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A 2024 Re/Max Canada Commercial Real Estate Report was recently released. It analyzed 12 markets nationwide in Q1 2024, identifying 13 key trends.

Notably, there was a significant shift toward purpose-built rental construction, partially replacing new residential condominiums and, to a lesser degree, commercial projects. Multi-family and industrial real estate emerged as the leading asset classes in all 12 surveyed markets, followed by retail, with 66.7% of markets reporting strong performance. Farmland in Saskatchewan recorded one of its strongest years. Hospitality real estate also had a resurgence.

Developers increasingly focussed on purpose-built rental properties, at times prioritizing them over new condos and commercial buildings. Mall and strip plaza landlords are exploring residential additions to increase density, indicating a clear move toward mixed-use developments.

Despite these moves towards increasing housing, Canada’s growing population, now exceeding 40 million, means that the current boost in residential construction is still inadequate.

The key trends identified in the report included:

Multi-Family Construction

Canadian cities focussed heavily on purpose-built rental developments, driven by government incentives like GST removal on new residential builds. Cities such as Vancouver, Calgary, and Halifax had vacancy rates at or below 1.8% in 2023, reflecting high demand for rental housing. 

High-Density and Mixed-Use Development

Due to urban land scarcity, there was a rise in high-density and mixed-use developments. Property owners of malls and strip plazas integrated residential components into their properties to maximize land use and meet increasing housing needs, especially in densely populated areas.

Capital Gains Tax Changes

The 2024 Budget proposal to increase the capital gains tax inclusion rate from 50% to over 66% led some smaller investors to sell properties before the June 25 deadline to avoid higher taxes, although most held back.

Industrial Real Estate Demand

Industrial real estate remained robust across Canada, especially for warehousing and manufacturing, and flex space. Even with new space becoming available, demand stayed strong. Vancouver’s industrial land scarcity pushed businesses to consider alternatives like Alberta.

Resilience of Bricks-and-Mortar Retail

Physical retail stores continued to thrive, particularly in neighbourhood settings. There was a shift from goods retailers to service-oriented businesses like health and wellness services. Malls are adapting to optimize tenant mixes.

Expansion of Luxury Retail

High-end retail brands continued to expand, attracting global luxury retailers.

Agricultural Land Boom

Saskatchewan’s farmland experienced a boom due to record commodity prices, leading to significant land value increases. The FCC Farmland Values Report noted a 15.7% rise in 2023, with large farming corporations dominating the buyer market and creating intense competition. Few farms made it to the Multiple Listing Service (MLS) as most deals were word of mouth, cash purchases and not dependent on financing.

Revitalization of the Hospitality Sector

The hospitality sector showed signs of rebounding, with strong activity in markets like Halifax, where room rates have tripled. New hotel developments and expansions by major chains are ongoing, signalling recovery for a sector heavily impacted by the pandemic.

Strategic Reallocation by REITs

Real Estate Investment Trusts are optimizing their portfolios by selling older assets and acquiring modern properties, particularly focusing on newer office and retail properties.

Downtown Office Sector Challenges

Downtown office spaces continued to struggle and saw rising availability, particularly for older buildings. Converting office buildings to residential use in some cases can help with housing crunches, but this is not always possible with every building. The report noted that revitalization efforts by municipalities are crucial for rejuvenating downtown areas.

Growing Momentum for Adaptive Reuse

Adaptive reuse of commercial buildings, especially office-to-residential conversions, gained traction. Calgary led with several projects, followed by Winnipeg and Ottawa, to address housing shortages and repurpose existing structures effectively.

Vendor Take-Back Financing

In high-interest-rate environments like the Greater Toronto Area and Halifax, vendor take-back mortgages became more common to facilitate land development deals that might otherwise be stalled due to financing challenges.

Source: Canadian Real Estate Wealth