The strong pace of Canadian commercial investment property sales and record-high levels in the multi-suite rental sector defined the second quarter of 2019, according to the latest Canadian Economic Outlook and Market Fundamentals Report issued by Morguard Corporation.
The pace of commercial investment property sales picked up at the end of the second quarter, indicating strong closing volumes for the three-month period on a quarter-over-quarter comparison. The multi-suite residential rental sector was again the strongest contributor to the record transaction activity during this period.
“Investor confidence in property sectors with strong historical performance, apartments in particular, has been demonstrated recently with sales activity remaining at the record high despite growing economic uncertainty,” said Keith Reading, Director of Research at Morguard. “Investors are looking for safer investments as they become more cautious and question where Canada and the United States are situated in their respective economic cycles.”
In the multi-suite residential rental market, investors looked to increase their exposure to sectors that had performed relatively well during times of economic weakness. Investment in the sector surpassed the $2.0 billion mark.
In the office leasing space, the overall health of the Canadian market was sustained through to the end of the second quarter. Technology-based businesses and shared workspace companies remained at the forefront of Canada’s office space demand cycle and the challenge of finding available properties sharpened the focus on fewer high-quality assets available.
The wave of change that has unfolded in the retail industry served to bring vacancy levels progressively higher over the past few years. After seeing single-digit vacancy levels for more than 15 years, the sector has continued to post double-digit vacancy levels since the end of the third quarter of 2018, prompting investors to exercise increased scrutiny when looking at potential acquisitions.
“As the late stages of the Canadian commercial investment property cycle continue throughout 2019, investors will try to balance capitalizing on late-cycle growth and increasing positions in assets that offer greater downside protection,” continued Reading.
The Bank of Canada’s decision to maintain the overnight rate at 1.75 per cent in July helped to maintain investor activity and appetite for real estate across property asset classes. Despite growing economic uncertainty – as the ongoing trade conflict between the U.S. and China continued to have a negative impact on the global economy – investor confidence in the commercial real estate sector remained strong in the second quarter of 2019.
In the same period, the national unemployment rate fell to a near four-decade low as a result of April’s surge of 106,500 new positions, further stimulating overall investor and business confidence.
The Second Quarter Update of the 2019 Economic Outlook and Market Fundamentals Research Report, released today by Morguard, provides a detailed analysis of the 2019 real estate investment trends to watch in Canada. The full report is available at morguard.com/research.