Investors continue to demonstrate confidence in multi-suite residential and industrial sectors

MISSISSAUGA, ONT.—According to Morguard’s 2024 Economic Outlook and Market Fundamentals Second Quarter Update, the Canadian commercial real estate sector showed positive momentum in the second quarter, the multi-suite residential rental property investment remained largely stable due to healthy fundamentals and there was a surge in industrial investment property transactions.

In terms of the rest of 2024, further rate cuts by the Bank of Canada and a continued easing of inflationary pressure are anticipated and investor confidence is expected to increase as monetary policy becomes less restrictive.

Investors demonstrated continued confidence in the multi-suite residential rental property market, driven by the sector’s strong long-term fundamental and positive near-term rent growth outlooks. Although borrowing rates remained high in the second quarter, investor optimism increased with the Bank of Canada’s 25-bps overnight policy rate cut in June, states a release.

Looking ahead, the multi-suite residential rental property market is expected to continue to exhibit stable performance characteristics.

Industrial investment property transaction volume also rose, with sales of properties valued at $10 million or more increasing by 48.1 per cent quarter-over-quarter across five major markets, driving overall Canadian investment volume higher. However, leasing demand patterns softened as industrial construction activity ramped up, leading to a rise in the national availability rate.

Canada’s office leasing market showed positive progress, primarily driven by pre-leased spaces in newly constructed buildings. Toronto and Montreal registered positive absorption in the second quarter through the pre-leasing of newly built spaces which highlighted the preference exhibited by Canadian businesses for efficient and high-quality office space with access to an abundance of attractive amenities.

“Despite a weaker near-term economic growth outlook, real estate investors will continue to exhibit a measure of confidence in Canada’s commercial real estate sector as evidenced by the uptick in transaction volume in the second quarter,” said Keith Reading, senior director of research at Morguard, in a statement. “This confidence is expected to persist as the real estate sector gradually recovers from the effects of the most recent economic slowdown.”