Report: Commercial real estate created $278.4B last year

Key Takeaways:

• Commercial real estate construction created $278.4 billion of economic activity last year.
• Despite solid investment, lingering economic impacts from Covid could create risk for some assets.
• However, pent up demand for multifamily housing is likely to be huge forward.

Digging In:

While North American real estate development is holding the line, it faces ongoing challenges, a new report from the Commercial Real Estate Development Association shows. 

The group commissioned the report to examine the economic benefits of commercial construction across four distinct asset classes: industrial, retail and entertainment, office, and multifamily housing during 2021. 

The report also digs into the benefits of commercial brokerage, property management and landlord operations. It analyzes the commercial real estate sector across Canada and for selected major metropolitan centres including Montréal, Ottawa, Toronto, Calgary, Edmonton and Vancouver. Metrics are also provided for the provinces of Quebec, Ontario, Alberta and British Columbia.

“The Canadian economy is emerging from a two-year period with significant fluctuations in GDP and jobs due to the COVID-19 pandemic and the public health measures undertaken by governments to contain the infection,” stated the report. “The commercial real estate sector could be vulnerable to long-term impacts related to the pandemic, such as the demand for office space that will continue to evolve with hybrid work practices, and the demand for retail and industrial space that will continue to evolve with shifts in e-commerce trends.” 

The report also found that high inflation and rising interest rates have also increased costs for new commercial real estate development. 

But the research showed that despite these risks, non-residential investment is generally holding up, and leasing activity related to new buildings is robust. 

“At the same time, an acknowledged housing shortage in Canada and the emergence of Gen-Z, a large cohort of young people emerging into their prime rental years, will continue to create opportunities for multifamily investors looking to bring new apartment buildings to market,” said the report. “Although the commercial real estate industry faces challenges from the pandemic and slowing economic growth, it promises to continue to be a major contributor to the Canadian economy in the years ahead.”

Here are some of the report’s key findings: 

• The commercial real estate sector’s building construction spending and ongoing operations generated $278.4 billion of economic activity in Canada in 2021. 
• It generated $148.4 billion in net contribution to GDP in Canada in 2021.
• In 2021, Canada’s commercial real estate sector created and supported 1 million jobs in Canada, of which 372,710 are direct jobs.