OTTAWA: Commercial rents fell 0.6% in the fourth quarter, following a 0.5% (revised from +0.7%) increase in the third quarter, Statistics Canada said in a report.
The decline was concentrated in the retail sector, where rents are tied to retail sales.
Retail revenue fell sharply in the fall during the resurgence of the COVID-19 pandemic, following the shutdown of non-essential businesses in many regions of the country.
Nationally, commercial rents decreased by 0.6% from the third to the fourth quarter. Lower rents for retail buildings (-4.0%) more than offset higher rents for industrial buildings and warehouses (+2.2%) and office buildings (+0.5%).
Retail building rents generally rise in the fourth quarter in tandem with the Christmas shopping season, as a portion of those rents is tied to retail sales.
However, retail rents fell 4.0% in 2020, mostly because of large base rent concessions and discounts given by landlords during the onset of the resurgence of the pandemic; this brought rents down 4.5% from September to October.
Retail rents rose 1.9% in November and edged down 0.1% in December. Office rents edged up 0.5% in the fourth quarter, following the phasing out of rent rebates and deferrals by landlords in the sector.
With the resurgence of e-commerce sales in November and December, coupled with strong wholesale and manufacturing sectors, demand for inventory space continued to grow.
This contributed to the 2.2% quarterly rent increase for industrial buildings and warehouses.
Overall, commercial rents were down in 6 of the 13 census metropolitan areas covered by the survey, up in 6 and unchanged in 1. Toronto (-2.6%) and Calgary (-4.0%) contributed the most to the decline in the fourth quarter, with landlords offering rent support and concessions to help tenants in retail buildings.
The largest rent increases were in Vancouver (+2.2%) and Ottawa (+3.3%). Increases in both census metropolitan areas were mostly driven by higher rents for new negotiated leases in industrial buildings and warehouses.
Commercial rents also rose in Edmonton (+1.2%) because of above-average sales at shopping malls in October.
At the national level, commercial rents were 2.1% lower in the fourth quarter compared with the same quarter a year earlier, mainly driven by lower retail rents.
Physical distancing measures were tightened and non-essential businesses were closed in several regions of the country in December.
The subsequent loss of revenue contributed to the 6.1% year-over-year decline in retail rents in the fourth quarter.
The decline in the retail sector was partly offset by continued growth in office rents (+1.3%), whereas industrial building rents were flat because of the phasing out of the rent support and deferral program in the fourth quarter.