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With Newfoundland-Labrador forecast to lead Atlantic Canada in terms of GDP growth in 2023, demand for commercial properties is expected to rise in tandem in St. John’s and surrounding communities. To date, sales of St. John’s commercial real estate are up more than 20 per cent, while dollar volume has soared to $18.8 million, up from $6.4 million during the same period in 2022.
Industrial remains the strongest commercial asset class in St. John’s, characterized by solid demand and limited supply. Just five industrial properties are currently listed for sale on the St. John’s real estate board, with the highest MLS sale on record –a 60,000 square foot warehouse— reported in St. John’s earlier this year. The city’s affordable price-point for both sales and leased space has recently drawn the attention of potential industrial buyers/tenants from Ontario, the most recent of which was interested in a facility to manufacture parts for electric vehicles.
While vacancy rates for commercial office space in the core topped 20 per cent in the first quarter of the year, the outlook is improving. Recent inquiries suggest a potential shift back into the downtown core. Several years ago, the province’s largest corporations moved their office space from the core to the suburbs, where greater square footage and available parking at a lower cost proved irresistible. With the shift to remote working, the abundance of space is unnecessary for many employers, and the move back to the vibrancy of the city centre is attractive to employees from both a recreational and social point of view. The Bank of Montreal, for example, just located their corporate offices to the new Class A commercial space at 331 Water St., a new development which also offered ground-level retail space for their branch.
Retail sales and leasing continue to thrive in St. John’s, Mount Pearl, and Paradise. Avalon Mall, one of the top enclosed malls in Atlantic Canada, remains the city’s premier shopping destination with almost 100 per cent of its premises leased. The Shoppes at Galway is the city’s latest big-box development, housing big-name retailers such as Costco, Home Sense, Marshalls, Orangetheory, Starbucks and Tim Hortons within it’s 700,000 square feet of existing retail space with another 300,000 square feet planned for the future. Demand for retail properties and lease opportunities is expected to remain healthy, with average lease rates holding relatively stable year-over year, ranging $21 per square foot net in the waterfront district to $30 plus per square foot in high-demand shopping centres.
Investment in the province has ramped up significantly, with the natural resource sector behind much of the push this year. Of the $18.3 billion in major capital spending on projects valued over $25 million that are planned and underway in 2023, mining and oil top the list at $8.9 billion, according to the government of Newfoundland and Labrador. The spill over into the St. John’s commercial market is inevitable, as evidenced by the more than $37 million in commercial building permits issued in the city in the first three months of the year, up 57 per cent from one year ago.
