Institutional investors realized modest returns on standing real estate assets in Canada last year. Newly released results of the MSCI/REALPAC Canada Property Index peg the total return for 2022 at 1.3 per cent — a significant dip from the 8 per cent total return in 2021.
The 2022 total return breaks down to 4.35 per cent income return against a 2.9 per cent loss in capital value across the entire index, which comprises 2,370 assets in 48 portfolios, encompassing nearly 490 million square feet of space and collectively valued at more than CAD $172 billion. It is just the fourth year in the 21st century that the index experienced negative capital growth, an outcome also seen in 2020, 2008 and 2009.
Office was hardest hit among the property sectors, registering a total return of negative 5.8 per cent and 10.2 per cent negative capital growth. Industrial and multifamily continued their long run as the top two performers, delivering respective total returns of 17.1 per cent and 4.8 per cent. Both property types also registered gains in capital value, at 13.1 per cent for industrial and 1.5 per cent for multifamily. In contrast, retail posted a negative 3.9 per cent total return along with an 8.4 per cent drop in capital value.
Halifax emerged as the top performer among eight Canadian urban centres, with an 8.3 per cent total return breaking down to 2.5 per cent capital growth and 5.7 per cent income return. All other markets sustained loss in capital value, although Ottawa and Winnipeg were the only two to register negative total returns.
After sitting atop the chart for the past several years, Vancouver and Toronto both slipped farther down the rankings — with 2022 total returns of 1.1 per cent and 0.7 per cent respectively — surpassed by Edmonton, Montreal and Calgary in addition to Halifax.
This year’s total return trails both the index’s four-year average (2.9 per cent) and 10-year average (5.7 per cent). However, looking to other asset classes, it outperforms bonds, equities and listed real estate for 2022.