TRREB Commercial Network Members reported 5,524,894 square feet of leased space through TRREB’s MLS® System in Q4 2020 for all lease transaction types across the industrial, commercial/retail and office market segments. This result represented a 10.8 percent decrease compared to Q4 2019.
Year-over-year changes in average per square foot net lease rates, for transactions with pricing disclosed, were mixed depending on the market segment. The average industrial lease rate was up to $10.20 in Q4 2020 from $9.62 in Q4 2019. The average commercial/retail lease rate was $21.15, slightly down from $21.35 in Q4 2019. The average office lease rate was $15.90, down from $17.29 a year earlier. It is important to note that annual changes in average lease rates can result from changing market conditions and changes in the mix of space leased from one year to the next, in terms of location, size, property type mix and other related variables.
The industrial and commercial/retail segments faired well in Q4 2020, both in terms of leasing activity on property sales, despite the pandemic. The office leasing segment experienced a year-over-year decline in space leased. This follows the general trend of many office workers transitioning to the home office and the uncertainty surrounding when workers will be able to return to their offices en masse and how space requirements may change in the post-COVID period.
Total commercial sales in Q4 2020 were down by 26 sales to 290, from 316 in Q4 2019. Sales in the industrial sector amounted to 106 in Q4 2020 – down from 111 sales in Q4 2019. Commercial/retail sales were down from 130 in Q4 2019 to 125 in Q4 2020. There were 59 office sales in Q4 2020, a drop from 75 sales in Q4 2019. It is important to recognize that the effects of COVID-19 and related public policies have impacted the commercial real estate industry, and have certainly resulted in changes in market activity on a year-over-year basis. Given the uncertainty around the path and exact timing of economic recovery, it makes sense that some investors in commercial real estate have temporarily moved to the sidelines.
Moving forward, it will be important to monitor trends through the lens of COVID-19 and the related recovery. Vaccine take-up in Canada and globally will be a key factor in determining when many bricks and mortar businesses reopen and ultimately their space requirements.