Commercial Real Estate
Outlook 2014
Canada’s commercial real estate outlook looks healthy in
2014. With continued investment from both domestic and international investors,
Canada is poised to maintain positive growth as one of the most robust
economies amongst the G-7 nations.
Industrial and Distribution
These two important sectors will lead much of the way through
2014 due in large part to the strong growth in e-commerce and its continued
need to build regional fulfilment centers to support its one day service
delivery commitments.
Manufacturing
Manufacturing makes a comeback in America largely due to the
increase of labour cost in China (15 – 20%), and the steady appreciation of the
Chinese Yean against the dollar. Lower energy costs are also helping this
trend. Manufacturing alone will provide for some 600,000 new jobs in North America
in 2014.
Accommodation
As the North American economy sees an increase, so does the
hotel business. These aren’t at peak levels yet but occupancy has steadily
risen since 2010 to just over 65%. Corporate travel is the bread and butter of
the accommodation industry and all indicators continue to grow for all
participants. Limited service hotels are expected to perform better than their
full services counterparts due largely to prudent fiscal management.
Apartments
Moderate and high income development projects will drive
much of the growth in this sector in 2014. This change comes amidst a more positive
economic outlook than in the previous 8 years. The recent lack of interest in
this sector has created a short supply resulting in a pent up demand for this product
class.
Retail
Brick and mortar retail is still undergoing the most
significant shift in consumer demand as technology and e-commerce are dictating
a “new think”. It’s safe to say that size does matter but smaller rather than
larger. The mega centre mentality is gone and retailers are scrambling to find
the best size match for their new business model. Urban mixed use properties
are clearly the market winners as fifty something’s continue to rush back into
the city leaving their snow shovels and second car behind.
Office
Caution is the corporate watchword for office builders in
2014, as this trend is clearly on the down. Companies are learning to get by
with fewer employees, reducing work space per employee and more people choosing
to work from their homes. This is a continued trend that sees no end. The
tightening of the office market is here to stay as workers become more mobile
and technology is again dictating a “new think”. Rents and vacancy rates will
remain somewhat capped in 2014 as corporate growth no longer equates to more
space.