residential transactions increase while office and industrial transactions slow
due to product availability
The overall pace of Canadian
commercial real estate transactions slowed in the second quarter of 2018 but
the dip in volume has nothing to do with demand for assets, according to the latest
Research Report issued by Morguard Corporation ("Morguard") (TSX:
"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. "With quality office and industrial space at a
premium, apartments are a crowd favourite as investors search for yield."
properties bucked the second quarter trend, with transaction volumes growing by
17.5% 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.
The supply-demand imbalance has
driven up prices in key markets and asset types to an extent, particularly for
Class A, new-build assets. 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.
"Office and industrial
tenants who are looking to expand or move to new premises are being forced to
make do with what they have due to a lack of alternatives in the downtowns of
certain metros," said Reading. "Landlords of prime assets are
enjoying record occupancy levels and steadily increasing rents as supply
On the economic front, the Bank
of Canada's July interest rate increase was widely anticipated by investors.
The rate hike indicates the Bank expects Canadian economic activity to pick up
through the balance of the year, despite increasing concerns surrounding
escalating Canada/U.S. trade tariffs and a slowdown in the national housing
The Second Quarter Update of
the 2018 Economic Outlook and Market Fundamentals Research Report, released
today by Morguard, provides a detailed analysis of the 2018 real estate
investment trends to watch in Canada. The full report is available at www.morguard.com.
About Morguard Corporation
Morguard Corporation is a major
North American real estate company. It has extensive retail, office,
industrial, multi–suite residential, and hotel holdings owned directly, or
through its investment in Morguard REIT (TSX: MRT.UN), Morguard North American
Residential REIT (TSX: MRG.UN) and Temple Hotels Inc. (TSX:TPH). Morguard also
provides real estate management services to institutional and other investors.
Morguard's owned and managed portfolio of assets is valued at $21.3 billion.
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Statements contained herein
that are not based on historical or current fact, including without limitation
statements containing the words "anticipates," "believes," "may,"
"continue," "estimate," "expects" and
"will" and words of similar expression, constitute
"forward-looking statements." Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause the
actual results, events or developments to be materially different from any
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forward-looking statements. Such factors include, among others, the following:
general economic and business conditions, both nationally and regionally;
changes in business strategy; financing risk; existing governmental regulations
and changes in, or the failure to comply with, governmental regulations;
liability and other claims asserted; and other factors. Given these uncertainties,
readers are cautioned not to place undue reliance on such forward-looking
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any forward-looking statements.
For further information: K. Rai
Sahi, Chief Executive Officer, T 905-281-3800; Keith Reading, Director of
Research, T 905-281-3800