Resilient commercial real estate markets in Western Canada expected to rebound in latter half of 2021, says RE/MAX

Industrial and multi-unit residential asset classes to lead the way

Kelowna, BC (February 25, 2021) — While endless challenges faced commercial real estate markets in 2020, investors and end users in Western Canada showed incredible resilience in their ability to both adapt to changing conditions and position themselves for the future, according to a report released today by RE/MAX of Western Canada.

The RE/MAX Commercial Real Estate Report, highlighting trends and developments in seven major centres in Western Canada, found that institutional investors and private equity played a substantial role in almost every market in 2020, fuelling demand for multi-unit residential, industrial product, and office buildings while end users and smaller investors were strong in the industrial and, to a lesser extent, retail sectors. Industrial was the top performer from Vancouver to Winnipeg, driven by increased demand for warehouse and fulfillment space from multi-national companies such as Amazon and FedEx, while demand for multi-unit residential remained consistent, with higher CAP rates and lower values attracting investors in markets like Edmonton and Calgary. Farmland rounded out the top three sectors, with robust demand in Saskatchewan sparking strong sales and upward pressure on values.

“Despite a strong start to 2020 in virtually all asset classes across Western Canada, the pandemic shook the very foundation of the commercial market, and ultimately altered the playing field,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “Industrial captured the spotlight in the aftermath as e-commerce sales exploded across the country – prompting even greater demand — while the retail and office sectors struggled with lockdowns and safety measures.”

Closure of bricks and mortar during lockdown and the acceleration of e-commerce placed retail tenants behind the proverbial eight ball in 2020. Smaller retailers used the opportunity to invest in their future by purchasing smaller storefront locations, especially in high-traffic areas – with equity gains buffering any downturn in sales. Others looked to upgrade their online presence and augment with a reduced physical footprint, and if need be, industrial space for warehousing and distribution.

“The country’s largest landlords were able to evaluate and pivot with some success in 2020,” explains Ash. “Changing up the tenant mix has been one option exercised by landlords over the past year, while redevelopment is another, with some malls owners planning future multi-unit residential development on their properties. Others, such as the Orchard Park Mall in Kelowna, are using vacated space to expand their parking capacity. Conversion of retail vacancies to industrial space is also likely in the future, with large companies such as Brookfield already pushing forward with retail conversion to distribution models within their US portfolio. Given the movement underway in the US, it’s only a matter of time before we see this approach mirrored in Canada.”

While restaurants were hard hit by the pandemic, drive through locations emerged as 2020’s perfect business model — no touch, no contact, just tap and go. Demand for this product has surged in Saskatoon, Kelowna, and Calgary, and is expected to continue to experience strong demand in the year ahead.

Lockdowns and uncertainty contributed to negative absorption and higher vacancies in the commercial office sector throughout Western Canada in 2020, although year-over-year dollar volumes in some markets indicate the sale of larger properties. Institutional investors in Calgary accounted for 48 per cent of sales volumes while private equity represented 24 per cent in the office sector last year. With CAP rates rising to their highest levels in recent years at 10.1 per cent, according to CoStar’s Office Capital Markets Report, the growing presence of institutional investors and private equity in Calgary suggests the market is at or near bottom.

“Rebounding global demand for primary energy should help bolster economic performance, as well as demand for commercial real estate, in Alberta in the second half of 2021,” explains Ash. “In the interim, we could see out-of-province institutional investors walk-away with some of the city’s most coveted assets.”

Major drivers identified for the upswing in demand in the year ahead include historically low interest rates and strong economic recovery. The Bank of Canada (BOC) has indicated that it intends to keep overnight interest rates at 0.25 per cent and has predicted a strong second quarter rebound with “consumption forecast to gain strength as parts of the economy reopen and confidences improves, and exports and business investment is buoyed by rising foreign demand.”  The BOC has projected GDP growth at four per cent in Canada in 2021.

Limited inventory, shortage of available zoned land, and strong demand overall have made industrial real estate the cash cow of 2020. Vacancies remain low for industrial product, with Vancouver posting the tightest rate at under 1.5 per cent, and rental rates climbing 10 per cent year-over-year. Large multinational companies have been behind the push as they gear up efforts to support a rapidly expanding e-commerce industry. Smaller investors have also been active, as the appetite for income properties in industrial areas that serve strong supply chains and essential services increases in strength.  Diversification of smaller portfolios is underway as investors choose to supplement their residential multi-unit residential holdings with industrial product, and to a lesser extent, office/retail.

