This year’s Canadian real estate trends are about creating possibility. Competitive forces are causing owners, developers, and investors to rebalance their portfolios with the right deals, rethink how they grow in a high-price environment, and reinvent how they do business amid technological disruption and increasing regulation. Staying on top of these trends will be key to prosperity over the long term.
The Canadian real estate sector continues its steady upward performance amid largely static economic conditions across much of the country. Owners, developers, and investors are generally more optimistic than last year, but they are also cautious of the larger implications from a potential external event or market correction in heated markets like Toronto or Vancouver, which both experienced shakeups in the past year from taxes on foreign buyers and some types of vacant properties.
Overall, those in the industry see opportunity in nearly every property type and major market, though most are cautious with retail property, as that industry continues to address disruption.
Day to day, the industry is more concerned with the business pressures it’s facing. While our survey shows that real estate investors expect to buy and sell property more frequently than in 2017, it has become more difficult to find good properties to buy. Companies find they’ll need to be more proactive and creative to uncover opportunities. Also, economic pressures are pushing many companies to be more efficient and focus on operational excellence to improve net operating income. This remains true regardless of region or property type— whether one is dealing with office space in Calgary or retail property in Toronto.
Others cite a need to improve decision making and find an operating strategy that is better suited to the current environment. Canada has faced an oversupply of investment capital in recent years, creating upward pressure on prices. Confronted with a highly competitive and frothy marketplace, developers and investors say they need to be ready to be more creative and make swift, strategic decisions. Companies are also revisiting their operating strategies to mine opportunities, including redevelopment and intensification, within their portfolios and allow them to gestate long enough to determine if they’re worth pursuing. “Having the right team at the table to navigate the complexities and create a competitive edge is increasingly more important,” one interviewee noted.
Over the course of our cross-country interviews with real estate leaders and decision makers, several other long-term trends emerged.
Housing affordability concerns continue to reshape where and how Canadians live. They’re driving people to smaller cities in search of a less costly lifestyle and causing those who stay to rethink homeownership. This trend reaches beyond the housing markets of Toronto and Vancouver, contributing to the rise of long-term renters. And while a rise in interest rates and government actions to curb foreign homebuyers may push prices down in the short term, interviewees do not expect these measures to derail the real estate industry’s long-term growth prospects. One stated that the affordability issue moves beyond where and how Canadians live and is affecting the supply of labor and society’s general well-being.
Transit development will play a key role in shaping development in the decades ahead as municipal, provincial, and federal governments push forward with transportation infrastructure spending. Developers are already avidly investing in new projects along new transit lines from Toronto to Ottawa to Edmonton, and these corridors, stations, and hubs are sure to be home to new and exciting urban spaces.
Technology is poised to reinvent the real estate industry by helping developers and investors uncover new opportunities with trusted and actionable data-driven insights. Analytics will allow companies to turn vast amounts of data into key insights and develop go-forward strategies that will enable effective, faster decision making. And the evolution of technologies like automated vehicles, drones, and smart buildings is changing the way developers design buildings and communities. Technology and “big data” are transforming all aspects of real estate, including how companies anticipate and respond to customer trends, manage, develop, and lease their buildings, and serve their tenants.