Source: MPA Magazine

The landscape of Canada's commercial property market is poised for evolution in 2024, with key trends set to influence the sector, according to insights from Brian Rosen, the Chief Executive of Colliers Canada, as reported by MPA Magazine.

Impact of the Bank of Canada's Rate-Hike Campaign

The Bank of Canada's aggressive 475-basis-point rate-hike campaign in the previous year has left a lasting impact on the commercial property sector. This move significantly contributed to the heightened uncertainty in the market, affecting property valuations and creating challenges in finding the equilibrium where vendors and buyers can meet. Brian Rosen acknowledges the impact but notes that it was a logical outcome of addressing inflation.

Adapting to the Remote Working Revolution

Rosen emphasizes the enduring nature of the remote working revolution, stating that hybrid working is here to stay. Even though hybrid working existed before the pandemic, recent data suggests that daily occupancy levels are now at 70% to 75% of the 2019 levels. This shift is likely to persist, with varying occupancy rates throughout the week.

Challenges Posed by Elevated Construction Costs and Interest Rates

While anticipating a positive trajectory for the commercial property market, the challenges posed by elevated construction costs and multi-decade-high interest rates. Rosen suggests a potentially slower start to the year in terms of overall transactions, attributing it to the persistence of certain costs despite a flattening in construction costs.

Looking Ahead: Predictions and Opportunities

Predicting a potential increase in market activity in the second half of the year. While acknowledging the stickiness of construction costs, the impact of central bank interest rate cuts might take time to materialize. The anticipation of distressed situations in the market is accompanied by a recognition that these dynamics will require time to work through the system.

In summary, the commercial property market in 2024 is expected to grapple with the consequences of previous economic adjustments. While challenges such as elevated construction costs and interest rates persist, there is optimism regarding a rebound in market activity in the latter part of the year. Navigating these trends will require a balance between adapting to remote work dynamics and addressing economic realities in the commercial property sector.