Demand for farmland in Saskatchewan continued unabated in 2020 as Alberta’s Hutterite Colonies sought to expand farming operations. The trend was highlighted by the sale of a 20,000-acre farm in Norquay in August of 2020, considered one of the largest in Western Canada. Overall average price for farmland in Canada increased 3.7 per cent in the first six months of 2020, with Saskatchewan reporting the greatest increase in values, according to the Farm Credit Canada’s (FCC) 2020 Mid-Year Farmland Value Report.

“Saskatchewan’s attractive price point is expected to continue to attract investors and end users, especially those from province’s that have higher farmland values, in the coming months,” says Ash. “This segment is also expected to heat-up as foreign investment returns to the overall market in 2021.”

Institutional and private investors flocked to multi-unit residential in 2020, spurred on by the promise of greater security and lower interest rates. Calgary and the Greater Edmonton Area saw consistent demand in 2020, although much of the activity occurred in the first quarter, while Vancouver kicked off 2021 with a $292 million sale of 15 rental apartments to two Ontario-based Real Estate Investment Trusts (REIT).

“While the COVID-19 vaccine roll out should have been well-underway at this point, supply issues continue to hamper progress, with just 10 per cent of Canada’s population expected to be vaccinated the end of the first quarter,” says Ash. “Economic growth, as such, will remain on standby in short-term. However, once that objective is achieved, the general consensus is that economy’s across Canada will roar back to life, fuelling an upswing in commercial real estate activity as greater stability returns to major centres.”

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KELOWNA, DECEMBER 10, 2019 – Despite the expectations of cannabis carrying the commercial market in the West to new highs in 2019, the sector has fallen short, especially the limited retail roll out in British Columbia. As a result, regions like Greater Vancouver, poised to become a cannabis hot spot in 2019, has experienced a year-over-year decrease in total dollar value of 69 per cent across all commercial property types.

“While we anticipated the legalization of cannabis to drive prices and sales up in the commercial real  estate market this year, a variety of factors including overall supply, stigmas, approval times and licensing restrictions have impeded commercial property growth across Western Canada – particularly in British Columbia,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “Despite the pressures, we’re starting to see the market steady and 2020 looks more promising.”

Commercial markets like Regina, Edmonton and Calgary have also been plagued by ongoing economic short falls, including falling oil and gas prices and sub-par performance in the farming industry as a result of global trade disputes. This has resulted in lower levels of activity, deflated prices and higher vacancy rates.

In contrast, Saskatoon has been able to weather the tough economic conditions seen in the rest of the region over the past year with out-of-province investors taking advantage of lower prices.

“Commercial markets in the prairies and in Alberta are still not out of the woods yet. Economic recovery across the region is taking much longer than anticipated, negatively impacting the commercial property market,” says Ash. “While we anticipate modest growth in 2020, uncertainty such as global trade disputes, and oil fluctuations will continue to loom over the region.”

Greater Vancouver

One year into the legalization of cannabis and Greater Vancouver’s retail landlords have found it difficult to get traditional commercial financing due to reluctance among banks. While attitudes towards cannabis have relaxed, cannabis retail locations still carry some stigma in the mainstream commercial market.

Co-working space has experienced a surge in popularity with up to 1.5 million square footage in Vancouver being either occupied or under construction – a 250 per cent increase since 2014. This is especially true for shared office space and warehousing for retailers. Vancouver’s retail landlords have found it difficult to get traditional commercial financing in the region due to concerns over high risk.


Kelowna only has one cannabis retailer, with six more seeking provincial approval before they can open their doors. However, the retail performance is expected to take off in 2020, with Okanagan College now offering training programs in Cannabis and the province’s Liquor & Cannabis Regulation Branch looking to set up shop in the Westbank Towne Centre Mall.

Kelowna and the Okanagan have also become attractive alternatives to buyers who find themselves increasingly priced out of the Vancouver market. These buyers typically include local investors, owner-occupiers and larger institutional buyers. The speculation tax has affected interest from offshore and foreign buyers.

Looking further into 2020, developers are eyeing bigger mixed-use complexes with higher densities to maximize the potential of each property. Investors are waiting for new property supply across all commercial sectors.


The cannabis industry initially took off in Edmonton, spurring industrial building as well as retail and office leasing activity. The retail market has since dialed back a little as producers concentrate on providing adequate supply and achieve sustainable cash flow. Larger players are looking to establish permanent market presence as they anticipate the legalization of edibles.

Co-working spaces account for approximately five per cent of the overall commercial market. This business model is expected to grow to 10 to 15 per cent of the overall commercial market by 2030. Newer office towers in the downtown core are sought by global pension funds. Well-located retail and mixed-use projects are also seeing strong interest.

Looking forward into 2020, overall sales are expected to be slightly down from 2019, with tenants in the oil and gas sectors hoping for increased recovery.


