MISSISSAUGA, ONT. — According to Morguard’s 2023 Economic Outlook and Market Fundamentals Fourth Quarter Update, the Canadian commercial real estate market outlook remained steady in the fourth quarter of 2023 amid economic uncertainties.
The update offers a detailed analysis of the 2023 real estate investment market and its outlook for 2024.
Multi-suite residential rental, industrial and retail properties exhibited continued strength and resilience and positive performance momentum, indicates a release. Moving forward, easing inflation and interest rate pressures will play a role in both the industry and overall economic growth in 2024.
The growth cycle for Canadian multi-suite residential rental properties showed signs of moderation during the fourth quarter after reaching its peak in the recent past. Rent growth slowed in the nation’s most expensive rental markets, Toronto and Vancouver.
In Alberta, above-average rent growth was reported which was fuelled by increased demand as international and inter-provincial migration surged.
In keeping with the recent trend, rent growth is expected to moderate over the next several months.
Multi-suite residential rental property transaction volume rose by more than 30 per cent quarter-over-quarter but remained below the long-term average. However, the sector managed to attract significant interest due to its positive performance characteristics and long-term track record.
While investment property sales activity in the Canadian commercial property sector continued to slow in the fourth quarter of 2023, industrial property sales increased quarter-over-quarter.
Available industrial supply also increased slightly over the recent past due to a combination of a wave of new construction completions and more moderate leasing demand.
The office leasing market performance was mixed in the fourth quarter as leasing demand characteristics varied significantly.
The mixed trend is projected to continue in 2024. Generally, class A buildings outperformed class B and C buildings by a significant margin.
Investors demonstrated confidence in the Canadian retail property sector as seen in the sale of separate interests in two prime Greater Toronto Area shopping centres. Confidence was highest for low-risk, high quality retail assets with positive performance characteristics, as shopping behaviour continued to evolve and investors exercised caution when assessing higher-risk retail asset acquisitions.
“Industry gains are anticipated once again in 2024, as inflation and interest rate pressures moderate and investment confidence levels build,” said Keith Reading, senior director of research at Morguard, in a statement. “Canada’s economic performance and the central bank’s projected rate cuts are crucial factors to keep an eye on as the industry forges ahead.”
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