Demand for Retail Space as well as Commercial Property are Soaring
Finally, we are recovering from the long nightmare of the pandemic
[CANADA] It was very painful to see dark, empty stores with lease signs hanging from numerous storefronts. The shadow that the pandemic Covid-19 drew was frighteningly dark and drab. It might still be too early to beat the drum, but we've definitely begun to see silver linings getting thickened.
Growing Demand for Retail Space
According to a recent article from Toronto Stars, retailers and employers are starting to make the move back to in-person work.
Back in May, RioCan Real Estate Investment Trust reported an occupancy rate of 97 percent in the first quarter of this year. This is an increase from 95.8 percent a year earlier.
First Capital, one of the largest retail landlords in Canada reported its “highest leasing volume ever” in its first-quarter earnings. The company reported that the renewal leasing volume was 838,000 square feet in the first months of 2022, compared to 452,000 square feet at the end of 2021.
Nationwide retail vacancies recorded the multi-year highest back at the end of 2021.
According to foot-traffic data from Avison Young, a global commercial real estate services firm headquartered in Toronto, in-store shopping in Canada grew a whopping 371 percent for local retailers compared to a year ago.
Toronto Star reported that the recovery is generally evident in areas including downtown Toronto. It noted, however, that some realtors are still going through challenges trying to attract new tenants.
Commercial Landprice Soar Nation-wide
Canada sees a record-breaking land rush according to a recent article from The Globe and Mail. This phenomenon is evident nationwide, including in Winnipeg, Vancouver, Montreal, Waterloo, and the Greater Toronto Area.
Take a look at Waterloo Region. Back in 2008, it was $80k an acre to buy a 28.50-acre land zoned for industrial development. A decade later, properties with similar conditions sold for between a whopping $400k-500k an acre.
The dramatic soaring in commercial land prices was especially prominent over the last couple of years.
“Two years ago, we were talking between $300,000 to $450,000 per acre across Southwestern Ontario. Now it’s $800,000 to $1.5-million per acre," said Joe Benninger, a vice-president with commercial real estate services firm CBRE’s Southern Ontario investment team.
What caused such a steep hike in price? Many professionals agree that it is a matter of supply and demand. It takes time to zone land and as the demand for distribution, warehousing, and manufacturing sites is stripping supply and setting records, developers need to get the land, despite a higher price. Companies that can't find land available in the same province now look for cheaper options in other provinces. Given the unprecedented commercial land prices, affordable pricing in other provinces can be sufficient to make them decide to change locales entirely.
The demand is very strong now that buyers would not want to wait, The Globe and Mail noted. If you have a piece of land ready to be sold, the chances are you will see multiple bidders. The rise of commercial land prices is expected to continue to rise this year.