Commercial Snapshot

Third Quarter-2023

1. Non-Residential Building Permits : $13.48 billion in non-residential building permits were issued in Q3-2023, up 19% YoY and 7% from the previous quarter.

- Institutional and industrial sectors showed a 14% increase in Q3 compared to Q2, but the number of permits decreased in commercial and industrial subsectors.

- Year-over-year declines were noted in the industrial (-15%) and commercial (-5.4%) subsectors, while the institutional and governmental subsector saw an increase (+14.7%).

The rise in non-residential permits as a leading economic indicator, indicates ongoing construction activity, but concerns about decreasing permits in some sectors may be influenced by economic uncertainties and recession.

2. Unemployment Rate : The national unemployment rate is at 5.7%, the highest since the pandemic began.

- Despite higher unemployment, full-time employment grew by nearly 50,000 from August to October, up almost 3% from the same period last year.

- The labor market dynamics are influenced by population growth, and the Bank of Canada notes easing pressures on the labor market due to reduced economic demand.

The rise in unemployment as a lagging economic indicator may be offset by growing full-time employment, but concerns about the overall economy and labor market persist which is also a sign of recession.

3. Housing Starts : Housing starts increased over 4% in Q3-2023 compared to the previous quarter but were down 7.9% from the same period last year.

- Affordability issues persist, leading to elevated housing starts, and a report emphasizes the need to fill 12,000 vacancies per year in the residential construction industry.

High home prices drive housing starts which is a leading economic indicator, but addressing affordability issues and skilled labor shortages is crucial for sustained development.

4. Gross Domestic Product (GDP) Growth : The Bank of Canada maintained a 5% overnight lending rate in October 2023.

- GDP growth has been flat since spring, with preliminary Q3 GDP numbers indicating economic decline for two consecutive quarters, hinting at a possible recession in 2024.

- Factors contributing to the economic slowdown include reduced consumer spending, housing activity slowdown, forest fires, and a federal public sector strike.

Economic challenges, including reduced spending and external factors, suggest a cautious economic outlook with potential implications for the real estate market. As a lagging economic indicator, GDP growth suggests that the economy has experienced a recession.

In general, a complex web of interrelated economic factors, such as housing demand, labor market dynamics, construction trends, and general economic circumstances, impact the real estate business. Following these data reveals that the economy has been experiencing recessionary difficulties. These difficulties are expected to last at least into the following year, though they may abate due. One of the most affecting factors is continuance of contractionary monetary policy of Bank of Canada which tries to maintain the interest rates at its historical lowest rates. Navigating possible obstacles and possibilities in the dynamic real estate sector is critical for stakeholders.