Atlantic Canada’s Commercial Real Estate Outlook Is Optimistic

Atlantic Canada is a haven of stability and optimism in a sea of global economic and political uncertainty.

Local retail is showing resilience. The region’s industrial market is sorely lacking development sites, pushing land values higher. The multi-residential sector is experiencing all-time high demand for apartments that far outpaces the supply of new units. And Halifax office vacancy is trending downward as the market rounds the corner into 2025.

“Unlike other places, Atlantic Canada has managed to maintain much of the commercial real estate momentum that we had during the pandemic and as we look to the new year, we expect all of the key sectors to experience some growth and investors will take a closer look at opportunities in our region,” says CBRE Halifax Executive Vice President Bob Mussett, who addressed an audience of 900-plus at CBRE’s Atlantic Market Outlook event on Nov. 12. “We’re not immune to economic trends and deal-making will require creativity and patience, but we’re seeing a brighter path forward in 2025.”

Bricks and Mortar Retail Remains Strong

Despite facing elevated interest rates and moderated consumer spending, Atlantic Canada’s retail sector remains robust heading into 2025. Bricks and mortar retail has shown tremendous strength, particularly grocery-anchored sites, which along with enclosed retail projects are seeing increased financing activity.

With retail vacancy rates at record lows, retailers are facing stiff competition to secure prime locations. This has led to higher rents and more aggressive leasing terms in favour of landlords.

There is a growing divide between luxury and discount retailers, both of which are performing well, while the middle segment is shrinking. The region continues to attract discount retailers and Halifax’s luxury sector is experiencing newfound attention as population and demographics continue to change.

New Projects Will Ease Industrial Demand

Pent-up demand for industrial space to lease has eased with the completion of multiple significant projects delivering a record-breaking amount of new supply to the market in 2024. Significant industrial construction is still underway.

A severe lack of new industrial development land is causing land values to hit new highs. Amid high land values and construction costs, expect rental rates to continue to rise in the near term.

On the industrial leasing side, expect companies to select new, modern buildings that allow expansion upward rather than outward. AI is enhancing property valuation by optimizing space usage and improving tenant experience.

Multifamily Supply Lags Drastically

Despite record levels of multifamily starts in Halifax, supply still lags drastically while absorption and rental growth remain strong.

Halifax’s apartment market continues to reflect extremely tight conditions, with vacancy and turnover at historically low levels. New construction is hindered by lengthy approval times, a lack of labour capacity and construction cost acceleration, even with the removal of HST.

The additional density afforded through the housing accelerator fund for existing and new projects should result in higher multifamily construction starts in 2025. Development land sites with any issues of uncertainty are not trading, while pad-ready sites are commanding higher prices. 

Optimistic on Office

Halifax outperforms the rest of Canada in terms of positive absorption of office space and vacancy continues to trend downward as the market works through new supply from the past seven years. This includes large developments like The Nova Centre, Queen’s Marque, Westway Campus in Bedford.

Larger office buildings are being converted to multifamily taking some stock out of the market. From a sales perspective, the office sector has experienced an unexpected increase in appetite from both investors and lenders. This is expected to grow and lead to increased capital allocation to the sector in 2025. Though lenders are expected to be selective in targeting Class A office. 

From a demand perspective, suburban office assets will continue to outperform the downtown office market, especially suburban assets with strong government or health care tenants. The tech sector has also been a main driver of office absorption, with Halifax.