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Media

The Bank of Canada’s 2024 Rate Cuts and Impact on Commercial Real Estate

A significant turning point for Canada’s commercial real estate (CRE) industry was reached on December 11, 2024, when the Bank of Canada decided to lower its overnight lending rate target to 3.25%. This policy change, the fifth rate cut since April 2024, is expected to impact leasing, development, and investment activities nationwide in 2025 and determine the direction of the CRE market.

The Context Behind the Rate Reduction

A key factor in Canada’s post-pandemic economic recovery is monetary policy. Consumer spending, borrowing expenses, and total economic growth are all directly impacted by interest rates. Financial markets generally expected a rate cut in the run-up to the December announcement, highlighting how crucial it is for investors and companies.

In less than a year, the overnight lending rate has decreased by 1.75% as a result of the 50 basis point decrease and earlier reductions in 2024. The cost of capital has significantly decreased for the CRE industry, which mostly depends on financing for developments and acquisitions.

Impact on Borrowing Costs and CRE Investment

Lower Borrowing Costs for Developers

The decrease in borrowing costs is among the most direct effects of rate decreases. Lower interest rates can help developers who are planning new projects or who are looking to refinance existing debt, increasing the viability and profitability of their initiatives. We can anticipate more groundbreaking for new projects in 2025. As developers take advantage of lower borrowing costs, industries like industrial real estate and mixed-use complexes will probably witness a spike in activity. Due to lower borrowing thresholds, smaller market actors may be able to enter the CRE sector, which would encourage competition and innovation.

Increased Appeal for CRE Investments

In contrast to fixed-income assets like bonds, which generally lose appeal in low-rate settings, investors might expect higher yields on CRE when interest rates are lower. Increased investment in industries like office, retail, and industrial real estate is anticipated as a result of this dynamic.

Sector-Specific Impacts

Industrial Real Estate

In 2025, the industrial real estate market is expected to grow thanks to the demand for logistics and e-commerce. The rate reductions will make it less expensive to build warehouses, distribution facilities, and last-mile logistics hubs, especially in places with high demand, like Toronto, Vancouver, and Montreal.

Office Space

The shift in demand due to remote employment has presented issues for the office industry. Nonetheless, the reduced financing rates can persuade companies to rent or purchase office space in cities, especially for hybrid work arrangements. In this setting, coworking facilities and flexible workplace ideas might win out.

Retail CRE

In 2025, the retail industry will face a variety of challenges. The recovery of the retail industry depends on customer confidence and purchasing trends, even though lower rates can encourage renovating retail facilities. Specialty retail markets and immigrant entrepreneurs may significantly influence the demand for retail space.

Impact on CRE Financing and Lending Practices

Mortgage rates and other financing choices are impacted in a cascading manner by the decreased overnight lending rate. Because institutional and private lenders are anticipated to provide more favourable terms for CRE loans in 2025, allowing developers and investors to grow their portfolios, we foresee improved access to money. Opportunities for refinance: Homeowners who already owe money may be able to refinance at reduced rates, freeing up funds for other projects or reinvestment. Investors can use reduced borrowing costs to strengthen their positions and pursue riskier or larger ventures.

Inflation and Employment

Lower interest rates affect inflation and employment even though they boost economic activity. The action taken by the Bank of Canada indicates a careful balancing act between controlling inflationary pressures and promoting growth. Because rising labour and construction costs may cancel out some benefits of lower borrowing costs, CRE stakeholders must look for inflation threats. The demand for office space, retail establishments, and residential developments in mixed-use projects is expected to be supported by a robust job market, especially in urban areas.

Regional Insights for 2025

Greater Toronto Area (GTA)

The GTA is anticipated to continue to be a hub for CRE activity in 2025. Due to the strong demand for e-commerce, industrial constructions will predominate, but as hybrid work models solidify, downtown office space may experience a modest resurgence.

Vancouver

Vancouver’s position as a gateway for global trade will help the city’s real estate market. The main growth zones will be industrial areas and mixed-use projects that serve the country’s expanding immigrant population.

Montreal

Investors find Montreal to be a desirable alternative due to its reasonably priced commercial real estate compared to other major Canadian cities. The need for office space and flexible work arrangements will be fueled by the city’s startup community and IT sector.

Opportunities and Challenges in 2025

Opportunities

Sustainable Developments: Developers may prioritize eco-friendly projects if borrowing costs are reduced, which would meet the growing demand for green buildings.

Mixed-Use Projects: Especially in urban areas, the movement to combine office, retail, and residential space will pick up steam.

Secondary Markets: Due to lower entry fees and rising demand, secondary markets may be a good option for investors looking for better yields.