Calgary is still being impaired by the ongoing downturn of the oil and gas industry. Demand that was initially seen in 2018 for retail cannabis locations has fallen. The industrial market continues to be strong and relatively stable with the increase in demand for more affordable logistic supply management.

Buyer types have shifted to more sophisticated commercial buyers with the staying power to weather the remainder of Calgary’s downturn, knowing that they are getting a great asset at a discounted price. The shift from a frenzied retail market to larger more sophisticated buyers and investors looking to set up cannabis production facilities is a good example of this trend.

Looking further into 2020, Calgary will experience modest growth in all segments of commercial real estate.


Regina is seeing low levels of activity and decreasing prices and rates, which, when combined with more business closures and a higher-than-normal foreclosure rate, leads to some uncertainty in the commercial market.

While there are some attractive opportunities for buyers, investors are few and far between and values are shrinking.  Vacancy rates have increased year-over-year from two to five per cent and it is even higher in some areas. Demand is limited.

Interest in cannabis retails stores was originally quite high, but limited licencing by the government didn’t create the big market that was anticipated. Economic factors, including the falling oil and gas industry and the sub-par performance of the farm industry due to poor weather conditions and trade tensions with China, are taking its toll.


In contrast to Regina, the Saskatoon commercial real estate market has weathered the tough economic conditions over the past year, including manufacturing, agricultural, construction and service sectors.  Demand for commercial properties continues to be driven by a mix of out-of-province investors and Institutional investment taking advantage of lower prices.

The city’s retail sector has cooled from 2018 as a result of new retail developments creating more inventory than demand. Vacancy rates are moderate at almost five per cent. This trend is anticipated to continue in 2020 as several of the projects are expected to be completed next year, such as the redevelopment of the former Sears retail location in Midtown Plaza being re-leased to Shoppers Drug Mart and Mountain Equipment Co-op.

Buyers expected to drive the market in 2020 include private investors and institutional buyers looking to take advantage of lower pricing and better cap rate.


Co-working spaces in Winnipeg, particularly those offered by Regus, are becoming more popular. The company offers space out of two sites. The struggle in Winnipeg’s office market continues as vacancy rates have notched up since the development of True North Square. Inducements have increased and landlords are reinvesting in their properties to make them more attractive.  There has been significant investment activity in the apartments sector as investors continue to look for stable income sources. Industrial properties are also in high demand.

Buyer types include REITs, pension funds, private equity players and private individuals. As cap rates continue to see pressure move down in the primary Canadian markets, Winnipeg is expected to see robust interest as it features higher cap rates and stable market conditions.

Looking forward, Winnipeg will continue to enjoy strong demand for its commercial property space due to its diversified economy positive net migration and the resulting steady growth in the Capital region.

Both Kelowna and Edmonton are poised to become hot spots for Canada’s cannabis market post-legalization with competing cannabis enterprises looking for operating space in both cities.

While Kelowna’s commercial real estate market saw an 8 per cent decrease in total sales value for commercial property types year over year, the city has identified more than 900 locations for retail spaces.  It’s expected that the approval of licenses will be extremely competitive further driving prices up for the remainder of 2018 and beyond.

Edmonton is also welcoming the addition of an 800,000 square foot facility by Aurora Cannabis which is contributing to the positive growth in the total sales value for the city’s commercial properties, topping $1 billion. This was also the case in 2017 at the mid-year point. Although office and retail sales have not been as strong in the first half of the year, there are more than $500 million worth of completed transactions slated for the third quarter of 2018. Furthermore, the price of oil is continuing to stabilize with increasing global demand, helping Edmonton’s commercial property market along the road to economic recovery.

“The upcoming legalization of cannabis is continuing to have a major impact on the commercial real estate market this year,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “In Kelowna and Edmonton, the cannabis industry is slowly absorbing the existing industrial spaces and development lands, which has contributed to the rise in lease rates for those areas.”

Like Edmonton, Calgary’s commercial real estate market primarily revolves around the city’s oil and gas sector. Factors including the increase of oil prices, higher interest rates from the Bank of Canada and the Trans Mountain pipeline project have made buyers in the region more cautious, contributing to a significant year over year decline of 28 per cent in total property sales. However, Calgary is expected to remain stable as we head into 2019 due to a variety of reasons including the investment of big technology companies in the area.

While the past two years were exceptional in Greater Vancouver’s commercial property market, the first half of 2018 has returned to historical norms. There were 523 commercial property sales in the first quarter of 2018, compared to 886 sales during the same period last year. However, continued growth in Vancouver’s technology sector continues to drive demand for both office space and industrial space throughout the region. Larger tenants like Amazon and WeWork continue to expand and are expected to further increase inventory in the region going into next year.

