Each year, several reports by leading real estate groups become available. They discuss the previous year performance and predict the upcoming year performance. The first quarter commercial retail trend along with the 2019 forecasts, also help the individual and institutional investor forecast the likely performance of their assets as compared to the market.
Avison Young’s 2019 North America, Europe and Asia Commercial Real Estate Forecast showed that investors considering Canada’s retail real estate would do well. The report was released earlier in 2019, and the discussion of the shortcomings of the previous year and the failures of some larger retail chains to expand in 2018 are all starting to be a distant memory, as the commercial retail market is trending strong.
Canadian tourism spending is a driver in the retail market. As new industries are born and old industries improved, the effect has shown a positive wave of new tourist to Canada. Marcus & Millichap noted in their 2019 retail report that visitor expenditures rose 2.4% in third quarter of 2018. This is great news for high-end retail sales, as tourism along with a strong domestic demand remains the driver of luxury sales and luxury brand expansion.
Creating a customer experience still remains the key to repeat business from loyal customers. Marcus & Millichap reported that Internet sales increased 20% in 2018; however that only comprises of 4% of the Canadian retail activity. This performance marker demonstrates how retail real estate dominates the retail sales market, not Internet sales.
One of the main reasons why is because people enjoy the convenience of visiting a downtown storefront versus surfing the web. This is why service-oriented businesses like fitness and dining, continues to thrive. They understand their customer and look for ways to create the memorable consumer experience. It is most effective tool used to improve visitor expenditures.
Retail leasing performance is erratic at times; however, the sector is still enjoying good performance. Asset diversification, geographic diversification and debt reduction continues to be sound leasing fundamentals that keep prime asset values elevated and their cap rates low.
According to Morguard, the “Canadian commercial property sales activity will remain robust over the near term, against a backdrop of positive overall sector performance.” This strength largely stems from the increased purchasing power of an economy that is steadily recovering, as more jobs are being created.
It’s all very positive news for the Canadian retail investor. The overall assessment of the commercial retail market in Canada is positive as forecasted.
The end of April marks the close of the first four months of 2019. As each year begins with forecasts and predictions for the year ahead, this year has proven to be favorable for investors, and the governing policies are aiding in strengthening the market and creating more jobs. More and more retail real estate owners are expanding and growing their commercial retail real estate portfolios.
Are you looking to invest in retail or a mixed-used property? If yes, ReDev continues to bring deals together to help their clients to achieve the returns they seek. Now is a great time to get in and invest for short- and long-term gains.