While a slowdown in national residential construction will play a role in moderating growth for Canadian businesses in 2013, a pickup in office/retail construction, combined with increased population density in major cities provide excellent opportunities for entrepreneurs, according to a special report from Sherry Cooper, chief economist for BMO Financial Group.
“The boom in non-residential construction represents a clear example of where opportunities lie for Canadian business,” said Cooper. “The boom applies to both office buildings and shopping centres, as vacancy rates remain low and foreign businesses continue to pour into the country. Despite the enormous office construction in many cities, especially Toronto, space has been gobbled up and A-rated buildings are now planned in areas formerly considered undesirable.”
With a well-publicized push towards increased density taking place in Calgary, which has included a rise in the number of condominiums under construction in and around the downtown core, Cooper said the commercial momentum is evident in the number of people calling downtown home.
“This helps create a readily available pool of well-educated younger workers happy to work downtown. This is not unique to Toronto and has been evident in Vancouver, Montréal and other major Canadian cities.”
Steve Murphy, head of commercial banking at BMO Bank of Montreal, notes that the strong commercial real estate fundamentals also extend to the owner-occupied market, where businesses own commercial properties for their own use.
“There is strong demand for these properties by users, who are often able to lease out part of the property for additional rental income,” said Murphy. “Now may be a particularly good time for businesses to invest in commercial property for their own use,” he added.
When looking for a commercial market to invest in, it would be difficult to find one performing better than Calgary. According to a report from Avison Young, Calgary’s commercial real estate investment market saw a significant 111 per cent dollar volume increase in the first half of this year compared with a year ago.
In the first half of 2012, the dollar volume of office investment transactions greater than $1 million increased 121 per cent to $1.1 billion from $495 million in the first half of 2011.