Challenges

Economic Uncertainty: Market volatility may result from the possibility of policy changes or economic shocks.

Tenant Preferences: To stay competitive, developers may need to quickly adjust to changing tenant demands, especially in the office and retail sectors.

News

Wal-Mart Canada Breaks into Vaughan Distribution Centre – Expected Completion: 2024

Walmart has been growing within Canada for a while now, consistently grabbing new commercial real estate “CRE” opportunities all over the country. With how Wal-Mart’s Canadian portfolio seems to grow every day, this is great news for their further growth. New brick-and-mortar and online stores are coming up out of the woodworks everywhere to bring the best experiences to customers.

The newest distribution centre, located in Vaughan, Ontario, is another store in the chain making up more than 400 stores Canada-wide.

Breaking Ground with Condor Properties

Condor Properties, a local Vaughan real estate developer has teamed up with Walmart Canada to make this happen. Condor Properties boasts more than 100 diverse real estate properties in the Toronto area and the surrounding towns and cities.

The ground-breaking ceremony for these two partners’ and their new 550,000 ft2 Vaughan distribution centre was just held in August 2020. The project is expected to provide hundreds of jobs not only when the building opens and retail positions are available, but also job opportunities for local construction workers to build the facility.

The target location is at 11110 Jane Street. Not so far from residential and shopping areas so customers will be able to shop for any food or merchandise their hearts desire. It’s estimated that over 70 million products will be on the shelves coming from over 3,000 renowned suppliers, which far exceeds any other Walmart store that Canada offers so far.

The CEO and president of Wal-Mart Canada, Horacio Barbeito, couldn’t help but express his excitement about the project during the ceremony in August, saying: “These are challenging times for everyone, but we are investing for growth because we believe in Ontario and Canada’s future are proud to do business in this great country.”

The project aims for their slated completion in 2024.

Other Wal-Mart Canada’s Investments

Wal-Mart isn’t just working on this new storefront, they are set up to build many other distribution centres all throughout Canada, and some of are already in the process of development.

One such example is the new centre in Surrey, British Columbia, another grand project that aims to provide much more of Wal-Mart’s products with its 300,000 square feet of space.

The Wal-Mart distribution centre though, like the one in Cornwall, Ontario; has new plans to move towards renovating it. The upcoming improved centre will have more automated systems to help with managing health and beauty products, general merchandise, apparel, and more.

Retail investment of $3.5 Billion will benefit Canada

Only about a month ago, Wal-Mart Canada announced its newest five-year investment plan that is seen to be worth a whopping $3.5 billion, this will help Canada grow and prosper even further.

One of the things included in the plan is constructing more distribution centres and working to upgrade more than 150 of the already existing facilities to upgrade the shopping experiences to Canadian consumers and make it better.

The brick-and-mortar stores will be upgraded and made to work much smarter with digitization, and also adding new bigger self-checkouts. They will also start to introduce much more merchandise pick-up services, as well as hybrid locations for both a faster pickup and delivery for everyone.

This isn’t all though, they have the goal of having stores employ robotics and computer vision cameras to reduce any touchpoints; which helps to increase efficiency and accuracy.

Summary

Canada, and particularly Ontario, offers great potential in developments within retail commercial real estate, and it’s being recognized by many investors such as Wal-Mart. As Wal-Mart’s Canadian continues to grow, all of Canada’s consumers will have a much more efficient, faster and enjoyable shopping experience – both online and offline in-store.

The retail company aims to also make full use of the newest and best technology to help enhance Canada’s growth, partnering with a number of high-tech companies in the country.

Learn more about this and Walmarts growth in Canada here:

https://www.redevgroup.com/news-article/wal-mart-canada-breaks-ground-on-the-vaughan-distribution-centre

Media, News

Ontario Cannabis Retailers Opening Up to Selling Online and Over the Phone

One year after pot legalization and it seems Ontario has been struggling to uphold brick and mortar businesses. With a minuscule 24 stores fro the whole province many people still use the black market for their weed. Now the province wants to take more initiative to combat the underground market by increasing the amount and availability of approved retailers.

Selling Over the Phone and Online

It was announced on November 6th, 2019 that the government of Ontario. would allow stores to sell pot online and over the phone, buyers would then pick up their order in the brick and mortar store. Delivery is discouraged though for now, so the strict age verification process can be more easily upheld for both businesses and clients protection.

Edibles would also be allowed to be bought online or through phone since it recently became legal. There is a 60 day waiting period before edibles officially are on sale though, allowing time for sellers to have their edibles submitted and reviewed. Introducing this will almost certainly boost sales and access to legal weed, especially if the prices will be more competitive against the black market. Cutting out the black markets’ stronghold on cannabis sales will help to regulate to product and increase safety.

