What are the Canadian commercial market's prospects over the next year?

A significant share of Canada's commercial firms have scaled back their expectations

What are the Canadian commercial market's prospects over the next year?

Among Canada’s commercial segments, the office market is expected to perform the worst over the next 12 months, while the industrial sector is anticipated to post robust activity over the next year, according to Altus Group.

“Despite the Canadian economy’s demonstrated resilience, the commercial real estate industry’s expectations dimmed over the last 12 months,” Altus Group said in the just-released results of its Q3 CRE Industry Conditions and Sentiment Survey.

“A third (34%) of respondents noted deteriorating revenue growth expectations and 40% have lowered their NOI growth expectations. Expectations for cap rates have also shifted – with 72% of respondents noting increased going-in/current cap rates and 70% noting higher reversion/exit cap rates.”

Over the next year, Canada’s commercial firms said that they will be prioritizing the cost of capital (79% of participants), elevated inflation rates (62%), and construction/development costs (47%).

Survey respondents reported being “bullish” on the industrial (62%), multi-family (61%), and self-storage (50%) sectors, the Altus survey found.

However, while relative neutrality was the order of the day for the retail (65%) and land/development (58%) segments, respondents were markedly bearish when it came to the office market (74%).

“Industrial and multi-family were ranked as expected top-performers by more than 80% of respondents, while an impressive 100% of respondents expected office to underperform,” Altus said.