Annual Market Update 2024: Commercial Real Estate in Kelowna, British Columbia
As we step into spring 2025, the commercial real estate market in Kelowna, British Columbia, reflects a dynamic landscape shaped by economic shifts, demographic changes, and post-pandemic recovery. This annual update provides an in-depth analysis of the key trends, challenges, and opportunities within the region’s commercial real estate sector, which encompasses retail, office, industrial, and multi-family properties.
Economic Context
Kelowna has continued its trajectory of growth, largely fueled by population influx and a vibrant local economy. The region has seen significant investments, particularly in technology, healthcare, and tourism. The influx of new residents—often young professionals and families—has created a demand for commercial spaces that cater to their lifestyle and work preferences. Furthermore, Kelowna’s position as a desirable destination has accentuated its economic viability, contributing to the strengthening of its commercial real estate market.
The Canadian economy is expected to grow moderately in 2024, with inflation stabilizing and unemployment rates trending downward. Given these macroeconomic dynamics, Kelowna is well-positioned to benefit from an expanding labor market and consumer spending, which directly influences commercial real estate demand.
Retail Sector
The retail sector in Kelowna has undergone a transformation, adapting to shifting consumer behaviors and increasing online shopping trends. In 2023, the retail vacancy rate hovered around 5%, with notable activity in sectors such as food and beverage, health and wellness, and experiential retail. As of early 2024, the outlook remains optimistic, as local and national brands continue to seek physical presences to complement their online capabilities.
New developments in popular areas like Downtown Kelowna and the Orchard Park Shopping Centre reflect a trend toward mixed-use spaces that combine retail with residential and office components. The demand for experiential retail—a combination of shopping and entertainment—has led to the emergence of pop-up shops, market stalls, and community engagement events, particularly appealing to younger consumers.
Office Sector
The office market in Kelowna has shown resilience amidst the evolving work environment, notably with the increase in remote and hybrid work models. In 2023, vacancy rates continued to remain stable at approximately 9%, with demand for flexible workspaces surging. The increase in hybrid work has also driven heightened interest in co-working facilities and shared office spaces, which have become integral to the local office dynamics.
As Kelowna attracts tech companies and startups—partly attributed to the presence of educational institutions such as UBC Okanagan—the demand for modern, amenity-rich office spaces has risen. Landlords are actively investing in upgrades to enhance energy efficiency and tenant experience, catering to the changing tenant preferences focused on sustainability and well-being.
In 2024, a potential rise in office space demand is anticipated, particularly in the downtown core, as businesses adapt to new employee expectations and workforce demands.
Industrial Sector
The industrial sector in Kelowna has been a rising star in the commercial real estate market, driven by increased demand for logistics, warehousing, and manufacturing spaces. The vacancy rate for industrial properties remained exceptionally low at around 3% in 2023, a trend expected to persist into 2024 due to e-commerce growth and supply chain transformations.
The ongoing infrastructure developments, such as the expansion of the Kelowna International Airport and improvements to transportation networks, have further bolstered the attractiveness of Kelowna as a logistics hub. Additionally, businesses are increasingly seeking properties that accommodate modern distribution needs, leading to new construction projects and renovations of existing facilities.
In 2024, continued interest from both local and regional investors is expected, particularly in properties that offer last-mile delivery capabilities—a critical requirement in today’s fast-paced retail environment.
Multi-Family Sector
The multi-family market in Kelowna continues to show robust activity as the demand for rental housing remains high. With a burgeoning population and an influx of residents seeking affordable housing options, the vacancy rate for rental units in Kelowna is projected to remain low at around 2% in 2024.
Developers are responding to this demand with a focus on building new multi-family units and renovating existing properties to meet modern standards. Areas near the lakeshore, transit corridors, and near essential services are increasingly sought after for new developments, particularly those that provide a mix of affordable and upscale rental options.
Additionally, the real estate investment community is paying close attention to Kelowna’s changing demographics, as younger renters prioritize urban living and amenities over traditional suburban setups. As a result, new apartment projects are incorporating community spaces, fitness centers, and eco-friendly features, which appeal to today’s tenants.
Challenges Ahead
While the commercial real estate landscape in Kelowna appears promising, certain challenges loom. Interest rate hikes and potential economic tightening could impact investor sentiment and borrowing capabilities, posing risks to both development projects and existing property valuations. Additionally, the ongoing evolution of the retail sector, influenced by e-commerce, demands that landlords be proactive in redefining their offerings and value propositions.
Regulatory hurdles related to zoning changes and development approvals may also present challenges for developers looking to capitalize on the growing demand for commercial spaces. As the city strives to balance growth with sustainability and livability, stakeholders across all sectors must engage actively and collaboratively to navigate this landscape.
In conclusion, the commercial real estate market in Kelowna, British Columbia, for 2024 is marked by resilience and adaptability amidst shifting economic and societal landscapes. The diverse sectors—from retail to industrial—show strong potential for growth, driven by local demand and economic conditions. While challenges may exist, the commitment of local stakeholders and investors to innovate and respond to emerging trends bodes well for the future of commercial real estate in Kelowna. As we move through 2024, continuous monitoring of market dynamics will be essential for stakeholders to seize opportunities and mitigate risks in this vibrant market.