Kelowna, B.C./Sept. 24, 2015 – In much of Western Canada, the fall in oil prices led to slower activity in the commercial property markets in the first half of 2015. In Greater Vancouver, however, the first half of the year saw a 14 per cent increase in total sales over the same period in 2014. The second quarter of the year, in which there were 591 sales, was the busiest quarter for commercial sales in the past five years.
“While commercial real estate activity in most of Western Canada has been dampened by the drop in oil prices, investor confidence has remained high in Greater Vancouver,” said Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “Land is in highest demand from local companies looking at long term opportunities.”
Continued low interest rates and high investor confidence drive demand in the Vancouver commercial property market, where land is the most in-demand property type. Most investors are local with some foreign investment as well. Long-term investors, primarily smaller developers, are driving demand for raw land in the suburbs. With the current low interest rates, developers view these purchases as safe long-term investments.
The impact of the drop in oil prices was felt most strongly in Edmonton and Calgary. In Edmonton, the total number of commercial and land sales was down nine per cent year-over-year in the first half of 2015. The overall value of those sales was down 13 per cent, dipping below $1 billion at half-year for the first time in three years. In Calgary, the downtown office market experienced the greatest impact from downsizing in the energy sector. Average net rents decreased approximately 19 per cent year-over-year; the average vacancy rate of all classes was approximately 13 per cent.
“Until oil rebounds, the markets in Alberta’s largest cities are expected to remain in a down cycle,” said Ash. “However, there is still demand for good investment properties in these markets. Significant development is currently underway in Edmonton, and Calgary continues to attract foreign and domestic buyers, prompting optimism for long-term growth and stability.”
In Regina and Saskatoon, while the drop in oil prices has affected the commercial property market, the impact hasn’t been as significant as in Calgary and Edmonton. The diversity of Saskatchewan’s economy, in which agriculture, potash, trucking and government are all significant employers, has mitigated the overall impact of falling oil prices.
In Winnipeg, a limited number of commercial properties for sale resulted in greater activity on properties that would typically be viewed as less desirable. Not until there is a significant interest rate hike is it expected that a healthier balance of supply and demand will come to the market.
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