Commercial segment can expect continued strength for the rest of the year – report

Commercial segment can expect continued strength for the rest of the year – report

Commercial segment can expect continued strength for the rest of the year – report A new report from a leading North American property management company noted that the Canadian commercial real estate sector is poised for sustained stability and reliability (especially in terms of investment) if recent trends are anything to go by.

Morguard Corporation estimated that the office asset class, in particular, will enjoy a strong $2.0 billion in closing volume during the second quarter of the year, while the retail and industrial segments are expected to post over $1.0 billion each. This is despite a more robust national economy driving an increase in interest rates.

“After a second consecutive quarter of stronger than expected economic output, projected growth for 2017 has now surpassed 2016 levels, with signs pointing to an early winding down of global monetary stimulus,” Morguard director of research Keith Reading said. “Despite a perceived eagerness to raise interest rates, particularly in the United States, low inflation pressure should continue to act as a buffer against rapid monetary policy change in the near term.”

“Demand for Canadian commercial real estate continues to outpace supply as Canada remains an attractive, stable option for investment,” Reading added. “While we anticipate that interest rates will continue to rise, the change will occur gradually and at levels that remain palatable for investors. There will be little variation in the strength of the Canadian property market in the near term.”

“Historically hot markets like British Columbia, Toronto and Montreal are already showing signs of reheating despite recent cooldown efforts,” he explained. “Long-term, however, the cumulative effect of increasing interest rates should act as a buffer against future housing market imbalance.”

Q2 2017 also saw nationwide office vacancy rates remain low, mainly thanks to record-low vacancy levels in the Toronto downtown submarket and declining rates in Vancouver and Montreal.

“Robust office occupancy rates were tempered slightly by Calgary and Edmonton, who are still battling extended oil sector weakness. Similar trends were identified in the industrial sector, with low national vacancy rates despite higher vacancies in the two Alberta population centres,” Morguard stated.

The full report can be accessed here.


Related stories:
Commentary: Canadian commercial real estate now a reliable money-maker