The mass deployment of COVID-19 doses is significantly boosting confidence
Amid swelling confidence in the economy’s prospects, Canadian commercial property market conditions stabilized during the first quarter, according to Morguard’s newly released 2021 Canadian Economic Outlook and Market Fundamentals Q1 Update.
“An increased volume of COVID-19 vaccinations reported across the nation boosted investor confidence as part of a more optimistic economic outlook despite further uncertainty triggered by a third wave of the pandemic,” Morguard said in its report.
In particular, multi-suite residential rental properties continued to generate strong bids from investors, with the asset class enjoying “largely positive” medium-to-long term prospects. Industrial investment demand remained robust, leading to high transaction volumes and upward pressure on property values.
Low-risk industrial and multi-suite residential rental properties also had “stable-to-high” transaction activity, mainly due to increased investor confidence.
“Defensive assets, such as multi-suite residential rental and industrial, garnered strong bidding due to their relatively stable and positive fundamental outlooks,” said Keith Reading, director of research at Morguard. “The positive impacts of the vaccine rollout and government transfers to Canadian businesses and households are expected to boost both economic and investment market performance in the second half of 2021 as the outlook for the commercial real estate sector becomes clearer.”
Read more: What will happen when Canada reopens?
On the other hand, investors had a more cautious approach when it came to potential office and non-essential retail property asset acquisitions.
“Work-from-home measures from late last year continued to impact the sector in the early months of 2021,” Morguard reported. “The national vacancy rate increased 1.2% over the first quarter of 2021 to 14.6%, marking the highest rate recorded since 2002. The average first-quarter vacancy rate for downtown areas in major cities, such as Edmonton, Toronto, and Vancouver, stood at 13.3%, a 20-year high.”
Morguard added that the extent to which companies will mandate employees to return to office work “will dictate leasing performance over the near term while investors acquire office properties selectively over the balance of 2021.”
