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Immigration and Commercial Real Estate - A Match Made in Heaven?

Throughout history, certain political leaders have often pushed anti-immigration policy as the way forward for prosperity and growth. Their manifestos have been built on an unfounded premise that existing residents could and should fulfill the jobs that immigrants take. Despite this rhetoric, the facts speak for themselves and there’s a clear correlation between population growth and positive economic growth.

Why does Canada need immigration?

Canada’s population is aging, its birth rate is significantly lower than other developed countries and unemployment is historically low. What all this amounts to is that there are simply not enough skilled workers to replace those that will reach retirement age in the coming decade.

Immigrants are more often than not, better educated and qualified than native Canadians, they fill gaps in the labor market and start businesses that employ even more people. With an aging Canadian society, the country needs immigration to pay into the system so that it can keep up with the increasing burden of healthcare costs, insufficient infrastructure and growing pension obligations. Typically, higher immigration means a growing economy and this growth leads naturally to a buoyant commercial real estate market which is always good news for real estate investors in Canada.

Aside from the broader benefits of economic growth, there are more localized benefits to specific industries and property markets. Canada needs the world’s best talent in order to attract new and existing tech companies to set up shop here and a lack of that talent could be a challenge for investors into the Canadian tech-market, something which as a country, can’t be allowed to happen if we want to compete on a global scale.

How does Canada fare on immigration levels?

Although the origin of immigrants is changing and the amount of immigration has fluctuated substantially between the late 1800s and early 90s, Canada has always been reliant on a stream of skilled workers from other countries to fill labor gaps and support growing industries.

Immigration rates have been consistently high since the 1990s and In the three-year period 2019 through 2021, Canada averaged over 196,000 immigrants per year. The level of immigration in 2022 is set to top 430,000 and the government has so far shown commitment by surpassing their target and making decisions on over 147,000 permanent residence applications in Q1 of 2022 alone, which is double the amount from the same period in 2021. According to StatCan, the highest number of immigrants ever recorded was in 1913, when 400,000 plus came to settle in Canada; over one hundred years’ later and 2022 is about to take that record. Canada has one of the highest immigration rates per capita in the world and this shows no signs of abating.

Why do immigration and Commercial Real Estate go hand-in-hand?

Over a fifth of the Canadian population are foreign-born and this will increase further as immigration trends upwards. On arrival in Canada, the priority for most immigrants will be to source rental accommodation for themselves and their families and as we know, affordable housing continues to be in very short supply.

Ontario attracts almost half of all immigrants coming into Canada with Toronto being the city of choice for most newcomers to settle. Employment opportunities, infrastructure, diversity and affordable housing amongst many other factors, all play an important part in the decision as to where to settle.

Although Toronto has historically been the ‘Mecca’ for newcomers, work lives have become more flexible over the past couple of years and other regions and suburbs in GTA such as the Kitchener-Waterloo region have also proved an appealing place to start out life as a newcomer to Canada. Smaller communities with enhanced housing stock and an ‘up-and-coming’ tech sector, potentially offer better value for money for immigrants, most of whom prefer to purchase a house or condo in the place they first settle.

Aside from the 1.2 million growth in net new immigrants requiring accommodation across the next three years, there’s also millions of temporary foreign workers and graduates who will remain in Canada and achieve landed resident status, all requiring accommodation in their preferred locations.

Not only does immigration present a huge multifamily opportunity for investors, there will be an uplift in office, industrial and retail assets related to new housing developments.

Population growth provides robust Multifamily outlook

Multifamily properties as an asset class will likely outperform office and retail during 2022 as we begin new ways of working and shopping and those markets settle down. Immigrant demand for housing in popular urban and outlying areas in Toronto and the Waterloo region will continue to drive growth in multifamily investment as immigration reaches record levels up to 2024 and beyond, supported by federal proposals. Despite housing construction being at an all-time high in Ontario, supply still cannot keep up with demand and Canadian newcomers are expected to purchase over 130,000 homes per year across the next five years.

The only real concern for investors is that so far, immigration policy has quite rightly sought to attract the world’s most highly educated, highly qualified applicants. The construction and trade industries have not been without their own labor challenges however. Ontario colleges estimate that half of the workforce in this area will be eligible to retire in the next decade, leaving 200,000 jobs to be filled; this gap is something that for now appears to have been overlooked in terms of the immigration programs available today; although the Federal Skilled Worker (FSW) program seeks to address this, the requirements are onerous on both the applicant and the employer. Without these skilled tradespeople, including industrial electricians, plumbers and stonemasons, keeping up with demand for affordable housing will be an ongoing challenge.

To discuss the multifamily opportunity in Ontario, reach out to our experienced commercial realtors today.


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