Is a Stronger Loonie on the Horizon? What that means for Corporate Real Estate
Updated: Jul 26, 2019
Canadians have been obsessing over the strength of our dollar (or lack thereof). It’s been a rough go for the Canadian economy, but Maclean’s Magazine recent published a forecast that sounds promising for a stronger loonie ahead:
“Oil prices used to have an 80 per cent correlation with the loonie and now it is a 94 per cent relationship. Further the commodity looks to have not just carved out a bottom but is visibly basing — the U.S. production and inventory data have finally become supportive. But what is key is that finally, the cheaper currency has triggered a manufacturing revival. All roads lead to a firmer loonie until otherwise notified.”
Is a Stronger Loonie taking Shape?
We want to keep in mind, that in the past, a cheap Canadian dollar has been a mixed blessing for our economy. While importers and Canadians who need to travel or spend money outside of the company suffer, exporters and those who work with organizations and individuals outside of Canada are benefiting. Simply put, it is economical for people outside of Canada to do business here. And while the pain appeared almost immediately, the gains are starting to take shape.
Commercial Real Estate and Foreign Retailers
The low Canadian dollar has caused an influx of tourists into the country, and because of these tourists, foreign retailers — for example, Nordstrom Inc.— are leasing space to take advantage of the dollars they are spending.
The low loonie is actually a positive for Canadian retailers, who are seeing growth as Canadians’ purchasing power is staying at home and tourists are bringing their money here as well. In fact, the Conference Board of Canada is forecasting that 4.2 per cent growth in retail sales 2016, up from 1.3 per cent in 2015, which means growth for retail commercial leasing.
Proving Forecasts Wrong
The low Canadian dollar is also responsible for an influx in Canadian production, resulting in an increased demand in not only industrial space but also in office space for production staff to work.
The end of 2015 saw a strong industrial market, with lower vacancies and more inventory and the office real estate market is following suit. While many experts were originally forecasting doom and gloom for Canadian corporate real estate, this hasn’t been the case. And with the building cycle for many office spaces surpassing 25 years now, many organizations are looking for new space that meets their needs.