“Investment by major companies like Amazon in Calgary and Greater Vancouver is evidence that commercial real estate – office space specifically – in Western Canada remains a hot commodity,” says Ash. “As Canada continues to push further ahead in areas like technology, investors both domestic and abroad see the potential for growth here and are willing to call Canada home.”

Regina’s commercial real estate market has slowed this year due to economic uncertainty. High interest rates, the price of oil and the low Canadian dollar have all contributed to the commercial market. However, new projects are still underway such as the construction of the megamall at the Global Transportation Hub. The mall – which will boast 300 stores – was originally billed at $45 million but could go as high as $300 million when completed. Saskatoon on the other hand has experienced relative stability as 2017 was considered a year of recovery. This is mostly due to the relative diversity of its sectors which include manufacturing, agriculture, construction and the service industry.

In Winnipeg, the commercial market has experienced a 3 per cent decrease in total sales value year-over-year. While interest rates have remained low, the lack of available property has had the biggest effect on sales which has affected the decisions of investors.

Both Calgary and Edmonton saw strong year-over-year increases in total dollar value of commercial property sales during the first half of 2017 as a result of the ongoing stabilization of the oil sector. In contrast, total dollar value of commercial real estate sales in Greater Vancouver declined by 37.5 per cent during the second quarter, indicating a return to market activity at levels seen prior to 2016, which was a year of record-setting activity. Winnipeg’s commercial market remained strong with high demand across almost all property types, while Regina and Saskatoon slowed due to the ongoing downturn in the commodity sector.

The total dollar value of commercial real estate sales in Calgary in the first half of the year was $1.43 billion, an increase of 55 per cent over the $932 million total in the first half of 2016. Alberta’s capital city also saw significant year-over-year growth in total sales value for commercial properties of 39 per cent, topping $1 billion at the mid-year point for the first time in three years in Edmonton.

“Alberta’s two largest markets have seen strong commercial property investment in 2017, as the worst of the recession that has defined the market over the last few years appears to be over,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “Oil prices have remained relatively stable in recent months and the outlook for the province’s economy overall is optimistic. As a result, there is renewed confidence among investors in Calgary and Edmonton and total sales value is up in both cities.”

In contrast to growth in Alberta, Greater Vancouver’s commercial property market slowed during the first half of 2017 after significant total dollar value and activity increases during the same period in 2016. There were 595 commercial property sales in the second quarter of 2017, compared with 875 sales during the same period last year. The slowdown in activity is due to a lack of supply across the market, limiting opportunities for investors.

“Demand remains high for commercial property, particularly office space and vacant land in Greater Vancouver, but there simply isn’t enough inventory to maintain the strong activity seen during 2016,” says Ash. “The market continues to be primarily driven by local investors, but there is also strong interest from offshore buyers from Europe, Asia and the United States. New development projects around the waterfront and BC Place are anticipated to alleviate some of the pent-up demand in Greater Vancouver in the coming years.”

Virtually all commercial property types in Winnipeg are in high demand and investors view properties with passive income streams as most desirable. Continued low interest rates have fueled demand, and recent rate hikes from the Bank of Canada are unlikely to slow activity in the market as rates remain relatively low. Overall, the outlook for Winnipeg’s commercial property market for the remainder of 2017 and 2018 remains positive, with strong anticipated demand moving forward.

Similarly, there is optimism in Regina and Saskatoon’s commercial markets despite slowed activity in 2017 due to the prolonged effects of the downturn of Saskatchewan’s resource sector. The positive outlook for 2018 is fueled by the stabilization of the oil sector and the potash industry showing signs of growth over the last few months combined with a variety of development projects currently underway in both cities.

Much of Western Canada continued to experience slower market activity in the first half of the year, as regional economies continued to recover from the downturn in the oil sector.

However, in B.C.’s Lower Mainland, activity was brisk and prices continued to increase significantly in the commercial property market.

“Demand for commercial property in the Vancouver area remains very high and continues to be driven mainly by local investors,” said Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada.

“Over the next several months, we may start to see more interest from foreign investors. As a result of the recent foreign buyer tax on residential properties, buyers who are interested in investing in Greater Vancouver may start to shift their focus to commercial properties.”

The commercial real estate markets in Calgary and Edmonton continued to feel the impact of lower oil prices.

“There continues to be demand for good quality product in the Calgary and Edmonton markets, though a full recovery is not expected until oil prices rebound,” said Ash.

“For investors, there will likely be some good opportunities coming on the market later this year and next year as owners start to sell off assets.”

The markets in Saskatoon and Regina have remained fairly active despite a somewhat softer market caused by the downturn in the resource sector. In both cities, the first half of 2016 saw increased investor interest from Real Estate Investment Trusts (REITs).

In Winnipeg, demand for commercial properties has continued to outpace supply.

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.