Halifax Commercial Real Estate Propelled by Interprovincial, Foreign Investors

2024 Halifax Commercial Real Estate Trends

Interprovincial and foreign investors continue to play a substantial role in the Halifax commercial real estate market, sparking demand for the city’s industrial, multi-family, retail and to a lesser extent, office properties in the first quarter of the year, according to the RE/MAX 2024 Commercial Real Estate Report. The city’s unexpected population growth in recent years has amplified the need for housing and services, which has prompted the municipality to push for greater density, increased investment in infrastructure and healthcare, as well as the reconfiguration and improvement of access routes into Halifax, freeing up acres of land for future commercial and residential developments in the process. Through the Cogswell Interchange Exchange district, a $122 million joint initiative between the province and municipality that will connect downtown with the north end and waterfront, more than 16 acres of road infrastructure will be converted into a mixed-use neighbourhood, including new residential and commercial developments.

Industrial remains the top performer in the Halifax commercial real estate market in 2024, with vacancy rates falling under one per cent. Demand remains greatest for flex space, warehouses, and stand-alone buildings from single-tenants and owner-operators, many of whom are distributing products throughout Atlantic Canada. Real Estate Investment Trusts (REITs) such as Skyline have also been active in the market, with projects like the multiphase, net zero development currently underway that will bring more than 400,000 sq. to Bayers Lake Business and Industrial Park by the third quarter of this year. Some large-scale retail/industrial operators such Volvo’s heavy equipment division (StrongCo) and John Deere are building new facilities in Halifax’s industrial parks. Aeroplan Park, servicing the airline industry and home to large corporations in the aviation industry such as Pratt and Whitney, has been experiencing expansion. Asian investors have been instrumental in the development of cold storage, lobster processing plants, and warehousing facilities in the park, given its proximity to Halifax’s Stanfield International Airport for overseas export. A transfer of land is also occurring within city limits as occupants of traditional industrial areas move to suburban industrial/business parks on the periphery such as Bayers Lake, allowing land once earmarked industrial to be converted to multi-family residential.

With the city running about 20,000 units short of demand, construction of residential apartments cannot happen fast enough. According to the Canada Mortgage and Housing Corporation, rental apartment construction is hitting record highs month over month and this momentum is expected to continue. Investor appetites have also grown in this segment of the market, given rapid population growth and affordability. For example, Hazelview Investments recently announced it has commenced construction on a two-tower rental community at 210 Willet St. that will add 530 units to the Halifax market upon completion in 2026. The federal government announced its intention to invest $268 million to build five buildings in Halifax, Bedford, and Truro, adding 710 units through the Rental Construction Financing Initiative. Several outdated schools in high-density neighbourhoods have been purchased and rezoned as future residential development properties, with as many as 1,800 to 2,000 units expected to come on-stream once completed.

Residential conversion is underway in the downtown core as commercial office vacancy rates approach 14 per cent. One example is the Centennial building on Hollis where repurposing to multi-unit residential is in progress, while office space in Dartmouth, including a former hotel on King St. and the Royal Bank of Canada (RBC) building, are also undergoing redevelopment. Other offices include the RBC building and the BMO buildings on George St. Many of the older buildings near the waterfront are ideal for retrofit, with more landlords investigating repurposing. The municipality is considering incentives for developers who convert office to rental, following in the successful steps taken by the Calgary government.

Flight to higher quality product continues to occur in the downtown core, where A-class buildings are attracting the most tenants, with the average net lease at an estimated $30 per sq. ft. plus taxes, maintenances, and insurance (TMI). Cap rates for office space currently sits at 7 1/2 to 8 ½ per cent, while suburban markets hover between eight and nine per cent.

Retail continues to surprise, showing year-over-year strength in both sales and leasing, with vacancy rates edging lower. Despite several smaller business closures, malls in the Halifax area are seeing a steady influx of new tenants, ranging from Simon’s, Nespresso, and Orange Theory Fitness to restaurants such as Milestone’s Grill and Bar. Atlantic Canada’s largest indoor mall – Mic Mac Mall – is nearing approval on a sizeable mixed-use development that will include over 1,000 residential units, including senior living, two office towers and a major family entertainment area. Steady foot traffic in traditional shopping pockets such as the Spring Garden area in downtown Halifax continues to support some of Atlantic Canada’s finest boutique shops and dining experiences.

The hospitality industry is thriving, with a substantial increase in tourism to the city, including a strong uptick in interprovincial travel in recent years. Room rates have tripled as a result, prompting more of the city’s existing hotels to consider expansion and a growing number of prominent hotel chains to enter the market. Moxy Hotels just debuted its brand in Halifax—the first Moxy’s to open its doors in Canada. The 160-room Moxy Halifax Downtown, part of Marriott Bonvoy’s portfolio of over 30 extraordinary hotel brands, has “staked a place in Halifax’s iconic food and beverage community.”  The Moxy brand joins the Sutton Place Hotel (2020) the Muir, (2021), and Halifax Tower Hotel and Conference Centre (2022), as the most recent additions to the Halifax Travel and Tourism landscape.

While higher rates have had an impact on land development, creative financing has helped close most deals, with an estimated 70 per cent of deals involving a three-to-five-year vendor take-back mortgage (VTB). With Canada Mortgage and Housing Corporation’s (CMHC) favourable financing packages and 50-year amortization, REITs, pension funds, and institutional investors have been most active in the Halifax market to date, given the attractive price points and the need for more purpose-built rentals.