Ontario real estate becoming more expensive to obtain and maintain


As the costs related to procuring and maintaining commercial and industrial real estate in southeastern Ontario rise, the benefits that can be gained from smart buildings become even more pronounced.


This trend is especially notable in the greater Toronto area, as individuals and companies spent approximately $4.9 billion on commercial real estate from April to June of this year, The Globe and Mail reported. The most recent figures compiled by research firm RealNet Canada showed that in the latest quarter, sales were up 75 percent over the previous quarter and 74 percent over the same period in 2012.


Additionally, The Globe and Mail reported that this commercial real estate spending spree is affecting a number of different industry verticals:


  • Office space sales totaled $1.4 billion during Q2 2013
  • Individuals and companies spent $1 billion on industrial real estate
  • Q2 retail sales equated to $1.2 billion


“I think Toronto has had an amazing ride in the last few years from a real estate perspective. It’s been really exciting,” said Gunnar Branson, chief executive officer of the Chicago-based National Association of Real Estate Investment Managers, according to The Globe and Mail. “The question is, is it too much excitement? It’s difficult to say, but there is certainly heightened sensitivity.”


Rising electricity prices squeeze area companies
Not only is it becoming more expensive to obtain commercial real estate space in parts of Ontario, but observed spikes in electricity rates also suggest it is increasingly less cost-efficient to maintain real estate investments.


This trend has been especially noted in Guelph. For instance, the Guelph Mercury reported that the heat wave currently affecting the region has caused electricity demand in the metropolitan area to skyrocket. On July 17, when temperatures exceeded 30 degrees Celsius, city utility provider Guelph Hydro reportedly generated more than 302 megawatts of electricity, a new one-day record.


Since most Ontario residents pay more for electricity when demand is at its highest, this record likely means that building owners and tenants in the region will be paying more money than ever for electricity. According to the Ontario Energy Board, the difference between off-peak and on-peak rates is about 5.7 cents per kilowatt-hour.


However, this increase is likely not only due to the heat wave, as a number of area businesses told the Guelph Mercury earlier this month that their electricity bills have been steadily rising over the past few years. For example, Bill Mechar, co-owner of Integrated Packaging Films in Ayr, told the source that his company now pays approximately 50 percent more for electricity than in 2009. Of the $10 million to $12 million the firm brings in every year, close to $600,000 goes toward electricity-related costs.


“It’s not one of those things where you can’t pay,” Mark Fisher, finance director at Krug Furniture in Kitchener, told the Mercury about the company’s electric bills. “You’re kind of at the mercy of your bill.”


How smart buildings mitigate these concerns
Companies in Ontario and elsewhere in Canada that are looking to make their infrastructure more cost effective in light of these trends should turn to FlexITy​. As one of Canada’s largest and most trusted IT consulting services firms, FlexTy can help transform a business’ infrastructure into a smart building. FlexITy’s team of experts can equip any space with state-of-the-art sensors that allow facility managers to more intelligently control all aspects of the office. With this kind of system in place, companies can lower costs and increase employee productivity, thereby boosting the return on investment from the physical infrastructure.