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Canadian Commercial Real Estate Market Outlook Remained Steady in Q4 2023: Morguard - Feb 12, 2024

Canadian Commercial Real Estate Market Outlook Remained Steady in Q4 2023: Morguard

Feb 12, 2024

  • Canadian multi-suite residential rental property rent growth moderated during the fourth quarter.
  • Supply constraints eased slightly in the industrial leasing market due to a wave of new supply and demand moderation.
  • The challenging office leasing market environment continued to unfold.
  • Investors exhibited confidence in the retail property sector, resulting in the sale of interests in two significant greater Toronto area shopping centres.

MISSISSAUGA, ON, Feb. 12, 2024 /CNW/ - The Canadian commercial real estate sector garnered a steady level of interest overall amid economic uncertainties during the fourth quarter of 2023, according to Morguard's 2023 Economic Outlook and Market Fundamentals Fourth Quarter Update ("Morguard") (TSX: MRC). All in all, multi-suite residential rental, industrial and retail properties exhibited continued strength and resilience and positive performance momentum. Moving forward, easing inflation and interest rate pressures will play a role in both the industry and overall economic growth in 2024.  

"Industry gains are anticipated once again in 2024, as inflation and interest rate pressures moderate and investment confidence levels build," said Keith Reading, Senior Director, Research at Morguard. "Canada's economic performance and the central bank's projected rate cuts are crucial factors to keep an eye on as the industry forges ahead."

Multi-Suite Residential Real Estate

The growth cycle for Canadian multi-suite residential rental properties exhibited signs of moderation during the fourth quarter after reaching its peak over the recent past. Rent growth slowed in the nation's most expensive rental markets, namely Toronto and Vancouver. Contrarily, above-average rent growth was reported in Alberta, fueled by increased demand as international and inter-provincial migration surged. Rent growth will moderate over the next several months, in keeping with the recent trend.

Multi-suite residential rental property transaction volume rose by more than 30 per cent quarter-over-quarter but remained below the long-term average. Nonetheless, the sector managed to attract significant interest due to its positive performance characteristics and long-term track record.

Commercial Real Estate

While investment property sales activity in the Canadian commercial property sector continued to slow in the fourth quarter of 2023, industrial property sales increased quarter-over-quarter. Available industrial supply increased slightly over the recent past, due to a combination of a wave of new construction completions and more moderate leasing demand. Leasing demand had outpaced supply over much of the past few years during the peak phase of the cycle following the initial phase of the pandemic.

The office leasing market performance was mixed in the fourth quarter, as leasing demand characteristics varied significantly. Generally, class A buildings outperformed class B and C buildings by a significant margin. This mixed trend in the office leasing market is projected to continue in 2024.

Investors demonstrated confidence in the Canadian retail property sector as seen in the sale of separate interests in two prime Greater Toronto Area shopping centres. Confidence was highest for low-risk, high quality retail assets with positive performance characteristics, as shopping behaviour continued to evolve.  Investors exercised caution when assessing higher-risk retail asset acquisitions given the high cost of debt capital and increased economic uncertainty.

Economic Factors

The Canadian economy cooled off during the second half of 2023, a trend that will continue through much of the first half of 2024. Consumer spending slowed in the late stages of 2023, as the Bank of Canada's interest rate hikes reduced the funds available to Canadian households to spend on discretionary items.

The Bank of Canada held off on changes to its policy rate in the fourth quarter considering the slowdown of Canadian economy, consumer spending and labour market growth. By the end of the fourth quarter, it was widely anticipated that the central bank may start cutting rates as early as the spring of 2024 if inflation pressures continue to ease. Despite the near-term softening trend, Canadian consumer spending growth is expected to strengthen in the second half of 2024, driven by lower interest rates, reduced inflation, and increased economic activity.

Released today by Morguard, the 2023 Canadian Economic Outlook and Market Fundamentals Fourth Quarter Update offers a detailed analysis of the 2023 real estate investment market and its outlook for 2024. The full report along with the 2024 Canadian Economic Outlook and Market Fundamentals Report are available at

About Morguard Corporation

Morguard Corporation is a major North American real estate and property management company. It has extensive retail, office, industrial, 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 $17.9 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: Keith Reading, Senior Director of Research, T 905-281-3800; or email