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Canada's Multi-Suite Residential Sector Records Steady Growth in Q2 2023: Morguard - Aug 15, 2023

Canada's Multi-Suite Residential Sector Records Steady Growth in Q2 2023: Morguard

Aug 15, 2023

  • The multi-suite residential sector recorded steady growth in the second quarter as rents continued to climb
  • Industrial investment property sales surged with market interest focused on functional warehouse properties
  • The office leasing market remained muted throughout Q2 2023 with the national aggregate vacancy rate continuing to rise
  • Following the Bank of Canada's rate hike in July, job growth and retail spending patterns are expected to remain moderately positive in the second half of the year

MISSISSAUGA, ON, Aug. 15, 2023 /CNW/ - Major Canadian commercial property sectors remained resilient during the second quarter of 2023, according to Morguard's 2023 Canadian Economic Outlook and Market Fundamentals Second Quarter Update ("Morguard") (TSX: MRC). Overall, the total sales figure for the multi-suite residential rental, office, industrial and retail property types combined rose in the second quarter compared to previous quarters. Investors continued to target industrial and multi-suite residential rental properties because of healthy fundamentals and rent growth forecasts.

"Despite the overall muted growth in the commercial real estate industry, the Canadian economy demonstrated a significant amount of resilience," said Keith Reading, Senior Director, Research at Morguard. "The modest growth in various real estate sectors within the last quarter signifies that the outlook for the remainder of this year remains positive."

Multi-Suite Residential Real Estate

The multi-suite residential sector continued to grow as total sales of rental properties rose by 29.5% quarter-over-quarter. Additionally, the rent growth phase of the multi-suite residential rental market cycle persisted during the second quarter with a year-over-year increase of 10.6% in the average asking monthly rent for listed units for the 25 cities tracked by as of the end of May.

Rental market demand-supply dynamics have driven rents progressively higher over the past several quarters despite the addition of a near-record high volume of new supply in recent years. This can be mainly attributed to a record-high immigration rate and stronger-than-expected job growth. The demand for rental accommodation is expected to remain robust over the next few years with the federal government's plan to welcome additional international arrivals.

Commercial Real Estate

The Canadian commercial property sector investment sales activities grew modestly in the second quarter. Due largely to a surge of activity in the industrial sector as investment property sales increased 117.9% quarter-over quarter. It is worth noting that available industrial space remained in short supply during the second quarter, continuing the medium-term trend and keeping leasing market conditions tight.

The second quarter also saw a continued downturn in the office leasing market. The national aggregate vacancy rate continued to rise, partially attributed to tenants reducing expenses by downsizing their office spaces as their employees work remotely and tenants delay long term leasing decisions.

Retail investment property sales activity remained muted in the second quarter. The investment sales slowdown of the past few years can be attributed to multiple factors, including the Bank of Canada's interest rate hikes and the evolution of consumer shopping behaviour. Smaller and value-add assets with repositioning potential have been brought to market more commonly, amid an environment of relatively muted sales activity.

Economic Factors

Canada's economy demonstrated resilience in the second quarter despite some challenges. While consumer spending slowed significantly during the period, it was generally healthier-than-expected in the first half of 2023 even as inflation and rising debt payments impacted household spending power. Canada's labour market remained stable due in large part to a stronger-than-expected economic growth trend. Moving forward into the second half of the year, both retail spending patterns and job growth are expected to remain moderately positive.

The Bank of Canada again raised its target overnight rate by 25 bps in July to 5.00% July, the highest it's been since 2001. Inflation pressure eased in the second quarter with Canada's Consumer Price Index (CPI) down from the 4.4% in April to 3.4% year-over-year in May. Stronger-than-anticipated economic and job market performance still pose significant upside inflationary risks. As a result, the probability of further interest rate hikes has not been ruled out.

The second quarter update released today by Morguard of the 2023 Economic Outlook and Market Fundamentals Research Report provided a detailed analysis of the 2023 real estate investment trends to watch in Canada. The full report is available at

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 $18.6 billion. Please visit 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

For further information: K. Rai Sahi, Chief Executive Officer, T 905-281-3800; Keith Reading, Senior Director of Research, T 905-281-3800; or email

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