2015 Q1 Update - Canadian Economic Outlook and Market Fundamentals Report
The first quarter of 2015 saw the continuation of the mature phase of the Canadian commercial property investment cycle. Arguably, the most tangible evidence of this prolongation was contained in property value trends. Investment property values continued to settle close to the peak, after a marked rise between 2010 and 2013. In some cases, investors showed a willingness to push values slightly higher, however, the broader trend is one of stabilization. First quarter sales volume was below the pace of the past two years, a performance that characterized the overall market maturity. Transaction volume totaled $1.3 billion for assets sold with a minimum sale price of $10.0 million for the office, industrial, retail, and apartment asset classes according to RealNet Canada data. However, the slowdown was attributed more to a lack of available product, rather than weaker demand. There continues to be a wide range of sources of low-cost debt and equity capital allocated to Canada’s real estate sector, which has been the case for much of the post-financial crisis era. This demand-pressure will continue to ensure prices hold at the peak for the cycle, at least through to the close of the year.
2015 Canadian Economic Outlook and Market Fundamentals Report
Morguard is predicting a fourth consecutive year of positive performance for Canada’s commercial property sector in 2015. Investors are expected to achieve attractive returns once again, driven in large part by the stability and growth in rental income. Sales of commercial property will top $25 billion CDN - slightly below the 2014 total - but higher than the long-term average of $20.7 billion CDN. Healthy and stable fundamentals will attract a range of investors armed with low-cost debt and equity capital. Core offerings will receive interest from pension funds, institutions, private capital groups, and capital market groups who continue to slowly return to the market. This demand will hold property values at the peak of the cycle, having stabilized through much of 2014. In the 2015 Economic Outlook and Market Fundamentals Research Report, Morguard provides a detailed analysis of 2015 real estate trends to watch in Canada.
2014 Q4 Update – Canadian Economic Outlook and Market Fundamentals Report
The Canadian commercial property investment market ended 2014 on a largely positive note. An “historic amount of capital” continued to drive the sector. Funds were sourced domestically and abroad, with many groups looking to add to their holdings in this market. In their quest to increase allocations to the sector, most groups focused on core properties. For the most part however, there was a persistent shortfall of product available for purchase. In some instances, investors were willing to push values beyond the peak for the cycle in order to meet their investment objectives. The line between core and non-core assets remained somewhat blurred as 2014 came to a close. More groups pursued development or redevelopment activities as part of their core strategy, driven by a search for yield.
2014 Q3 Update – Canadian Economic Outlook and Market Fundamentals Report
Canada’s commercial property market remained healthy over the third quarter, with plenty of capital looking for a home. Demand continued to outpace supply for the most part, holding prices near peak levels for the cycle. Cominar’s acquisition of a substantial portfolio of assets marked the return of capital market buyers who have been essentially sidelined for the past several quarters. In the nation’s rental markets, office demand continued to show signs of life marking the second consecutive quarter of gains as the national occupancy rate edged higher for the first time in two years. Demand remains healthy in the nation’s retail and multi-family asset classes while a development boom is underway in the industrial property market. Despite global headwinds, the near-term performance outlook for Canada’s property sector is positive, a forecast predicated on ongoing recovery in the U.S.