Canada’s commercial property sector strengthens in Q3 while investors await election result across border: RICS

The Royal Institution of Chartered Surveyors (RICS) Global Commercial Property Monitor Q3 2024 found that sentiment toward Canada’s commercial property market is making improvements across most key measures.

According to RICS, overall occupier demand returned to positivity, and was up from a negative topline figure of -2 per cent in the second quarter.

In terms of the office market, it experienced a notable easing in negativity, although the latest reading remains relatively weak, with the dial moving from -20 per cent to -5 per cent. Sentiment toward industrial and retail property was more firmly positive, according to RICS, with both sectors scoring +19 per cent.

Those who believe the market is in a downturn phase now consists of 22 per cent of respondents, which was 7 per cent lower than in the second quarter, with most respondents across Canada now citing that the market is in an “upturn phase.”

Respondents indicate that the U.S. election is having some impact upon Canadian investors, who are employing a “wait and see” approach including the one that their American colleagues are taking. Canada has also faced some political uncertainty since September as a key allied party in the incumbent government, the NDP, removed itself from the coalition.

When looking toward the future, rent expectations are at least marginally positive across the board. However, this quarter, capital value expectations for the office sector posted a weak -33 per cent reading.

RICS noted that this hasn’t changed much from the past few quarters, but still signals continued worsening sentiment toward the office sector. Additionally, there is a notable gap between prime office space, which is doing relatively well, in comparison to secondary and suburban office space which suffers the worst of market negativity.

Over the past three months, the Bank of Canada has undertaken two 0.25 per cent reductions to the interest rate, however some respondents are disappointed that these actions have not impacted at the scale that they imagined.

It appears, according to RICS, that the Canadian commercial property sector is likely to continue to witness strengthening for the foreseeable future. The situation should become clearer once the United States decides on its next Commander-in-Chief, and Canadian investors will make key decisions on where to put their money.