The multi-suite residential sector recorded steady growth in the second quarter as rents continued to climb, says a report by Morguard.
The 2023 Canadian Economic Outlook and Market Fundamentals Second Quarter Update also said industrial investment property sales surged with market interest focused on functional warehouse properties; the office leasing market remained muted throughout Q2 2023 with the national aggregate vacancy rate continuing to rise; and following the Bank of Canada’s rate hike in July, job growth and retail spending patterns are expected to remain moderately positive in the second half of the year.
Keith Reading
“Despite the overall muted growth in the commercial real estate industry, the Canadian economy demonstrated a significant amount of resilience,” said Keith Reading, Senior Director, Research at Morguard. “The modest growth in various real estate sectors within the last quarter signifies that the outlook for the remainder of this year remains positive.”
The report said the multi-suite residential sector continued to grow as total sales of rental properties rose by 29.5% quarter-over-quarter. Additionally, the rent growth phase of the multi-suite residential rental market cycle persisted during the second quarter with a year-over-year increase of 10.6% in the average asking monthly rent for listed units for the 25 cities tracked by Rentals.ca as of the end of May.
“Rental market demand-supply dynamics have driven rents progressively higher over the past several quarters despite the addition of a near-record high volume of new supply in recent years. This can be mainly attributed to a record-high immigration rate and stronger-than-expected job growth. The demand for rental accommodation is expected to remain robust over the next few years with the federal government’s plan to welcome additional international arrivals.” said Morguard.
The report said Canadian commercial property sector investment sales activities grew modestly in the second quarter. Due largely to a surge of activity in the industrial sector as investment property sales increased 117.9% quarter-over quarter. It is worth noting that available industrial space remained in short supply during the second quarter, continuing the medium-term trend and keeping leasing market conditions tight.
“The second quarter also saw a continued downturn in the office leasing market. The national aggregate vacancy rate continued to rise, partially attributed to tenants reducing expenses by downsizing their office spaces as their employees work remotely and tenants delay long term leasing decisions,” it said.
“Retail investment property sales activity remained muted in the second quarter. The investment sales slowdown of the past few years can be attributed to multiple factors, including the Bank of Canada’s interest rate hikes and the evolution of consumer shopping behaviour. Smaller and value-add assets with repositioning potential have been brought to market more commonly, amid an environment of relatively muted sales activity.”
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)
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