Halifax Commercial Real Estate Outlook 2023
February 22, 2023 3 Minute Read
Halifax has quickly become an attractive place to work, live and invest, despite the economic headwinds impacting the commercial real estate market in recent years.
Although there is short term uncertainty, the fundamentals across all asset classes remain strong.
We checked in with Atlantic Region Managing Director Andrew Bergen to find out what he’s watching for in his commercial real estate market in 2023.
We’re back to pre-pandemic numbers in terms of vacancy. There have certainly been challenges but the market has been fairly stable throughout the pandemic and into this new wave of macroeconomic turbulence.
Vacancy is coming down; however, we anticipate more sublease opportunities in the next 12 months as companies will look to downsize to accommodate new hybrid work strategies.
And with construction costs rising, tenants are looking for plug and play turnkey solutions versus building new.
But we’re also seeing tenants commit to longer-term deals. That’s really promising: organizations seeing the value in having office space and bringing people back together. We also continue to see a flight to quality in the downtown core, with new product coming online. That’s been a major trend over the past 24 months.
And we’re seeing a lot of repurposing of the older office product to multi-residential. We’ve seen several projects go through that process and we think that will continue. It’s a complex process but we’ve seen a number of acquisitions in the past 12 to 24 months where that’s the developer’s vision: take an old obsolete office building and convert it into multi-res.
Neighbourhood grocery anchored strips are attracting the lion’s share of activity and restaurants continue to be very active, especially national quick service brands.
We see retail coming back and that’s similar to most major markets. Consumer trends have shifted slightly in the last two to three years. Consumers now are seeking more of that in-store experience. Not to say online shopping is dead but people are wanting to be in actual stores again as prominent enclosed shopping centres are attracting new-to-market fashion retailers.
Similar to what’s happening nationally, the industrial market continues to perform well with limited availability. We’re finally seeing new product coming to market in 2023, which will alleviate some of the demand pressure.
The big story is the position of our market, being a port city in the midst of global supply chain shifts plays to our strategic advantage. Halifax is seeing record numbers in port traffic; Saint John, New Brunswick and Montreal are seeing the same. Population increases in New Brunswick and Nova Scotia will continue to drive e-commerce growth.
Rapidly rising rental rates and employment shortfalls are pushing companies with several locations to consolidate into new high cube warehouses. With a sub 2% vacancy, any available space is dated and inefficient. There has been pent up demand for higher clear height, new warehouse distribution facilities, and we’re seeing new multi-tenant projects under construction, which is promising.
With strong population growth in the Atlantic Region there is the requirement for new multi-family supply, so construction activity is expected to continue.
The Halifax Regional Municipality is now close to 500,000 people. We’ve benefitted from attracting new people to the region and that’s absolutely driving multifamily demand and development.
New product is achieving higher rents, driving overall market rent growth. Interest rates, construction costs and rent caps are will continue to be a challenges. But the demand is there and we don’t see that slowing down.
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