MISSISSAUGA — A new report from Morguard Corporation indicates that in the third quarter of 2020, the multi-suite residential and industrial sectors of Canada’s commercial real estate market remained resilient despite the economic slowdown resulting from the pandemic.
Meanwhile, the latest Canadian Economic Outlook and Market Fundamentals Report stated, the office and retail segments witnessed increased vacancy levels in most Canadian cities as restrictions in response to a second wave of COVID-19 kept Canadians working and shopping from home.
The report, issued Nov. 18, stated that demand for multi-suite residential assets outperformed the office and retail sectors in the third quarter of 2020, continuing with the trend seen since early 2020. Morguard said the segment’s stable performance is in part attributed to the uncertainty brought on by the pandemic regarding job losses, as many Canadians who had planned to purchase a home in 2020 have decided to continue renting until the economic landscape becomes clearer.
For investors, multi-suite residential assets remained a safe, long-term investment, the report said. Looking ahead, investment demand for multi-suite residential assets will continue to outpace the supply of available properties in major centres such as Toronto, Montreal and Vancouver.
“Canada’s job market continued to recoup after the losses seen in the spring. However, office and retail assets are anticipated to underperform in the approaching atypical holiday season. Entering 2021, consumer and investor confidence are anticipated to return, aligned with further developments regarding a COVID-19 vaccine or more effective treatments,” said Keith Reading, director of research at Morguard.
Demand for industrial investment properties also exceeded supply during the third quarter of 2020. More than $1 billion in industrial property sales was tallied in the country’s major markets combined. Investment sales have exceeded the $1 billion mark in every quarter dating back to the first quarter of 2014.
In the office segment, downtown vacancy rose sharply in most Canadian cities in the third quarter of 2020 with a spike in sublease availability and a subsequent increase in supply. Tenants were pushed to reduce their footprints in the core of the country’s most expensive markets due to heightened economic and financial uncertainty. Morguard said investors applied caution when purchasing office assets and focused on stable investments with financially stable tenants on longer-term leases as a more forward-looking approach.
Looking ahead, the report stated, institutional investors are expected to target prime properties in Toronto, Montreal and Vancouver most aggressively, which will ensure property values hold firm. The Canadian commercial investment property capital flow is anticipated to remain muted over the near term, barring some form of resolution of the COVID-19 pandemic and a subsequent improvement in the economic outlook.