Pot Across the Provinces

Despite Ontario’s high population, Ontario is actually last in terms of the number of pot stores in the province. Province-wide there are about 24 stores for 14.57 million people. Northwest territories also has a low amount of stores, standing at just 5, but taking into account the population; that’s 1 store for every 9,000 people out of 38,780, significantly more population-wise than Ontario.

The ranking goes from Ontario, Saskatchewan, British Columbia, Newfoundland and Labrador, to Manitoba. The title for the province with the largest number of stores goes to Alberta with over 300 licensed private marihuana providers for 4.37 million people. Alberta’s industry is so strong that they have more stores than every other province combined and by 2012 the number of stores could even increase to 500.

This new initiative could open up the Ontario market and introduce more sellers in the province to help level the playing field a bit more. Because there is such a large discrepancy between Ontarios population and the number of pot stores province-wide the illegal underground industry is still very much thriving and the government wants to combat that in any way that it can.

Updated Legislation to Accommodate Growth

While Ontario seems to be falling behind, the government has made strides to update legislation and aid cannabis retailers to try to promote their growth and development. The plan is to increase the allowed amount of stores from 25 up to allowing 75 pot stores to open this fall. Having sales available over your phone and online will make the brick and mortar stores much more accessible and consumer-friendly in this age of online shopping and Amazon orders.

There is also the possibility of a new aspect of the cannabis industry to help it grow and fight against the illegal underground industry, with retail spaces for the products there is a chance of tourism. Just like a brewery or distillery doing tours and having back and forth conversations with the brewers working, it would provide a new experience for consumers while also providing an opportunity to educate on the product and growing process. These sorts of situations would be an advantage over the black market, providing a consumer-friendly environment and encouraging growth within the industry.

Read more about this new development for cannabis sellers here:

https://www.redevgroup.com/news-article/ontario-cannabis-retailers-to-sell-online-and-over-the-phone

Media, News

Sporting Goods Giant, Décathlon, Set to Open Store in Mapleview Centre, Ontario, in 2021

Looks like the residents of Burlington, Ontario have a huge reason to celebrate. Mapleview Centre will soon welcome yet another industry-leading brand.

In the Fall of 2021, the plaza will be opening its doors to Décathlon; the biggest sporting goods retailer in the world, marking the store’s second location in Ontario, with the first having opened in Ottawa in September 2019 as part of the retailer’s cross-Canada expansion.

Décathlon Has Had Quite the Prolific Journey Across the Globe

Having had its origins in France in 1976, Décathlon is on a mission to make its high-quality sporting line accessible across the globe. Ontario isn’t the only province on the list of Décathlon’s conquests. In 2018, the world-class retailer opened its first Canadian store in Brossard, Quebec. The French retailer has over 1500 stores sprawled across 52 countries.

Ivanhoe Cambridge, a real estate firm that owns the Mic Mac Mall in Halifax, has set aside 23,080 square feet of real estate for another Décathlon store.

Ivanhoe Cambridge and Décathlon revealed that the new store, opening in 2021, will occupy almost 5091 m2 or 54,800 ft 2 of the space in the lower level, formerly home to Sears.

Décathlon has also revealed that it plans to forge forward with this expansion and open stores in Calgary, Vancouver and the GTA in the very near future.

The retailer is making it a point to allow future customers to try their goods in a number of testing areas across the store so that purchasing isn’t a problem. At Mapleview, Décathlon will be occupying prime real estate seeing as the spot is a mere 45 minutes from downtown Toronto.

Mapleview is Taking Its Experiential Customer Focus to Greater Heights

Having had a humble start in 1990, Mapleview has made it a priority to enhance the customer journey and house some of the best brands in the world. Between 2008 and 2010, the plaza underwent significant renovations to improve its market and sales trajectory.

What stores call Mapleview home? Apple, H&M, Hudson’s Bay, Shoppers Drug Mart and Indigo to name just a few! Given its eclectic selection of shopping arenas, Mapleview has delivered a unique personalized shopping experience that one would be hard-pressed to find elsewhere.

Conclusion

Ontario has, without a doubt, become the hub for retail commercial real estate investors. Décathlon making its mark on Burlington will open the floodgates for countless world-renowned brands to chart a course for the province as well. The bottom line remains as sure as ever; the Canadian real estate market is on the up and up and promises to deliver value to customers and investors alike.

For more, please visit;

https://www.redevgroup.com/news-article/mapleview-welcoming-a-second-d%C3%A9cathlon-sporting-store-in-ontario