These two segments set to win for real estate investors

Real estate investment trends report suggests uneven growth ahead

These two segments set to win for real estate investors
Steve Randall

Investors seeking to back winners in Canadian real estate in 2021 should look at two key areas for potential growth.

According to Morguard, which has almost US$20 billion in owned and managed real estate assets, the multi-suite residential and industrial sectors are the ones to watch in the months ahead.

Investor confidence in these two sectors remained robust in 2020 and is likely to continue this year, although there will be a cautious approach while they monitor national economic recovery.

"The outperformance of industrial and multi-suite residential assets was driven in part by relatively stable rental fundamentals, boosted by demand for warehouse and logistics space and government transfer payments to renter households, respectively." said Keith Reading, Director, Research at Morguard. "Investors will continue to tread carefully with regard to acquisitions in 2021, given a heightened level of uncertainty surrounding the economic outlook."

A recent report also suggested that seniors housing will be an important sector to consider.

Market outlook

Although the multi-suite residential sector segment held up well in the first six months of 2020, similar in transaction volume to the same period of 2019, vacancy rates increased as rental demand weakened due to the pandemic.

However, as vaccines are rolled out, confidence should return to the rental market, tightening vacancy rates once more.

Meanwhile, the industrials sector saw healthy investment demand during 2020 as institutional and private capital investment groups were attracted by its durability through the pandemic-driven economic downturn. This resilience is set to continue.

For those investing in retail real estate, managing to increase vacancy and adapting to tenants' changing needs will continue to represent key challenges. Retail redevelopment, changes to the tenant mix, the introduction of more service retail and the consideration of alternative uses are expected to continue in 2021.

Leasing market conditions for offices will soften over the near term, during a period of gradual economic recovery, according to the report.