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 PricesThe 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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