Transactions up 25% in St. John’s Commercial Real Estate Market

2024 St. John’s Commercial Real Estate Trends

Renewed provincial optimism has contributed to a significant uptick in demand in the Greater St. John’s commercial real estate market, as expectations for economic growth rise in Newfoundland and Labrador for 2024, according to the RE/MAX 2024 Commercial Real Estate Report. Commercial transactions in the city are up almost 14 per cent in the first four months of the year, with 25 properties changing hands year to date, compared to 22 sales for the same period in 2023.

The government is “working towards a strong, smarter self-sufficient and sustainable province,” according to the province’s Budget 2024 press release. In its economic outlook section, the province reported Real GDP is expected to climb 5.1 per cent in 2024, in large part due to a rebound in oil and nickel production, while opportunities in the green energy, low carbon oil, mining and aquaculture industries are expected to further bolster economic activity. Population growth is forecast to climb almost one per cent year over year, on the heels of a strong 2023.

Few jurisdictions can match the abundance of resources of the Newfoundland and Labrador area, given its hydrogen gas, oil, minerals, windmill, and energy projects. Approximately $12.4 billion in major capital spending is underway, with mining and oil and gas leading the province. Some of the projects underway include: West White Rose Project (Cenovus Energy, Suncor Energy, and OilCo) valued at between $3.4 and $3.8 billion; Vale Newfoundland and Labrador Limited continued development of the underground mine at Voisey’s Bay’s Reid Brook and Eastern Deeps deposits, valued at $2.69 billion USD;  Voisey’s Bay Wind Energy Project (Innu-Inuit Envest Limited Partnership and Vale Newfoundland and Labrador Limited) valued $77.6 million; Rio Tinto IOC is making upgrades to Iron Ore processing, valued at approximately $70 million; while Cooke Aquaculture is expanding its integrated farming operations at a cost of $35 million. Infrastructure growth in the province has had a significant impact on commercial real estate markets.

Just 52 commercial listings are currently available for sale over the $500,000 price point in St. John’s and the surrounding areas –down almost 28 per cent from the 72 listings recorded this time last year. Tight inventory levels are having an impact on values, placing upward pressure on prices. Older listings are starting to move as investors/owner-operators grow impatient. Demand is greatest for diversified warehouse/office properties on the market offering an 80/20 split with a laydown area in the yard. Only two are available for sale in the city and four in neighbouring subdivisions. Limited product is available in Mount Pearl’s Industrial Park, with prices edging north of $1 million.

With the exception of a new retail development that will add an additional 590,000 sq. ft. in the Shoppes at Galway, some pullback has occurred in commercial construction as builders and developers shift their focus to the existing shortage in residential housing. Canada Mortgage and Housing Corporation’s (CMHC) incentive plan to increase stock of purpose-built rentals, offering five per cent down, favourable rates, and 50-year amortization periods, coupled with the elimination of the federal government’s goods and service tax, has been effective in re-directing development. According to the report by the government agency in 2023, Newfoundland-Labrador will need to build 10,000 homes a year or the province will be short 60,000 housing units by 2030.

Over the past year, St. John’s city council has fielded a numerous applications for rezoning, planning and construction permits for medium and low-rise apartments, including a 10-storey apartment on New Cox Rd.; Harbour Capital Corporations proposal for a 12-storey and two seven-storey apartments, plus the conversion of the existing home to a four-plex; a 60-unit apartment building with eight townhomes on the site of the old orphanage, a heritage property destroyed by fire in Logy’s Bay; and a four-plex on the site of the IJ Samson school. There have also been some interesting conversions, including a Super 8 Hotel to a residential apartment with 82 one-bedroom units and studio suites in 2024. Ground has also been broken on three six-storey student housing buildings across the Memorial University’s main campus.

While the office sector remains soft, with more than 300,000 sq. ft. of vacant space available in the city, excitement is starting to build in the city, given the resumption of projects in hydrogen gas, oil, mining, wind energy, and aquaculture. The possibility of reopening the existing Upper Churchill Agreement drawn up in the late 1960s has also added to the enthusiasm. The city’s return to prosperity is expected to bode well for the commercial market for the remainder of 2024 and into 2025.