While markets along Highway 401 are benefiting from strong demand for industrial properties, areas like the Ottawa Valley are seeing a slower recovery for commercial real estate post-pandemic.
Sherri Cobus of EXP Realty is based in Renfrew and handles a number of commercial real estate properties in the Ottawa Valley. She says the local market is still feeling the effects of the pandemic.
“Since COVID, commercial real estate has definitely taken a hit in Renfrew County and I think it’s just going to take a number of years to pick up again,” said Cobus.
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Commercial vacancy rates are high in Pembroke, Renfrew, Arnprior and beyond, she said.
“For sales, not leasing, things are not moving in the Renfrew area, commercial-wise, right now. We’ve had things listed on here since 2022 and they’re not moving. I’ve got nine commercial buildings just in town and they’re not moving,” she said.
In Arnprior, there are currently 11 commercial properties listed. Pembroke has a number as well, some that have been listed since 2021.
More people working from home is one of the factors affecting the market, Cobus said.
“I think we’re going to see more people gaining office space again, wanting office space, for advertising, for showrooms, just like it was before COVID. It’s just going to take time,” she said.
Higher interest rates also factor into why commercial properties aren’t selling, she said.
“Once they buy it, they pay property taxes, insurance – their rents can’t cover the price of the building,” said Cobus.
One component of the commercial market that is doing well in the area is industrial, including warehouses and storage facilities, she said. “Warehouses are really booming,” said Cobus.
Perth is an interesting town, said Cobus. While commercial real estate in the area has been on a rollercoaster the past few years, it’s performed well in Perth.
“Given the rising material costs and global supply shortages, new developments were few and far between, increasing the demand for established properties,” she said. “Commercial real estate in Perth has seen a renewed interest from investors located overseas or in the eastern (U.S.), too.”
When it comes to commercial properties such as retail and hotels in the Valley, the future is less positive due to subdued international tourism and reduction in tenant demand, said Cobus.
Steve Piercey, vice-president for advisory and transaction services for CBRE, says that, in areas along Highway 401, there is a trend market watchers are seeing when it comes to industrial property, particularly in Cornwall.
“We are really seeing an increased demand in major transportation corridors, anything along the 401,” said Piercey. “A lot of companies are seeking economical rents outside of the major metropolitan areas like Toronto, Montreal and Ottawa, where rents have basically increased so drastically, so quickly, it’s put them at an economic disadvantage.”
Also, industrial developments taking place in these larger cities have little to no yard or storage space.
“So, some of these users who require outdoor storage or trailer parking and they’re seeing rents skyrocketing in Montreal, Toronto and Ottawa have looked to these towns as an alternative location,” said Piercey.
As a result, areas like Cornwall, Brockville and Kingston have seen strong demand for industrial space.
“And you’ve seen limited growth in some of these other markets that are not on those transportation corridors, like Hawkesbury or Renfrew, where you’ve still seen some but not the same explosive rent growth,” he said.
Cornwall, in particular, has another desirable feature from a business perspective.
“It’s basically on the border of Quebec and … we’ve seen large groups go there like Wal-Mart, for example … they get all the benefits of being exposed to the Quebec market, without having to deal with any French language laws and limited union influence that Quebec typically has,” said Piercey. “That’s why in Cornwall there’s little to no vacancy there at any particular time.”
While communities such as Renfrew and Arnprior have Highway 17, the trend is not as strong, at least so far.
“You’ve got the highway that goes all the way up to North Bay, which is a transportation corridor in itself, but most groups launching to access those markets are launching from Ottawa or somewhere close by on a major highway or going up through Peterborough,” said Piercey.
“In some of the major markets, you’re seeing a little bit of increase in vacancy because there’s been so much development happening, but these small tertiary markets, they haven’t had any major new supply come online, so older buildings, buildings that have been around for 10 or 20 years are all filling up again.”
Piercey predicts more of the same for the foreseeable future.
“I expect the trends to continue. Again, because there’s just little to no development in those areas on a large scale to match regular demand. And I expect these other markets – Hawkesbury, Renfrew, Perth, all those groups that aren’t on that transportation corridor – to stay kind of stagnant as they are,” he said.
In Kingston, broker Martin Skolnick, vice-president of Cushman & Wakefield Kingston, says the area’s commercial real estate supply is limited in all sectors, including office, as demand remains strong.
“Currently, new office and retail is not being built, but multi-unit light industrial continues to be constructed on spec and filled,” he said.
Vacancy rates in all sectors of the Kingston commercial real estate market remain low, said Skolnick, noting demand has remained steady while supply is limited.
“We predict in the year ahead, within the Kingston market, that there will be a continuation of strong fundamentals, including the added pressures created by an increase in population year over year, limited land supply, strong absorption rates for new purpose-built light industrial buildings, and increased interest in the Kingston market from developers and investors being starved for opportunity in the major markets,” he said.
