June 2022: Commercial Real Estate News Roundup
Real estate remains a hot topic in Canada, with a market so desirable that many industry observers are worried about its ability to keep up with demand.
If you’re working in the commercial real estate industry, or you’re an investor interested in staying on top of industry news and trends, please read the stories below.
Commercial Landlords: Retail Making A Comeback
Financial reporting from Canada’s biggest owners of commercial real estate shows that retailers have begun the slow but massive shift back to working in physical stores.
Social distancing may have receded months ago, but it’s only now that many companies have reopened their brick-and-mortar stores after the brutal losses of the pandemic, The Star reported in May 2022.
For example, during the first quarter of this year, the RioCan Real Estate Investment Trust reported an occupancy rate of a whopping 97 per cent in the first quarter — up from 95.8 per cent just a year earlier.
“There has been significant recognition by a lot of our tenants that they need the brick-and-mortar elements to make their whole infrastructure work,” RioCan CEO Jonathan Gitlin told The Star.
The same was true for First Capital, a company that owns many shopping centres and grocery stores across the country. First Capital experienced a record-breaking first quarter, with renewal leasing volume increasing to 838,000 square feet from just 452,000 square feet at the end of 2021.
Ukraine and Inflation
When it comes to CRE in 2022, it’s not all roses, however.
The Russian invasion of Ukraine has caused a huge rise in global commodity prices that could cause major problems in the near future. According to Statistics Canada, inflation recently rose to 6.7 per cent — a 31-year high.
While the Bank of Canada raised interest rates in April, borrowing and building still costs more, resulting in more expensive commercial real estate properties, The Globe and Mail reported.
“The overriding factor for commercial real estate right now is that we are looking at extremely strong job growth – a very large increase in the number of workers hired,” Jean-François Perrault, senior vice-president and chief economist at Bank of Nova Scotia, told The Globe and Mail. “And, of course, you need to put those workers somewhere. We thought the commercial sector would do reasonably well coming out of the pandemic, and, to a large extent, that is still our view. Nothing is shaking us off that, even though, for instance, the cost of financing has increased.”
Supply Chain Issues
In a recent panel discussion in Edmonton, leaders of the commercial real estate industry said that supply chain issues have them worried.
Wait times have increased for many crucial items, especially mechanical parts like refrigeration, gas coolers and transformers, the CBC reported. That’s likely caused in part by the pent-up demand from the pandemic, Jarrett Thompson, chief operating officer at Cameron Corporation, told the CBC.
These supply chain delays have made commercial real estate projects more costly and time-consuming, he said. Examples include a lack of nails — also correlated with Russia’s war on Ukraine.
"Despite there being a market right now, a lot of the builders are pulling back, which is creating some major challenges," Thompson said.
Stay tuned for more commercial real estate news from Jordan Fletcher and Gorge Holdings.