Canadian commercial rents soar for office space, while retail businesses decline
The price of a commercial lease in Canada is getting higher and higher, unless it is retail. Statistics Canada Data from (Stat Can) shows commercial rents increased in March. The gains were led by office space and an industrial space boom. Retail was the only big loser, with prices plunging across the country.
Canadian commercial rents rise, but retail weighs on the index
Canadian commercial rents were relatively stable nationally, due to retail trade. Commercial rents increased 0.3% in March from the previous year. Gains were observed in offices (+ 2.2%) and industrial premises (2.6%) compared to a year ago. The reason the overall index was so low is due to retail space, which fell 2.9% from last year. These same themes can be seen in Toronto and Vancouver, but more extreme.
Commercial rental prices in Canada
The annual percentage change in the price of commercial rents in Canada and in certain markets. Source: Stat Can; Better accommodation.
Toronto office rents rise 3%, retail businesses drop nearly 5%
In Toronto, commercial rents have been climbing much faster, with retail being a huge exception. Commercial rents in the City were up 2.7% in March compared to a year ago. Gains were observed in offices (+ 3.3%) and a massive increase in industrial spaces (+ 6.0%). Retailing is in dire straits, however, with prices down 4.8% from last year. Toronto’s retail space was going through a rough patch before the pandemic. However, pandemic problems definitely intensify the problems.
Vancouver commercial rents increase 1.8%, but retail businesses fall nearly 6%
Vancouver’s commercial rents have increased at a faster rate than the national figures. The city’s commercial rents rose 1.8% in March. The gains were led by offices (+ 2.1%) and industrial premises (+ 6.3%). The latter must become scarce given this kind of premium. Retail trade, however, fell sharply, down 5.8% from the previous year.
Soaring house prices were expected to push up commercial lease prices. Pandemic closures have turned offices and retail spaces into ghost towns. However, companies should think that this is temporary for offices. Most empty units report higher rental premiums, indicating that demand is firm.
Retail is also hit by the same pandemic lockdowns, but is not responding as well. Even government subsidies have failed to prevent stores from closing. Closures and minimal business investment are probably behind the trend. How long the retail downturn will last is a mystery. Businesses are not as inclined to bet on this rebound as they are with offices.
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