What happens to a region when its housing market goes crazy and then businesses and industries need commercial space to support those new residents? Halifax is finding out.
Since December, 2019, house prices in Halifax rose by nearly 50 per cent, an increase that The Economist describes as “a boom that only a tiny number of cities have bettered.”
Downtown and suburban office vacancy rates in the Halifax area are still relatively high, according to data released last week from Colliers Canada. That’s changing as the pandemic finally shows signs of waning, people continue to move to Halifax, workers are expected to return to their cubicles and tourism gears up for a major boost.
Long-vacant commercial properties downtown are being bought up and either renovated or repurposed for live-work space.— Mike White, director of valuations at Colliers Canada in Halifax
A new luxury hotel, the 109-room Muir, opened on the Halifax waterfront in early December, anchoring a major $200-million redevelopment of the city’s prime tourist area. The hotel, designed by Nova Scotia architect Brian MacKay-Lyons, seeks to capture the mystique of the great luxury liners, jutting toward the water and built with local sandstone, timber and material called Muntz metal – a blend of copper, zinc and iron used in shipbuilding to withstand harsh seawater.
Another nearby mixed-use project called Cunard is under construction, which will include retail and public space along with 231 residential rental units.
Meanwhile, the office and industrial market is trying to keep up. The relatively high office vacancy rate is expected to tighten, and to meet the anticipated demand, three large office projects are now under construction in the Halifax area, which will add nearly 175,000 square feet. Industrial property is already scarce, with a record low vacancy rate of 2.4 per cent in this year’s first quarter, down from 2.7 per cent in the last quarter of 2021.
“If you come here you’ll see a skyline full of cranes,” says Mike White, director of valuations at Colliers Canada in Halifax.
Commercial activity has been prompted by the influx of new people in Halifax, says Patrick Sullivan, president and chief executive officer of the Halifax Chamber of Commerce.
“Statistics Canada recently ranked growth in downtown Halifax as number one in the entire country between 2016 and the end of last year. The overall population grew by 9.1 per cent and downtown Halifax grew by 26.1 per cent,” Mr. Sullivan says.
By comparison, Toronto’s downtown grew by 16.1 per cent in the same period, as city dwellers moved to the suburbs and to other cities – including Halifax.
According to Statistics Canada, more young people moved to Nova Scotia in 2021, and the province’s population reached one million for the first time. The province gained 4,678 new residents from other parts of the country in the second quarter of 2021 alone.
Migration to Halifax is driven at least partly by the fact that even though house prices are jumping, they’re still relatively cheap – in January, 2022, the average Halifax home sold for $392,828, which can hardly fetch a closet-sized condo in Toronto or Vancouver.
But this migration is raising expectations in the commercial market, says Colliers’s Mr. White. Although there are currently still many vacant offices in the Halifax area, demand is growing, he says.
“A lot of long-vacant commercial properties downtown are being bought up and either renovated or repurposed for live-work space,” says Mr. White. “National investors are starting to recognize that we exist out here.”
In the first part of the pandemic, after it was officially declared in March, 2020, retail properties languished in the region as people were locked down and couldn’t shop, Mr. White says.
Since then, properties that include grocery and pharmacy chains have risen in demand, not just by the grocers and the drug stores but by other retailers who want to be close by.
“There’s definitely more interest in these rock-solid, pandemic-proof tenants,” Mr. White says.
There are also new 21st-century jobs, Mr. Sullivan adds.
“Halifax has been awarded hundreds of millions [shared with other Atlantic regions] for the Ocean Supercluster,” he notes, a program in which the federal government matches funds with investors, startups and researchers in leading-edge areas related to ocean resources and protection, such as digital technology, artificial intelligence, plant science, advance manufacturing and – in Halifax’s case – ocean research.
“It’s another reason why the demand for industrial property in Halifax has been on fire,” Mr. White says.
“The supply of industrial sites here is highly constricted. There’s one primary site for ocean-related industry and it’s pretty much full,” he explains.
“Halifax has also reached number seven on the list of cities in the growth of its tech sector,” Mr. Sullivan adds. The ranking is from CBRE’s 2021 Scoring Tech Talent survey, which showcases up-and-coming areas for tech-related jobs and start-ups.
There is some potential as well for Halifax to benefit from the worldwide trend among manufacturers and distributors of all kinds of goods to rethink their supply chains, which were disrupted by COVID-19.
“Halifax is one of Canada’s major ports. Our supply chains weren’t disrupted as much as some others during the pandemic, but companies are looking at industrial space for distribution centres,” Mr. Sullivan says.
As for desk jobs, Colliers’s new commercial real estate report for Halifax notes that in the first quarter of this year, more than 130,000 square feet of office space have been rented, as businesses make decisions “that were on hold during the pandemic.”
“From a commercial perspective, Halifax was moribund for a long time, but it’s finally showing up on peoples’ radar,” says Mr. White. “That has costs – it drives up housing prices and the cost of living and the infrastructure has top keep up – but in the long run it’s a good thing.”