Industrial Demand Stays Strong Despite Commercial Real Estate Slowdown

Industrial Demand Stays Strong Despite Commercial Real Estate Slowdown
May 23, 2024

Canada's commercial real estate market saw a cooling off in investment activity during the first quarter of 2024, according to a recent report by Morguard. However, industrial properties remained a bright spot, attracting strong interest from both investors and owner-users.

Industrial Market Shows Strength

  • Industrial properties were the most sought-after commercial asset class in Q1.
  • Both investors and owner-users were actively acquiring industrial assets, with owner-users seeking to capitalize on ownership benefits.
  • Overall investment in the industrial sector did see a decrease compared to the previous quarter.

Multi-Family Dwelling Market Remains Stable

  • Multi-suite residential rental properties were the second-most popular commercial asset class.
  • Smaller multi-family properties were a significant portion of the reported transactions.
  • Despite a lower overall transaction volume, investor confidence in the multi-family sector remains strong.

Office and Retail Sectors Show Mixed Performance

  • The national office vacancy rate increased slightly, although some markets like Vancouver and Winnipeg saw positive absorption.
  • The retail vacancy rate remained mostly flat, with new businesses entering the market to replace those leaving.

Interest Rates Affecting Market

  • High interest rates continue to impact the commercial real estate market.
  • Increased borrowing costs and a gap between buyer and seller expectations are a challenge.

Looking Forward

  • With inflation showing signs of stabilizing, the Bank of Canada may consider rate cuts in the latter half of 2024.
  • This, combined with continued investor confidence, suggests a positive outlook for the commercial real estate market in the long run.

Source: Morguard

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