Canada continues to experience strong GDP growth, with the latest monthly data from May 2017 showing that the economy grew by 0.6% month-over-month, or 4.6% year-over-year.
This growth was consistent across 14 of the 20 sectors tracked. For good measure, the recently released IMF report on global economic growth indicates that Canada will lead all other G7 countries in GDP in 2017, with growth forecasted at 2.5%.
This is not all good news for the Greater Toronto Area (GTA), however. Here’s an explanation of why.
First, more than half of May’s GDP growth was attributed to the Alberta oil sands, representing a 13% rebound in nonconventional oil production.
Second and even more important, rising interest rates (combined with other government intervention) have led to a slowdown in the residential real estate sector.
Third, the high Canadian dollar value is chipping away at the tailwind that manufacturers have enjoyed. This does not take into consideration any potential impact the upcoming NAFTA renegotiations might have on manufacturing.
Nevertheless, given this economic backdrop, the office, industrial and retail commercial real estate markets continue to perform well. The office market has slowed slightly, with vacancy up 20 basis points year-over-year to 6.7%, and the average net asking rental rate down 1.0% over the same period to $18.29 /square feet per annum.
The industrial market is mixed, with vacancy up 80 basis points year-over year to 3.6%, but with average net asking rental rate up 5.2% to $6.30/square feet per annum. The retail market remains the strongest, with vacancy at 3.2%, unchanged year-over-year, and the average net asking rental rate up 6.5% to $25.55/square feet per annum.
These insights are made possible through CoStar, the largest commercial real estate source for property listings for sale or lease in Canada. CoStar enables users to gain insight into the 86,500+ properties currently tracked in the greater Toronto area, which include 2,737 properties for sale and 13,843 spaces for lease.
CoStar conducts constant, proactive research with a team of 60+ researchers making over 12,000 database updates each day.