MISSISSAUGA, ONT. — A lack of new commercial spaces available for purchase has been identified as a major contributing factor to a dip in volume in the pace of Canadian commercial real estate transactions in the second quarter of 2018, according to a new report by Morguard Corporation.
The lack of supply, rather than the lack of demand, is to blame for slow sales said Morguard in a July 17 statement.
The supply-demand imbalance has driven up prices in key markets and asset type, particularly for Class A, new-build assets, the report indicated. A shortfall of functional space has also been characteristic of the strong leasing activity in the office and industrial sectors, with cycle-low vacancy rates occurring in most regions. Newly built speculative development, while still lower than the long-term average, also saw substantial pre-leasing activity.
Multi-suite residential properties bucked the second quarter trend, with transaction volumes growing by 17.5 per cent year-over-year. Persistent rental growth, combined with a positive long-term sector forecast, has led to rising values for apartment properties in most of Canada’s major markets. The U.S. multi-suite residential sector also continued to provide value for Canadian investors, given healthy fundamentals driven by positive demographic trends and stable demand, Morguard said.
“A drop in transaction volume in the second quarter is very much a function of low product availability rather than a drop in demand,” said Keith Reading, director of research at Morguard, in the statement. “With quality office and industrial space at a premium, apartments are a crowd favourite as investors search for yield.”
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