Canada's CRE sector remains a solid investment says Morguard

Second quarter performance was strong despite economic headwinds

Canada's CRE sector remains a solid investment says Morguard
Steve Randall

Commercial real estate investors continued to feel confident in the Canadian market in the second quarter of 2019.

Morguard Corporation’s Economic Outlook and Market Fundamentals Report shows that CRE investment sales picked up pace in Q2 2019, again driven by strong transaction activity for multi-suite residential rentals.

"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."

Because the multi-suite residential rentals sector has performed relatively well in times of economic weakness, investors were keen to load up on this sector with more than $2 billion invested in the quarter.

Office leasing remained buoyant with tech and shared workspace companies remaining key players in the game.

The economic environment continued to support CRE growth with the labour market tight and generally healthy; but there were headwinds including a slower pace of GDP growth, trade concerns, interest rates, and increased concern about a global slowdown.

Retail vacancies remain elevated
But the retail sector continues to face pressures and vacancies remain in double digits, as they have done since the third quarter of 2018 following 15 years of single digits.

"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.