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Since the start of the pandemic, the Canadian CRE market has experienced some significant changes. We’ve seen a rise in demand for industrial solutions like warehousing and an unexpected rise in interest in residential and multi-family real estate in suburban environments. However, the urban environments have experienced heavy blows.
The urban office and residential sectors have seen a rise in vacancies in 2020, which was a great cause for concern for many investors. However, tides are slowly turning, and experts at Urban Analytics are predicting a massive apartment market growth in Western Canada in the following years.
The Impact of Covid-19 on the Canadian Apartment Market
Unsurprisingly, the pandemic’s negatively affected the apartment markets across the globe. In Canada, major cities like Edmonton, Vancouver, and Calgary have seen a significant increase in rental vacancies. Edmonton’s vacancy rates increased to 7.2% in 2020, Vancouver’s to 2.6%, and Calgary’s to 6.6%.
The rise in vacancies was, in part, to blame on closed borders and travel restrictions. There was a significantly lower influx of international students in 2020 and an overall slowdown in immigration.
Adding to the urban vacancy rates was also the shift to suburban environments. With lower rents and more space, suburban rental properties proved much more appealing than their urban counterparts, especially since many Canadian employees could avoid commuting and embrace remote work.
However, the pandemic had only a passing impact on the apartment market. As the borders open and travel restrictions ease, Canadian rental CRE is ready to bounce back.
The Return to Urban Environments
Experts predict a healthy rental market activity beyond 2021, especially with the expected return to offices once vaccines roll out. The return to offices is set to be slow and steady, and while not everyone will get back to the normal pre-pandemic working style at once, we’re bound to see a significant amont of workers get back to the downtown cores of the cities.
It is expected that workers who need to return to daily commuting will lead the migration back to downtown centres, increasing the demand for rental properties in Canada’s largest cities.
The rental market is also set to experience a comeback once the number of study permit holders and temporary foreign workers increases.
We also expect to see heightened demand for rental properties, with the biggest challenge being providing the supply. In Vancouver, there are currently 176 new purpose-built rental projects in the works, in Calgary 87, and in Edmonton 201. With mortgage rates expected to remain low in the foreseeable future, vacancy rates in Western Canada are expected to drop.
Although the Canadian rental CRE market has encountered significant challenges since the start of the pandemic, the future is looking bright. The demand for rental properties is slowly getting back on track, making this the perfect time to invest in Canadian rental CRE.