The commercial real estate industry plays a prominent role in the Canadian economy, contributing to economic growth, creating jobs and providing homes, workspaces and places for shopping, dining and recreation. In 2021, the CRE industry added $148.4 billion to Canada’s GDP and created and supported one million Canadian jobs, making the industry’s contribution to the Canadian economy roughly equivalent to the country’s oil and gas sector.
The NAIOP Research Foundation commissioned the “Economic Impacts of Commercial Real Estate in Canada” to evaluate the economic, employment and wage contributions of the industry across Canada and in selected provinces and urban areas. The report, authored by Altus Group Economic Consulting, examines the economic activity generated in 2021 by new office, industrial, retail and multifamily construction, as well as by commercial brokerage and property management and landlord operations. The authors drew from data published by Statistics Canada, Altus Group and a range of additional secondary sources to quantify economic activity in each subsector. The report also provides a summary of economic and industry trends across Canada and in the individual provinces.
2021 found the CRE industry in Canada in a state of transition as the economy emerged from the effects of the COVID-19 pandemic, growing 4.7% in 2021 with continued growth of 3.8% expected in 2022. The pandemic negatively affected the value of Class B and C office buildings and some categories of retail space while increasing demand for distribution space. Overall, the value of commercial real estate transactions grew substantially in 2021 when compared with depressed transaction values in 2020.
The economic recovery has been supported by government stimulus, growth in automation, a rebound in Canada’s oil and gas sector, easing pandemic restrictions, and supply chain improvements. The pandemic recession and recovery has been experienced differently by the four provinces profiled in the report (Quebec, Ontario, Alberta and British Columbia).
Ontario, the largest province by population and in the total value of its commercial real estate, experienced near-average economic growth in 2021, but Toronto’s economy declined more in 2020 and has experienced a slower recovery than the rest of the country. This is in part due to the city’s greater reliance on immigration and temporary workers, both of which were disrupted by the pandemic.
Alberta’s economy is heavily influenced by trends in the oil and gas sector, which crashed in 2020 but has since led a recovery in the province’s economy, which grew 5.1% in 2021.
British Columbia, which has enjoyed above-average population growth, experienced the strongest economic growth of Canada’s 10 provinces, rising 6.2% in 2021.
Although the CRE industry has experienced a recovery in activity alongside the broader Canadian economy, the authors note that high inflation, rising interest rates and the long-term effects of the pandemic (such as decreased office space utilization) present risks for commercial real estate. Nonetheless, despite challenges that may lie ahead, the CRE industry will continue to be a major contributor to the Canadian economy.
Shawn Moura, Ph.D., is research director at NAIOP.