BusinessWhich industries are ripe for investments in commercial real estate?

Jamie QuadrosAugust 27, 20198 min

Canada is in the midst of having multiple industries demonstrate remarkable growth and potential for investment. In particular, tech firms/startups, cannabis companies, and e-commerce retailers all present interesting implications for real estate leasing, sales, and development. We’ve taken a look at the market implications of those sectors and the directions they’re heading in, and narrowed down a few opportunities worth investigating.

Tech firms and startups

A steady influx of Silicon Valley heavy-hitters and startups setting up shop in Canada presents intriguing potential for real estate investment. Tech companies have shown considerable demand for co-working and flexible workspaces, especially in metropolitan areas. Developers, in response, have begun to focus on building or renovating structures that reflect the evolving needs of the market. For example, factoring in cars when designing space has become a much lower priority, especially in the age of ride-sharing and autonomous vehicles. Instead, new developments emphasize characteristics that appeal to these companies, such as an increased focus on “vibrant community spaces” and “vertical urban forests in downtown towers”.

Opportunities:

  • Rental/sales of Class A office space, especially in big cities with large pools of talent that attract companies
  • Redevelopment and rental/sales of Class B & C office space, especially in gentrified/up-and-coming city areas
  • New developments adapted for technological integration
  • Environmentally conscious and community focused developments
  • Retail space in proximity to existing collaborative/flexible workspaces

Noteworthy locations:

  • Toronto, ON
  • Ottawa, ON
  • Montreal, QC

Cannabis companies

The recent legalization of recreational cannabis in Canada has stimulated an already thriving industry that currently employs around 9,200 people—almost four times the number of workers that it employed in 2018. With the industry projected to be worth $5 billion by 2021, this offers lucrative opportunities for commercial real estate investors and developers, as growth in the sector continues. While the largest players in Canada already have functional operations, opportunity lies with new and upcoming cannabis companies who will likely require industrial space to grow their product. On the other hand, demand for retail space is inextricably tied to provincial rollouts of retail licenses.

Opportunities:

  • Warehouse and industrial space for growing plants
  • Retail space sufficiently spread out from existing retailers, in anticipation of store license expansion in participating provinces
  • Land for use in growing plants outdoors, in light of legalization

Noteworthy locations:

  • Smith Falls, ON
  • Leamington, ON
  • Brantford, ON
  • Edmonton, AB

E-commerce retailers

According to a 2019 Director’s report by eTail, Canada’s digital marketplace will see approximately $49.7 billion in sales for 2019 as increasing numbers of Canadians opt to do their shopping online. The continued growth of the e-commerce sector directly affects the future of brick-and-mortar retail stores, as more and more companies move their business to the web. However, this shift in the conventional business model also creates opportunities for development and investment. With the exceedingly competitive nature of online sales, vendors place a lot of emphasis on ensuring customers receive efficient, seamless service right from sale-of-product to delivery. There’s potential for an uptick in demand for last-mile warehousing and industrial space equipped for modern requirements, as companies seek to implement efficient, wide-reaching distribution networks.

Opportunities:

  • Rental/sale of smaller warehouses and industrial space close to major cities (as opposed to suburban areas) to capitalize on last-mile distribution potential
  • Warehouses and industrial space that can be optimized for breakout tech—like drone delivery systems or autonomous trucks
  • Redevelopment of retail space as brick-and-mortar sales decline
  • Development of undeveloped land in close proximity to urban centers

Noteworthy locations:

  • Quebec City, QC
  • Edmonton, AB
  • Calgary, AB

Note: This is intended to be used as general information only and does not constitute investment advice. Please conduct your own research before making any investment decisions.

Jamie Quadros

Freelance writer and communications professional at the University of Toronto. He’s an avid cinephile, voracious reader, and a terror at karaoke bars.

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