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Commercial real estate in Halifax continues to ramp up as investor appetite for key asset classes escalates in the region. Despite the higher interest rate environment, out-of-province and out-of-country buyers continue to seek out affordable opportunities in multi-family, industrial, and/or office conversion, contributing to the city’s rapidly changing landscape.
Commercial office vacancies hovering at 18 to 20 per cent in the core, coupled with the shrinking footprints of existing corporate offices, have prompted a seismic shift in the office market. While not all office buildings are well-suited for residential conversion, the city’s abundance of heritage buildings offer a unique opportunity to preserve history and provide homeownership opportunities in prime real estate on Halifax’s picturesque waterfront. The Centennial building, a 156,000-square-foot building offering spectacular views of the Halifax Harbour, is one of the first to undergo a complete retrofit. Slate’s Maritime Centre is currently in discussions regarding the possible conversion of its 600,000-square-foot property to residential while Purdy’s Wharf is considering the retrofit of one of its two towers to multi-family residential. At least four to five large scale projects involving the repurposing of existing buildings are approved and will come to market within the next 24-month period.
Vacancy rates under one per cent are behind much of the push for purpose-built rentals in Halifax and the surrounding areas, with not enough product to accommodate the city’s rapidly growing population. The Halifax Regional Municipality (HRM) is one of the fastest growing urban regions in Canada, adding more than 20,000 people to their population between July 2021 and July 2022, according to Statistics Canada. With the population approaching 500,000, the need for housing has never been greater, yet the estimated 24,000 units planned in 10 to 15 buildings throughout the Halifax Regional Municipality, are on hold, with developers waiting for more favourable conditions to present. The situation is expected to resolve itself somewhat with improvements to the existing supply chain and greater stability in construction costs in the year ahead.
The city’s malls continue to fare well, with few vacancies despite higher lease rates. Retailers are reducing their footprints in area malls, given robust on-line shopping sales while management is looking to enhance the shopping experience by adding more restaurants, gyms, and in some cases, higher-end grocery stores. Some landlords have revamped large parking lots, adding office towers and a residential element to complement existing retail. Big box retail power centres are having difficulty leasing larger stores ranging from 5,000 to 10,000 square feet or larger in today’s retail climate, as evidenced by the 30 to 40 per cent vacancy rate at Dartmouth Crossing. Proposed residential development in the area may help bolster activity at the centre in the future. Bayers Lake is adapting to new market realities by interspersing smaller stores, restaurants and a movie theatre into the mix. Their location, conveniently situated within Clayton Park, has also contributed to their success. In the downtown core, there have been a number of new rental buildings constructed on Spring Garden, with each housing a vibrant retail component on the main floor.
Inventory in the city’s industrial parks remains tight, with availability levels falling to four per cent in the first quarter of 2023, according to data from the Altus Group. Halifax was one of two markets in the country that experienced further decline this year. Warehousing, distribution and flexspace is most sought-after, although there is some demand for manufacturing facilities. The shipyards have experienced tremendous growth over the past decade, with more than $350 million spent by the Irvings to modernize their operations in anticipation of building 15 warships for the federal government, a contract now valued at close to $85 billion. Construction is scheduled to begin in 2024.
With growth in Halifax and the surrounding areas on an upward trajectory, the outlook for commercial real estate is bright. Last year alone, interprovincial migration accounted for 40 per cent of the surge in population growth, while international migration accounted for the remainder of growth. According to Statistics Canada, more than 10,000 business were in operation in Halifax in January of 2022 – a figure higher than pre-pandemic –with the 15-per-cent increase over 2020 numbers providing a clear indication as to what the future holds for the HRM.