Sector bucks broader investment slowdown
Canada’s commercial real estate investment activity cooled in the first quarter, but industrial properties remained a hot target for buyers, according to Morguard’s latest market update.
“Industrial properties were the most popular acquisition target of investors and owner/users,” the report stated. “Owner/users accounted for a significant share of industrial property sales in the first quarter, seeking to capitalize on the financial advantages and control attainable through ownership.”
At the same time, private capital groups took advantage of reduced competition levels to scoop up industrial assets. However, Morguard noted that overall capital flows into the industrial sector still slowed quarter-over-quarter.
“The continued popularity of multi-suite residential real estate and the steady demand from industrial property buyers as investment targets will bolster the market’s positive growth trajectory,” said Angela Sahi, Morguard’s president and chief operations officer.
Multifamily rental apartments emerged as the second most sought-after commercial asset class in Q1, continuing a recent trend. Smaller properties accounted for a large share of the $568 million in reported multi-suite transactions over $10 million across major markets.
“Despite the modest transaction volume total recorded in the quarter, investors remain confident in Canada’s multi-suite residential rental property sector,” the report stated.
The office and retail sectors proved more mixed. The national office vacancy rate ticked higher despite some positive absorption in Vancouver and Winnipeg. Retail vacancy was generally flat as new concepts balanced tenant exits.
Read more: Empty Toronto office space soars as new construction stalls
Keith Reading, Morguard’s senior director of research, said: “The ongoing high interest rates continue to impact the real estate market, leading to increased costs of debt and widening of the gap between seller and buyer price expectations.”
However, he added that with inflation stabilizing: “the Bank of Canada vigilantly monitors economic progress for rate cuts. This provides a solid foundation for real estate poised for growth, supported by investor confidence across various real estate sectors.”
The central bank kept its key rate on hold in Q1 as the economy showed resilience and consumer price growth slowed modestly, though inflation remained elevated due to high rental and mortgage costs.
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