Property type outlook


Warehousing and fulfillment remain the top prospects for development in 2020.

According to CBRE statistics for the second quarter of 2019, the industrial property market as a whole is very healthy, with a national availability rate of just 3.1% in that period. Conditions are particularly tight in Vancouver, which had an availability rate of just 2.1% and the Greater Toronto Area (1.5%).

Rental rates have also been on the rise, and while new supply is in the works in many Canadian cities, CBRE expects continued high demand to keep industrial markets tight in places like Toronto for the time being. One interviewee cited industrial property as a best bet, particularly in the hot markets of Toronto, Vancouver, Ottawa and Montreal.

In a region that has faced economic challenges in recent years, industrial property is a definite bright spot in Calgary. While interviewees were optimistic about Calgary’s industrial prospects, they expressed a significant concern about a lack of land. Halifax is also doing well. One interviewee noted there have been large portfolio transactions involving Halifax industrial land and suggested more are to come, with some assets sold off as smaller properties.

Future development trends to watch out for include vertical warehouses that require less space and the possibility of charging by cubic feet instead of square footage. Growth in self-storage facilities is another trend to watch as shrinking home sizes boost demand for that type of space.

Purpose-built rentals

Demographic and economic trends continue to move the dial in favour of purpose-built rental housing in Canada, where the national vacancy rate was 2.4% in 2018. Many baby boomers looking to downsize are choosing to rent, as are some millennials who find it an attractive and potentially more affordable alternative to buying a home.

Survey respondents are seeing the upsides, particularly when it comes to rental housing aimed at tenants with moderate incomes. There’s less interest in high-income apartments, with 47% of respondents rating that area of the market overpriced.

For the real estate industry, high demand and tight supply are helping to make it more attractive to develop and invest in purpose-built rental housing in some cities. In Toronto, interviewees suggested the Ontario government’s removal of rent controls on new units as of November 15, 2018, is also helping, although there’s still debate about where in the city and under what conditions it makes sense to build rental housing.

Many interviewees noted the evolving business model of incorporating different uses, particularly by adding a condo component, into projects to make rental housing more viable. "The condo pays for the land, which helps to make the numbers work", one interviewee said.

Amenities and services are also increasingly important in the rental market. While people may be willing to sacrifice size and home ownership, many want units that meet their lifestyle needs and preferences, such as more community-focused rental housing or co-living developments that offer opportunities for tenants to meet and interact with each other.


Office buildings continue to be a healthy area of the market, with survey respondents rating downtown properties fifth for development prospects in 2020. Canada’s continued gains in employment and fast-growing technology sector have been positive for the office sector.

While new construction is helping to meet the demand, preleasing activities are keeping vacancy rates low. According to JLL Research, the vacancy rate for office properties in Canada was 10.5% in the second quarter of 2019.

Many industry players are still figuring out how to respond to the co-working trend, with some looking to work with some of the big companies in that space and others seeing if they can emulate them. But emulating co-working companies is a challenge given the negative impact of short-term leases on property valuations.

According to one interviewee, the movement away from long-term leases means lenders will need to think differently about office properties. “Lease terms of seven years will not be seen anymore.”


In a year that saw announcements of yet more closings of well-known names in the retail sector, it’s not surprising that the subdued sentiment continues for that area of the Canadian real estate market. Once again, survey respondents rated property types like outlet centres, regional malls and power centres at the bottom of the list of development prospects in commercial real estate.

Several interviewees pointed to the poor outlook for enclosed malls, suggesting that while investors may want to sell off portions of their holdings, they’re reluctant to do so due to the impact on the valuation of their overall portfolios.

The rise of e-commerce doesn’t necessarily mean the end of a brick-and-mortar presence, particularly when retailers integrate their stores with their fulfillment operations. One interviewee suggested the sentiment against the retail sector has gone too far as it remains an important solution to last-mile delivery, while others emphasized the opportunities in conversions to service-oriented uses like fitness centres and health facilities.

The overall feeling is that many retailers will have a smaller footprint in the future, with some maintaining a scaled-down storefront in large part to display products available for ordering. Retail property owners are also reinvigorating their properties. Some have welcomed co-working companies to their premises, while others are redeveloping their properties to include community services and residential uses.

Single-family residential

As the affordability conversation continues, the market for single-family housing has come under pressure. Survey respondents reflected the impact of the affordability issue, rating the investment and development prospects of moderately priced single-family housing well above higher-end products.

The challenges for single-family housing have been playing out in the market. Inventory under construction in 2018 was 46,747 units, according to the Canada Mortgage and Housing Corp. That was down from more than 55,000 units in 2017.

With demand for new homes softening, prices of single-family housing have been levelling off. According to RBC Economics Research, that led to a small improvement in the affordability of a single-family detached home in the first quarter of 2019.

A significant factor in the soft market for single-family housing is the lack of move-up buyers. But many interviewees say they still like this area of the market, suggesting that if it weren’t for the affordability issue, many homebuyers would still choose a single-family home.


Condos have continued to dominate new-home construction in Canada. With inventory under construction reaching almost 121,000 units in 2018, condo activity far outpaced single-family (46,747 units) and rental (56,394 units) housing. Condos, which accounted for 54% of the inventory under construction in 2018, have also played a significant role in supplying the rental market, often through investor purchases.

But survey respondents are lukewarm on condos, rating development prospects as fair for 2020. Many demographic factors are favourable, including growing urbanization, rising populations, downsizing baby boomers and the relative affordability of condos. But the price gap between condos and single-family homes has been narrowing, particularly with factors like the mortgage stress test limiting demand for more expensive types of housing.

While many interviewees were optimistic about the overall prospects for multifamily housing, the outlook varies by city. The outlook tended to be less optimistic in Calgary, and while the housing markets in places like Ottawa and Halifax have been doing very well, many respondents noted the relative affordability of single-family and rental housing means condos are less of a factor than in some other cities.

In Toronto, the condo segment continues to be marked by a cautious sentiment amid concerns about project cancellations. Delays in approvals, rising costs and slowing momentum on pricing are all adding to the potential for further cancellations.

On the upside, many interviewees noted rising demand for larger suites. Other trends include a move toward integrating more diverse uses into developments. Rather than having just retail uses at the bottom of condos, developers are diversifying them to include facilities like elevated parks, community centres and daycares.

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