Investors remain confident in the multi-suite residential rental sector, a sentiment that was supported by attractive yields and a solid performance outlook.
Industrial property investment sales activity slowed due in part to shortage of available properties.
Office tenants exhibited a preference for limited-term subleases that were already improved and ready for immediate occupancy.
The Canadian economy is expected to gradually strengthen by next year, supported by the continued interest rate cut cycle.
MISSISSAUGA, ON, Nov. 19, 2024 /CNW/ - Sales of Canadian multi-suite residential rental properties surged during the third quarter thanks in part an increase in availability, according to Morguard's 2024 Economic Outlook and Market Fundamentals Third Quarter Update ("Morguard") (TSX: MRC).
"The multi-suite residential rental sector remains popular with a range of investment groups seeking attractive yields and stable and rising income streams," said Angela Sahi, President and Chief Operating Officer of Morguard. "While some buyers are waiting for borrowing costs to decline further, the continued easing of inflation and future rate cuts have created a solid foundation for Canada's real estate market to strengthen starting next year."
Economic output slightly exceeded expectations during the third quarter. In line with third-quarter trends, the Canadian economy is expected to expand modestly as the impact of elevated inflation and interest rates recede.
"The Bank of Canada's rate cuts will be crucial to the real estate sector's overall resilience, helping to drive the economic recovery from the effects of monetary tightening," said Keith Reading, Senior Director, Research at Morguard. "As the real estate market regains momentum, investor activity will increase in the second half of 2025."
Multi-Suite Residential Real Estate The third quarter saw a surge in multi-suite rental property sales, marking the highest quarterly total since the first quarter of 2022. Investment sales volume of $1.8 billion was recorded, with one week remaining in the quarter. This jump can be attributed to an increase in large-scale property and portfolio availability. Attractive Canada Mortgage and Housing Corporation financing supported the rise in sales activity.
Rent growth in the multi-suite residential rental market softened in the third quarter compared to the stronger gains seen in previous quarters. The average asking rent for all unit-sizes combined in the country's 35 largest markets increased by a modest 5.4% year-over-year in September, according to Rentals.ca. In the near term, rent growth is expected to continue to moderate.
Commercial Real Estate Industrial property investment sales activity moderated in the third quarter, following a significant uptick in the previous quarter, with the slowdown largely due to a shortage of available properties. Meanwhile, new supply in the industrial leasing market continued to outpace demand, consistent with the trend observed over the past year.
The Canadian office leasing market shifted into neutral gear in the third quarter with absorption rates varying significantly across regions. The Greater Toronto Area outperformed, recording over 650,000 square feet of positive net absorption, while the Greater Vancouver Area underperformed with negative net absorption. Overall, tenants continued to show a preference for shorter-term subleases that were already improved and move-in ready.
Economic Factors The Canadian economy was on track to expand by approximately 1.5% in the second half of 2024 with a slightly stronger growth trend projected for the first half of 2025. This slow-growth outlook is primarily attributed to reduced household spending, higher rental costs, and continued softening in the job market. However, the economy is projected to gradually strengthen in the second half of next year as the effects of higher interest rates subside, leading to improved domestic demand and consumer spending.
As inflation eased during the third quarter, the central bank is expected to continue cutting interest rates over the remainder of 2024 and in early 2025 while focusing on supporting the economy and labour market. As the central bank continues its rate-cutting cycle, housing market activity is expected to in 2025.
Released today by Morguard, the 2024 Canadian Economic Outlook and Market Fundamentals Third Quarter Update provides a comprehensive assessment of the 2024 real estate investment trends and outlook to watch in Canada. The full report 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 $18.5 billion. Please visit www.morguard.com or follow us on LinkedIn and Instagram.
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