BMO Financial Group

BMO Financial Group

November 19, 2012 06:00 ET

Urbanization in Major Cities Offers Canadian Businesses Opportunities-Report from Dr. Sherry Cooper, BMO Financial Group

- Non-residential construction and population growth in major cities' downtown cores create business opportunities

TORONTO, ONTARIO--(Marketwire - Nov. 19, 2012) - While a slowdown in residential construction will play a role in moderating growth for Canadian businesses in 2013, a pickup in office/retail construction, combined with increased population density in major cities provide excellent opportunities for entrepreneurs, according to a special report from Dr. Sherry Cooper, Chief Economist, BMO Financial Group.

"The boom in non-residential construction represents a clear example of where opportunities lie for Canadian business," said Dr. Cooper. "The boom applies to both office buildings and shopping centres, as vacancy rates remain low and foreign businesses continue to pour into the country. Despite the enormous office construction in many cities, especially Toronto, space has been gobbled up and A-rated buildings are now planned in areas formerly considered undesirable."

Steve Murphy, head of commercial banking at BMO Bank of Montreal, notes that the strong commercial real estate fundamentals also extend to the owner-occupied market, where businesses own commercial properties for their own use.

"There is strong demand for these properties by users, who are often able to lease out part of the property for additional rental income," said Mr. Murphy. "Now may be a particularly good time for businesses to invest in commercial property for their own use," added Mr. Murphy.

Dr. Cooper also noted the explosion in the number of condominium towers, many of them small and comparatively affordable. "This helps create a readily available pool of well-educated younger workers happy to work downtown. This is not unique to Toronto and has been evident in Vancouver, Montréal and other major Canadian cities."

Dr. Cooper noted some other positives:

  • Immigration continues to be a major growth factor in major cities. Population density is rising as land-use restrictions limit the number of single-family homes and rent controls encourage condo-for-rental construction. The burdens placed on our roadways and public transportation systems, as well as the cost of gasoline and pollution, are encouraging people to live closer to workplace hubs.

  • The continued urbanization of the population nearer to the downtown core boosts demand for a widespread array of personal and business goods and services. Large grocery chains are already opening up in downtown business centres and there is a remarkable proliferation of drug stores-larger and more glamorous than ever. Restaurants and fast food establishments in all price ranges are sprouting at an amazing rate and downtown shopping choices are expanding.

  • Even families are moving downtown - hence the emergence of new toy stores and children's clothing shops. More downtown day care is needed as are schools, but that too will come. Many boomers are finding downtown living an attractive alternative for retirement or partial-retirement, close to the entertainment districts, medical offices and hospitals. Empty-nesters are looking for a pied-à-terre - their city dwelling - allowing them the luxury of a country cottage.

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