Morguard research director highlights the market's numerous challenges in 2024
With the Canadian office sector looking increasingly unlikely to regain its pre-pandemic strength, the market is slated to experience “some weakness” into 2024, according to Morguard senior director of research Keith Reading.
“I don’t think it will return completely to the strength that we saw in the market prior to COVID-19,” Reading said in an interview with BNN Bloomberg. “Part of that will be driven by economic growth and also the gradual return of more employees to the office.”
In its November report, Morguard said that the Canadian office segment suffered a 57.3% year over year decline in investment sales during the first half of 2023, totalling just under $2.4 billion.
Reading said that while some tenants will eventually ramp up their in-office operations, the hybrid and remote working models are more likely to remain.
This trend will mark a significant departure from prior weak periods for the sector, in which lower rents and high vacancy rates were followed by “strong rebounds” amid a continuous stabilization in the economy.
Reading projected that the recovery in the office sector will be nowhere near as fast or as robust as the expected economic resurgence in the second half of 2024.
While hybrid work gains ground, Canada's office market is far from fading. Companies are reimagining the office's purpose - Marie-France Benoit tells @CMPmagazine tech advances had begun to transform workplace culture well before COVID-19: https://t.co/LjNXwndkND #AYdifference
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In 2024, the market’s likely focus will be on the “flight to quality” that will see accelerated demand for Class A buildings, which boast of modernity and prime locations compared to Class B and C structures, Reading said.
“What we have seen recently is that a lot of companies also have taken the opportunity to move up the quality ladder,” he added.
“The better buildings, the so-called Class A buildings across much of the country have fared really quite well. The real tough spot has been in Class B and C, sort of older buildings. Many of those owners are struggling with increased vacancy.”
