Is a remix the key to both housing affordability and office market resilience?

As Canada faces a crisis of housing affordability, suburban markets are growing more appealing as developers seek a balanced mix of multifamily and office needs.

Believe it or not, only one-quarter of Canadian households can afford a single- family home. And the housing affordability crisis in Canada keeps getting worse. In 2019, 60% of households could afford to own a regular condo apartment based on their income. Less than five years later, in 2023, this figure has dropped to below half—45% to be exact.

Meanwhile, there are no signs of stopping as the average home prices keep skyrocketing, especially in major cities like Vancouver and Toronto, where the National Bank of Canada reports prices in the ballpark of $1.2 million for both cities.

The increase in cost of living and the popularity of hybrid work models has led to two interesting parallel developments. Firstly – as people move out of cities to access more affordable housing options, average home-to-work commute times have hit record levels. At the same time, companies and office landlords are feeling the pressure to design spaces and experiences that make it worth the time, effort and cost of getting there. Job proximity was a factor in economic and social outcomes long before the pandemic, but as the impact of this scales, real estate priorities are firmly in the spotlight.

Suburban centers: The remix

This confluence of issues is influencing cities to rethink how they develop communities, leading to a greater appeal in mixed-use markets. Combining residential, commercial and recreational spaces to create a more integrated way of living while also addressing affordability in general — through higher density housing, reduced commuting costs and access to essential services within walkable neighbourhoods. All are key.

Developers and landlords have a pivotal role to play in creating vibrant, multifunctional communities that offer access to both living and working spaces for residents. Not to mention, leaning into this strategy gives them the opportunity for investment growth/recovery in underutilized commercial properties.

Scanning the skyline for resilience

Toronto’s submarkets appear to be showing signs of resilience in terms of demand. According to Avison Young’s intel, Toronto makes up 38% of office inventory in Canada. Between Q2 2019 and Q2 2024, submarkets in Toronto with a high concentration of households have experienced only a 182 basis point increase in office vacancy rates, compared to a 555 basis point increase in submarkets with lower household density.

One piece of the multidimensional puzzle

Avison Young’s experts indicate that multifamily real estate developers are growing a stronger appetite for housing in those outlying parts of cities, outside the core, as these areas can provide more opportunity for lower priced homes, more expansive properties, access to purpose-built properties, and successful adjacent commercial opportunities.

The redevelopment of suburban markets to include higher-density housing in tandem with additional workplace options could be a big part of the solution for both the housing affordability crisis and creating more resilient office markets. We certainly hope so.