- Interest in the multi-suite residential rental sector will
remain elevated in 2023, given healthy demand fundamentals and
constrained supply
- The industrial leasing market outlook remains positive, as
supply is constrained and vacancy rests close to the 2022 all-time
low in 2023, a trend that will continue into 2023
- Office property investment activity stabilized in 2022, with
investors targeting core urban and suburban property
acquisitions
- Canada's retail property
sector will continue to stabilize in 2023, following the leasing
market improvement of 2022
MISSISSAUGA, ON, Jan. 10,
2023 /CNW/ - Morguard Corporation ("Morguard") (TSX:
MRC) recently released its 2023 Canadian Economic
Outlook and Market Fundamentals Report, offering a detailed
analysis of Canada's commercial
real estate market in 2022 and trends to watch for in 2023.
Morguard's 25th annual edition stated that Canada's multi-suite residential rental sector
bounced back strongly from the pandemic downturn. Demand will
continue to trend positively in the near term. The full report with
regional insights and video is available at
morguard.com/research.
"Investor confidence will remain strong in the multi-suite
residential and industrial segments given the sectors' healthy
performance track record during economic downturns," said
Keith Reading, Director, Research at
Morguard. "That said, commercial property performance risk will
remain elevated in 2023."
Multi-Suite Residential Real Estate
Several factors contributed to the increase in demand for
purpose-built multi-suite residential rental units in 2022. The
primary causes included Canada's
economic recovery, which boosted employment, as well as the
loosening and subsequent removal of pandemic-related restrictions.
Young workers in the 15 to 24 age cohort were able to secure
employment and transition into the rental market. Rental demand
pressure also increased as international migration grew. With the
return of post-secondary and international students to in-person
classes rental demand strengthened.
As demand strengthened, availability became increasingly
constrained in several markets. Rents continued to steadily
increase with Rentals.ca reporting a year-to-date national average
asking rent increase of 7.7 percent in July
2022. Rent growth and strong rental market fundamentals
supported record-high investment sales activity in 2022.
In 2023, Canada's multi-suite
residential rental market will continue to tighten, as demand
continues to outpace supply. Many families will continue to rent
given the high cost of home ownership across much of the country.
Given the sectors healthy outlook and performance track record,
investors will continue exhibiting confidence in Canada's multi-suite residential rental sector
over the near term.
Commercial Real Estate
Investors continued to target income-producing commercial
properties with secure, long-term income streams in major urban
centres or with proximity to mass transit hubs in 2022.
Despite an increased level of sector risk, $5.5 billion in office property investment sales
was recorded in the first half of the year, which was up 187
percent year over year and was well ahead of the previous year's
pace. In 2023, some office tenants will further delay long-term
leasing commitments in the office sector. Corporations as well as
government agencies and departments will continue to adjust to
changes in office space usage patterns as an aftereffect of the
removal of capacity restrictions.
The industrial property sector investment market trends were
generally positive in 2022, a trend that will persist in 2023. A
total of $11.7 billion of investment
transaction volume was reported for the first six months of 2022,
up 57.5 percent over the same period a year earlier. Industrial
property and space supply remained historically low across
Canada in 2022, with availability
falling to an all-time low of 1.6 per cent at the midway mark of
2022. The generally positive leasing outlook for 2023 will continue
to attract investment capital to the sector as investor confidence
remains elevated.
The retail leasing market experienced a rebound in 2022
following the removal of restrictions on brick-and-mortar store
capacities. Vacancies leveled off in certain market segments,
having steadily climbed across much of the country over the past
few years. The leasing market rebound supported the moderately
attractive 3.1 per cent total investment return reported for the
retail properties contained in the MSCI Index for the year ending
June 30, 2022. Looking ahead,
Canada's retail leasing market
will continue to stabilize. However, the probability of an economic
downturn in 2023 leaves the retail property investment market
exposed to elevated risk over the near term.
Economic Factors
Canadian economic growth will slow significantly in 2023, due to
a combination of interest rate hikes implemented by the Bank of
Canada, declining household
wealth, and record-high inflation. Consumer spending patterns will
continue to slow through 2023, driven largely by the erosion of
disposable income as households pay more for necessities and
discretionary items. Residential investment will continue to
moderate while shoppers delay big ticket purchases such as
appliances and renovations. The continued implementation of
interest rate hikes will weigh on households and slow economic
growth throughout the year.
During 2022, labour shortages were common in most sectors of the
Canadian economy, thereby limiting growth. In August 2022, the unemployment rate rose 50 basis
points to 5.4 percent from the record low of 4.9 percent reported
in July 2022. The rate is expected to
range at a more sustainable level in 2023 despite continued labour
shortages. Canada's labour market
will remain tight over the near term, even with the rising
unemployment rate trend.
The 2023 Canadian Economic Outlook and Market
Fundamentals Report is a detailed analysis of the 2023
real estate investment trends to watch in Canada. The full
report, including analysis for the real estate markets
in Halifax, Montreal,
Ottawa, Toronto, Winnipeg, Regina, Saskatoon, Calgary, Edmonton, Vancouver and Victoria, is available
at morguard.com/research.
About Morguard
Corporation
Morguard Corporation is a major North American real estate and
property management company. It has extensive retail, office,
industrial, hotel and residential holdings owned directly and
through its investment in Morguard Real Estate Investment Trust and
Morguard North American Residential REIT. Morguard also provides
real estate management services to institutional and other
investors. Morguard's owned and managed portfolio of assets is
valued at $19.5 billion. Please
visit morguard.com or follow us
on LinkedIn.
Forward Looking Statement
Disclaimer
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 future results, events or
developments expressed or implied by such 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
statements. The Publisher does not assume the obligation to update
or revise any forward-looking statements.
SOURCE Morguard Corporation