Real Estate

Hamilton’s commercial real estate sees highest year on record

2020 was an undoubtedly difficult year in countless ways for both people and industries; but Hamilton’s commercial real estate (CRE) has managed to thrive, with record-breaking results. 

Despite the impacts of the pandemic, CRE transactions in Hamilton reached an all-time high in 2020, seeing multiple transactions of $100 million or more for the first year ever with a combined total value of nearly $1.2 billion; a jump up from 2019’s figure, which was just shy of $953 million.

Notably, this occurred across a total of just 289 transactions – the lowest since 2017 – marking an indicator of how drastically Hamilton’s value has climbed in recent years, and likely will continue to do so.

Among those transactions was the sizeable Centre on Barton, which stands out as the third highest single CRE transaction in the city’s history, topped only by the same property’s transaction in 2014, and the city’s highest-ever with the Stelco property, which sold for $190 million in 2006 to Hamilton Steel GP.

Additionally, this past year in commercial real estate saw a particularly strong result from multi-residential and industrial transactions. 

“This year, we’ve seen massive demand for the multi-residential and industrial asset classes and a continued decline in retail,” notes Alex Manojlovich, who leads market research & analysis for Hamilton-based investment firm Forge & Foster.

“Because of the former, Hamilton is well positioned as a relatively affordable mid-sized city with significant transportation and development potential.” 

Forge & Foster hosted their annual CRE Year End Review back in February, where they presented their research about Hamilton’s commercial real estate market, observed regional trends, and offered some predictions for the forthcoming year. Simultaneously, these same tech companies are building new offices and leasing the largest spaces during the pandemic, potentially signifying a marriage of working from home and the workplace for the future.

A large piece of their findings focuses on the drastic ways that the COVID-19 pandemic has upended office culture and shared working spaces, forcing countless professionals into an unprecedented era of working from home en masse.

This graph indicates the amount of CRE transactions per month. When the initial lockdown took effect, CRE transaction took a dip, but then followed normal trends starting July 2020.

Some companies are even looking at shifting to a permanent work-from-home model. Statistics show that the fourth quarter of 2020 saw the occupiers of some commercial office spaces allowing their leases to lapse, with intent to re-evaluate their particular needs for office space on the other side of the pandemic.

A few of the world’s largest corporations are leading the charge in this period of transition, with global tech brands like Twitter, Shopify, and Square having already announced plans to allow their employees the opportunity to permanently pivot to working from home. 

Though vaccination rollout is moving steadily across Canada and the promise of semi-normalcy is finally on the horizon, these trends nonetheless beg the question: “Is the office dead?” 

It’s a question that will play out as 2021 continues and companies rethink their need for a communal office space, with Forge & Foster predicting that the importance of flexible, remote work options will continue; even within businesses that choose to occupy a physical office space post-pandemic.  

Indeed, the continued construction of notable office buildings all across Hamilton – including the Effort Trust office at 50 King Street East and the space at 59 King Street East that will soon play host to Toronto’s Q4 Inc. along with the continued growth of McMaster Innovation Park and the West Hamilton Innovation District – indicates that shared offices and collaboration-friendly workspaces are hardly expected to vanish completely. 

Unsurprisingly, there has also been unprecedented growth in Hamilton’s residential real estate market, with the average price of a house climbing a considerable 16.8 per cent in 2020 alone to an average of just over $690,000 per home. 

The number of house sales in Hamilton also grew across the board in 2020, increasing anywhere from 8 per cent to as much as 24 per cent – depending on the region of the city – compared to sales in 2019. 

Much of this growth can be attributed to Hamilton’s widespread reputation as ‘the developing city’ which is leading to the substantial influx of new residents, many of whom are families or young people migrating in great numbers from larger urban centres like Toronto. 

The pandemic, and the fact that it has put a pause on the typical ‘big city’ lifestyle, has also forced many to think more meaningfully about affordability and space in their housing. 

After all, if someone from a city like Toronto can move to a smaller city to find a more affordable home with a larger amount of square footage – particularly in the work-from-home era – it’s no surprise that mid-sized urban centres like Hamilton are increasing in appeal. 

Hamilton isn’t just attracting new residents though; it’s also bringing in real estate developers who are erecting new properties, and attracting bigger players from the business world to set up shop locally.  

Some of the more notable transactions of 2020 include the former Hamilton Spectator building at 44 Frid Street, which sold to McMaster Innovation Park for just under $25 million; and various residential properties including the $26 million transaction at 150 Sanford Ave North and the $142 million tower at 140 Main Street West. 

There are other massive developments taking root in the city that will also become large pieces of Hamilton’s post-pandemic economic recovery. 

These include e-commerce giant Amazon’s plans to open a fulfillment centre by the John C. Munro International Airport – which is expected to bring more than 1,500 jobs to the city – to the forthcoming Aeon Bayfront Studios as a massive hub for major film production, and the multimillion dollar upgrades to the city’s entertainment venues like FirstOntario Centre and FirstOntario Concert Hall.  

With Hamilton predicted to grow by around 236,000 residents and 122,000 jobs in the next 30 years, it’s clear that the city is continuing on an upward trajectory with no signs of slowing; even in the face of a global pandemic. 

Data for this article was taken from Forge & Foster’s 2020 CRE Year End Review presentation.

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