The top five midmarket cities in Atlantic Canada show growth rates above the national average, says Don Clow, president and CEO of Crombie REIT, the company that owns St. John’s largest shopping centre and other commercial properties across Canada.

Atlantic Canada mid-markets also tend to be low risk, he says. “You have a high level of government and education, an established private sector and a growing portion of new private sector development that operates with technology that could be located anywhere in the world. They choose to be in Atlantic Canada because of the quality of life.”

Clow has also found that mid-sized markets in Ontario, such as Brampton, Burlington, London Ottawa, St. Catharines and Windsor are proving just as solid, as are mid-markets out west, such as Lethbridge.

Even cities that aren’t growing quickly are worth looking at, says Clow, because they tend to be more resilient than larger markets, especially during financial crises. Leases tend to last for very long periods, especially when tenants are grocery or drug stores.

The grocers have done their homework, the drug stores have done their homework and they want to be in these locations for a 20, 30, 40, 50 year period. They’re very stable.”

Land value doesn’t increase in mid-markets as fast as it might elsewhere, but the risk is lower.

“The cost of debt in these smaller markets is no higher than it is in the top six markets in the country, but the cap rates are clearly higher and as a result, you end up with a wider spread between your cap rate and your mortgage costs and you end up with a higher level of accretion,” says Clow.

Note: This article appeared on p36 of Canada’s Leading Real Estate Forum, Toronto, Winter 2012.