Weekly Morguard Research Newsletter
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2017 Q1 Update - Canadian Economic Outlook and Market Fundamentals Report
Above average transaction volumes, persistent demand and foreign capital are all driving Canada’s commercial investment property market. The abundance of capital available for investment, in combination with the overall attractiveness of the market, is resulting in multiple-bid scenarios and higher prices. Consequently, there is downward pressure on yields, particularly regarding Canada’s premium assets. Modest price increases are expected to persevere for the near-term. While the Canadian market may appear small on the international stage, it is garnering significant attention from international investors. Investment volume hit a record high in 2016 and foreign capital continues to support above-average transaction volumes and prices. There are risks to the market which include the new U.S. administration’s protectionist threat, possible interest rate hikes, a potential prolonged commodities slump and the knock-on effects of a breakup of the European Union. Despite these, in Canada, demand for commercial real estate continues to outstrip the supply.
2017 Canadian Economic Outlook and Market Fundamentals Report
Morguard is projecting another year of stable real estate investment performance in 2017 as investors look to the Canadian market for relatively stable yields. While there is a dichotomy between the financial and technology driven economies and resource-based economies in Canada, there remains attractive opportunities for investment. By the end of 2016, a record amount of capital, both debt and equity, was projected to flow into Canadian commercial real estate. Canadian investment transaction volume surged this past year reaching $27.4 billion in total over the first three quarters of 2016, compared with $16.9 billion over the same period in the previous year. Annual 2016 sales are projected to surpass the most recent annual peak of $32.1 billion in 2007. This immense growth in purchasing power, against a backdrop of moderately healthy Canadian economic fundamentals, was somewhat unique.
2016 Q4 Update - Canadian Economic Outlook and Market Fundamentals Report
Morguard’s Economic Outlook and Market Fundamentals Research report for the fourth quarter of 2016 indicated transaction activity in the Canadian commercial real estate market remained on a record high pace. Transaction closing volume in the fourth quarter resulted in an annual sales volume total of over $35.0 which represented a record high. Foreign capital was a key contributor to the total in adding to the demand strength of the fourth quarter. Upward pressure on property values was noted during the final few months of the year, especially for core properties in major markets. In particular, investors showed the highest levels of interest in Toronto and Vancouver’s office market of late, with several large assets transacting. Looking ahead, modest upward pressure on values will continue as demand outdistances the supply of core assets in Canada’s major markets.
2016 Q3 Update - Canadian Economic Outlook and Market Fundamentals Report
Morguard’s Economic Outlook and Market Fundamentals Research report for the third quarter of 2016 points to a sustained strong investment interest in Canada, particularly Ontario and British Columbia. While the cost of investing in the real estate sector remains high, particularly in the commercial office asset class, there remains equally strong competition for high quality assets – largely due to a lack of stable alternative investment opportunities. Domestic and foreign investor confidence continued to provide healthy liquidity in the third quarter, as has been the trend all year. Multi-suite residential continues to be a popular choice for investors, and is expected to remain so for the foreseeable future. Stock markets have rebounded from Brexit to return record performances, and impacts in Canada were minimal.