When weighing the productivity and profitability of real estate market, there is a variety of factors that need to be considered to arrive at an effective forecast. Every factor contributes a little to shaping the market, ergo when predicting the future of the market, it is imperative that each factor is given due consideration.
Pertinent to the future of Canadian real estate market in general and GTA commercial real estate in particular,numerous factors will directly affect the market and reshape investors’ response to the market by 2020.
“By 2050, the urban population will increase by 75% to 6.3 billion, from 3.6 billion in 2010.” – Department of Economics, Population Division, United Nations.
The never-ending chain of cranes in Greater Toronto Area is an example of Canada experiencing increased urbanization. This trend of people moving to the urban regions and increasing the density of urban core will continue in the years to come, which will put the constructors to test. To accommodate the increasing influx, they will have to be innovative pertaining to space utilization and develop commercial as well as residential units that are smaller, yet utilize space with optimal effectiveness.
“By 2030, the fast-growing population will need 50% more energy, 40% more water and 35% more food.” – ULI’s Emerging Trends 2014 presentation
The figures imply that in the days to come, sustainability will be a major factor effecting the commercial real estate market of Canada. Major investors, including Pension funds have already started investing in sustainability in their real estate across Canada. Not only will sustainability save cost of energy for the real estate owners, rather, it will be a demand of tenants as well. Moreover, corporate sector will also require eco-friendly office space because it will add to their ‘green credentials’.
“By 2017, the global social network audience will be 2.55 billion, which will be 70% more compared to 2012.” – Pwc Research
Technology will be another major player in shaping the commercial real estate market of Canada by 2020. With more and more people going online, businesses will also shift their focus to the online audience resulting in the space of retail space minimizing. Similarly, offices will have more employees working for them from home or on the go, decreasing the need for office space.However, on the other hand, the demand for distribution centers will increase. Hence, in the coming years, the industrial real estate is to witness an exponential increase in demand.
So, if the market is going to be effected by such factors, then how should an investor respond to it?
Firstly, an investor should develop partnership with financial institutions so that they share the risk and cost of the increasingly dynamic Canadian commercial real estate with the investor. Secondly, in the years to come the investors will need to be adaptable and flexible if they want to become successful players in the commercial real estate market of Canada. Flexibility in terms of considering a wider range of real estate investment options and adaptability in terms of complying with the changes in market, both of which will ensure success for the investors in Canadian real estate market of future.