Purpose-Built Rentals: The Future of Commercial Real Estate?

Discover the future of commercial real estate with purpose-built rentals as highlighted in the latest Re/Max report. Explore how landlords are shifting towards this trend for increased density and profitability.

Commercial real estate trends in Canada are shifting towards purpose-built rentals, according to a recent report by Re/Max. The analysis of 12 major Canadian markets revealed a significant focus on multi-family and industrial real estate, with developers prioritizing purpose-built rental construction over new residential condominiums and commercial buildings.

The report attributed this shift to the federal government's decision to cancel the GST on new residential builds, which has incentivized the construction of purpose-built rentals in urban centers across the country. In addition to purpose-built rentals, developers are also exploring student housing and seniors' residences, as well as incorporating residential components into malls and strip plazas to increase density.

Despite these efforts, Canada's growing population, which now exceeds 40 million people, continues to outpace residential construction. The report noted that the current upswing in construction falls short of the demand for housing in most major markets, highlighting the need for further development.

In addition to the rise of purpose-built rentals, the report identified other trends in the Canadian commercial real estate market, including the resilience of neighborhood retail, the resurgence of the hospitality industry, and the strong demand for industrial real estate. However, the office sector in downtown cores is facing challenges, with rising vacancy rates prompting conversions of office space for alternative uses, such as housing.

Looking ahead, the report emphasized the importance of economic performance, interest rates, incentives, development policies, and tax policies in shaping future trends in the Canadian commercial real estate market. While diverse market dynamics exist, overall improvement is expected as 2024 progresses.

The shift towards purpose-built rentals and mixed-use developments reflects the evolving landscape of the Canadian commercial real estate market. Developers are adapting to changing consumer preferences and demographic trends, with a focus on creating sustainable and vibrant urban spaces that meet the needs of a growing population.