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The industrial asset class continues to lead commercial real estate in Hamilton and the Golden Horseshoe, with strong demand for both properties listed for sale or lease demonstrated throughout much of the first quarter. Sales volume was up more than 50 per cent to $45.1 million in Q1 2023, up from $29.5 million during the same period in 2022, according to Co-Star.

Manufacturing facilities are most sought-after in Hamilton, representing approximately 50 to 60 per cent of all sales/leasing activity, followed by warehousing and distribution sites. Inventory remains tight throughout the area, with new industrial parks in and around the Hamilton Airport now fully leased. Rental rates for industrial space remain on an upward trajectory, now sitting at an average of $13.65 per square foot. Cap rates continue to trend lower, at just under six per cent in 2023. Last year’s sale of the Stelco site, with more than 800-acres of zoned industrial, is expected to bring approximately 725 acres of Class A industrial product to the market once the site is remediated and re-developed (75 acres have been leased back to Stelco). Apart from the Stelco site, which is expected to take years to develop, industrial land remains scarce and hard to come by throughout the region.

Retail product, especially strip plazas, has also experienced strong demand in the first quarter of the year in Hamilton. Ownership of both malls and plazas continue to find exceptional value in their parking lots, submitting proposals to convert under-utilized areas into high-density residential/commercial developments that promote live-work-shop communities. Eastgate Square, for example, has a proposal before council that includes of 5,162 residential units on its 45-acre property, while Lime Ridge Mall is seeking approval on 320 units in two 12-storey buildings on their site. Given the current housing shortage in Hamilton, characterized by tight inventory levels and upward pressure on both housing values and rental rates in recent years, these proposals may offer a feasible solution to existing market challenges. Recent retail sales, while falling short of last year’s levels, saw a significant uptick in price per square foot, rising from $267 to $416 year-over-year, based on data from Co-Star.

The availability rate for office space in Hamilton’s downtown core was accelerated by the pandemic and remains high to date, pushing close to 20 per cent. While some improvement has been noted in demand for urban/suburban office space, the work from home phenomenon has had a significant impact on the city’s commercial office space. There have been some discussions regarding the conversion of existing office space to much-needed residential in the downtown core, but the ability to convert remains in question, given that very few of the buildings have floor plates conducive to residential.

REITs continue to be an active participant in industrial real estate but have stepped back from other commercial asset classes in the Hamilton, given the rising cost of construction in today’s high interest rate environment. The promise of lower rates down the road should once again spur investment in multi-unit residential and other sectors, although the impact may not materialize until early 2024.

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While activity of commercial real estate in Hamilton, Burlington and Niagara has been somewhat tempered in 2022, two asset classes continue to stand out, according to the new 2022 Commercial Real Estate Report from RE/MAX Canada. Industrial and multi-unit residential—with particular emphasis on purpose-built rental apartments—were the exceptions to the rule, with logistics and procurement taking centre stage. Demand for properties in these cohorts remains strong, with limited supply noted throughout the Niagara Peninsula. Overall sales of commercial real estate in Hamilton and Burlington were down approximately 27 per cent in the first quarter of the year (49 versus 67), compared to the same period in 2021, according to the Realtors Association of Hamilton-Burlington. Dollar volume, however, rose exponentially to almost 108 per cent, rising from $48.8 million in Q1 2021 to almost $101.5 million in the first three months of 2022.

Institutional investors and REITs have been exceptionally active in the area’s industrial market. Land acquisition is well underway, as illustrated by the sale of 423 acres of industrial land in Brantford to Panattoni Development for $290 million in April. The City of Hamilton continues to develop and promote its Airport Employment Growth District (AEGD) as a North American Gateway hub for logistics, distribution, and goods movement. Amazon recently opened the doors on its 855,000-square-foot robotics fulfilment centre and delivery station in Hamilton.

The Niagara Region has also experienced strong demand over the past year, with vacancy rates for industrial product hovering at or near zero**. Properties in Fort Erie and along the Niagara River are most sought-after. Commercial sales fell just short of 2021 first quarter levels in the Niagara Region in 2022, with 70 properties changing hands between January and March of this year, compared to 71 during the same period in 2021. Dollar volume soared in Niagara year-over-year, climbing 26 per cent in the first quarter of 2022, compared to one year ago. Nearly $85.6 million in commercial real estate traded this year, up from $67.8 million one year earlier*.

End users have also been active in the industrial market in 2022, preferring ownership over renting as a hedge over inflation. The same trending has occurred in the office sector as owners seek to secure small freestanding structures that allow them to own their own domain. Office locations in more suburban areas have fared better than those in downtown Hamilton this year, where vacancy rates** hover well over 14 per cent. While employees remain reluctant to return to offices in the core, those that are in suburban neighbourhoods have a better chance of returning to normal sooner rather than later.

Demand for retail storefront remains stable, especially in some of the trendier areas, while condo retail vacancies remain relatively high. The cannabis industry—which propelled retail leasing in previous years—has reached a saturation point. Closures are expected in the year ahead due to lacklustre sales and consolidation within the industry.

Given future population growth projections and current low vacancy rates for rental apartments (hovering at 2.8 per cent) in Hamilton***, the need for purpose-built rental housing is critical to the overall growth of the city. Several multi-unit, purpose-built residential projects are underway, including the redevelopment of Hamilton’s waterfront. Re-purposing of existing retail product is also occurring, as evidenced by the sale of Hamilton’s Eastgate Square. Plans for the 505,000-square-foot mall situated on 45 acres are currently in the design and development stage but will likely feature both a strong retail and housing component. A 2021 draft report prepared for the city by Lorius and Associates, in association with Hemson Consulting Ltd., suggests that the rate of intensification required for Hamilton “equates to nearly 1,800 units annually, which is more than double the historic level of such development that has occurred over the past decade.”

Since 2016, Hamilton has attracted seven million square feet of industrial and commercial space, including major corporations such as Amazon and Corbec Steel. Land values and employment support continue to resonate with potential employers considering the area as a potential new home for their organizations. Strong economic performance within Hamilton has rippled into surrounding areas, raising their visibility on a national stage. With GDP growth in Ontario expected to climb 4.2 per cent**** in the year ahead, the future looks promising.

*Realtors Association of Hamilton-Burlington


*** CMHC Rental Market Survey, October 2021

****RBC Economics, Provincial Outlook, March 10, 2022