Canadian Commercial Rents Are Soaring For Offices, While Retail Drops

The price of a commercial lease in Canada is getting more expensive, unless it’s retail. Statistics Canada (Stat Can) data shows commercial rents increased in March. Gains were led by offices, and an industrial space boom. Retail was the only big loser, with prices taking a dive across the country.

Canadian Commercial Rents Increase, But Retail Weighed The Index Down

Canadian commercial rents were relatively flat at the national level, due to retail. Commercial rents increased 0.3% in March, when compared to a year before. Gains were seen in offices (+2.2%), and industrial space (2.6%) from a year ago. The reason the general index was so low is due to retail space, which dropped 2.9% from last year. These same themes can be seen in Toronto and Vancouver, but more extreme.

Canadian Commercial Rent Prices

The annual percent change in price for commercial rents across Canada, and selected markets.
Source: Stat Can; Better Dwelling.

Toronto Office Rents Rise 3%, While Retail Drops Almost 5%

In Toronto, commercial rents climbed much faster, with retail being a giant exception. Commercial rents in the City increased by 2.7% in March, compared to a year ago. Gains were seen in offices (+3.3%), and a massive boost for industrial space (+6.0%). Retail is absolutely cratering though, with prices falling 4.8% from last year. Toronto retail space was having a tough time before the pandemic. Pandemic issues are definitely intensifying the issues though.

Vancouver Commercial Rents Rise 1.8%, But Retail Fell Nearly 6%

Vancouver commercial rents increased at a faster rate than the national numbers. The City’s commercial rents increased 1.8% in March. Gains were led by offices (+2.1%), and industrial space (+6.3%). The latter must be getting scarce considering that kind of premium. Retail experienced a big drop though, falling 5.8% from a year before.

Soaring real estate prices were expected to push commercial lease prices higher. The pandemic lockdowns made offices and retail spaces ghost towns. Companies must think that’s temporary for offices though. Mostly empty units are fetching higher lease premiums, indicating demand is firm.

Retail is also impacted by the same pandemic lockdowns, but isn’t responding as well. Not even government subsidies have been able to prevent shops from shuttering. Lockdowns and minimal business investment is likely behind the trend. How long the retail downturn will last is a mystery. Companies aren’t as keen to gamble on that bounce back like they are with office space.

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3 Comments

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  • Pepp 1 year ago

    Low interest rates allow large corporations with well established relationships with banks to borrow at a lower cost. At the same time small businesses are getting destroyed, therefore they left a void in the market. I always give examples, for example: a local restaurant is now bankrupt, the customers they serv will eventually come back. With vaccination in progress that would be the foreseeable future. One of the large chains like the keg or others will step in and open shop on their corpse. And this is happening in all industries.

    Hence, we are see these numbers. With inflation so high rent for homes will also increase. This will create condition where tenants having low rent staying put while new home hunters will pay high rents. However if one have to move in the near future its better to find a good place now then to wait. The longer you wait the high it will be. Inflation is here.

  • Tim Fiorito 1 year ago

    Do these bumps in rates reflect TI (tenant inducements)?

    All of my clients deals are below market. 12 months free on 5 year, $40 build out, paying on $10…..

    Why are landlords starting to come out with double commissions on office leasing? burbs and downtown. Wonder if small investors can afford to offer these generous inducement packages. Hmmmm

    Something Isn’t adding up again in Canaduh….I mean Canadowe….

  • Ahmed 1 year ago

    Lease rates are so high in Toronto and Vancouver, 25% of rent is a lot to pay for a year with no revenue. Not surprising the only thing opening are “essential” businesses, like fast food and cannabis stores.

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