi-residential properties, interviewees this year said there may be a shift toward single-family housing, with growing demand for smaller-format houses and townhomes. A burst of immigration and continued rural migration are forecast to boost demand for multi-unit residences, and an aging population interested in downsizing will support more multi-residential rentals with premium amenities and a community-oriented lifestyle.

In office, large organizations are continuing to sign long-term leasing agreements in traditional downtown towers. Many favour new downtown office space, with hundreds of thousands of square feet introduced recently, but smaller firms are looking for more modern set-ups, favouring smart amenities and shared spaces. Shifting tastes could eventually make the city’s older space less desirable, and as one interviewee said, “You’ll need to be amenity rich across all sectors to remain competitive.” Some respondents speculated the older downtown office stock presents an opportunity for more multi-residential development in the core.

Respondents commented that, while retail has struggled, there’s an opportunity to repurpose existing retail stock to accommodate e-commerce warehousing and fulfillment. In addition, the industrial sector is highly favoured for investment in Atlantic Canada, with respondents rating it second to multi-residential. The industry doesn’t anticipate any disruption, as the available assets are suitable for current demand.


According to the CBoC, the city’s economy was poised to grow 2.8% in 2018 and is forecast to expand 2.2% in 2019. Revitalization of the city’s downtown core continues with construction of the MacEwan Centre for the Arts, construction of Edmonton’s ICE District and work on the new Valley Line LRT.

High inventories of new homes will cause starts in both the single-detached and multiple-unit markets to fall, with activity expected to rebound slightly in 2019, according to the CBoC. Over the last five years, home prices have risen by less than the national average—and interviewees said this discrepancy bodes well for future sales. The market consistency is good for sellers and presents an opportunity for millennials who have been delaying entering the housing market.

Edmonton’s downtown condo market is getting a lift from baby boomers who are downsizing and moving into the city core. But the apartment rental market is experiencing high turnover as low interest rates entice some potential tenants to enter the housing market.

The office market will continue to be challenged by modest investment in the energy patch, with vacancy rates expected to climb beyond the 14.5% recorded for Q2 2018. There’s little on the horizon to drive demand as further inventory comes to market. But on a positive note, some interviewees expected the office sector to see its first positive absorption rate this year since 2015.



The CBoC expects Calgary’s economy to grow 2.3% in 2019 after hitting 2.9% GDP growth in 2018. Now that the city is seeing increased confidence as the oil and gas market starts its recovery, the wheels are in motion in the real estate market.

Even with increased interest rates and new mortgage rules, first-time and move-up home buyers are leading the residential charge in multi-family residences and luxury homes, respectively. Meanwhile, millennials and younger couples are balancing the condo market. For example, the East Village is a new city-supported community development, with condo and rental accommodations alongside retail and other cultural amenities. But Calgary’s housing market remains broadly oversupplied. Rental vacancy rates peaked at 7% in 2016 and have gradually improved since then to the 6% range, according to the CMHC.

The city’s office market remains oversupplied, as many tenants take advantage of the 23.8% Q2 2018 vacancy rate to move into Class A space. Downtown Class B and C assets have experienced the largest decreases in occupancy. There’s a flight to quality in office, so landlords need to get creative and are focused on developing unique, collaborative spaces targeted at millennials, startups and tech firms. For example, an older office building has been redeveloped as a dog-friendly office tower focused on attracting millennial businesses. Its unique lifestyle perks include a basketball court, a putting green, a dog spa and an outdoor dog park.

Calgary’s industrial market continues to gain momentum, showing positive absorption in 2018. But the region remains cautious, focused more on last-mile warehousing and fulfillment facilities and less on industrial.

Contact us

Frank Magliocco

Partner, Real Estate, Assurance, PwC Canada

Tel: +1 416 228 4228

Chris Potter

Partner Real Estate, Tax, PwC Canada

Tel: +1 416 869 2494

Miriam Gurza

MRICS Managing Director, Real Estate, Consulting, PwC Canada

Tel: +1 416 687 8143