Market Snapshot for Q1 2018: What’s driving real estate investment?

With 2018’s first quarter behind us, it’s time to take a look at how certain industry, policy and political events have affected the real estate investment landscape in Canada, as well as the Canadian economy as a whole.

Since January 1st, investment in commercial real estate is surging and there are many reasons for this, ranging from immigration buzz to a stabilizing market. Let’s break some of these down:

A sustainable market outlook

Following 2015’s dramatic drop in GDP growth thanks to lower oil prices, the economy appears to be stabilizing nicely. After rebounding in 2017 as a result of fiscal stimulus, housing activity and consumer demand, Canada’s GDP is projected to slow to a more consistent and sustainable pace of 2.3% throughout 2018.

Immigration benefits Canada

With Canada to welcome almost one-million immigrants over the next three years, this has the potential to stimulate GDP growth, offset a population nearing retirement age and contribute to the skilled labour force. In fact, over half of immigrants possess a bachelor’s degree or higher, compared to under 25 per cent of Canadian born citizens.

Immigration helps support a stable economic climate and encourages investment, especially as the need for housing and office space increases. In Vancouver, it contributes greatly to our real estate market’s sustained surge of activity.

Technology continues to increase efficiency in Canadian real estate

Emerging technology – including artificial intelligence, robotice, drones and Blockchain – is playing a key role in real estate investment, from changing the way buildings are designed to shifting the way transactions are conducted.  

Elsewhere in the digital sphere, E-commerce continues to steadily encroach on physical retail stores, posing a threat to traditional brick-and-mortar spaces, while simultaneously driving a need for different kinds of real estate; warehouse or production space in urban centers, for example.

Rethinking commercial space

Thanks to the collaborative economy and a new generation of professionals, traditional space – especially commercial and office space – is being redefined. Co-working outlets and other flexible spaces are in higher demand than ever, which not only provide more functionality, but help offset costs in Vancouver’s increasingly pricier commercial market.  

Land investment increasingly preferable to built asset investment

For investors, land sales are set to become the highest traded asset class, overtaking that of built assets. Primarily, this is due to the region’s rising prices, meaning that, increasingly, built assets can’t obtain enough yield based on cash flow. To adapt, many investors are becoming motivated to take on more of a development perspective when it comes to their real estate investments.

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