CRE pace slower but demand remains high

The pace of commercial real estate transactions in Canada in the second quarter of 2018 was slower than a year earlier but a new report from Morguard shows demand remained strong.

"A drop in transaction volume in the second quarter is very much a function of low product availability rather than a drop in demand," said Keith Reading, Director of Research at Morguard. "With quality office and industrial space at a premium, apartments are a crowd favourite as investors search for yield."

While office and industrial transactions were slower, multi-suite residential transactions bucked the trend with a 17.5% year-over-year rise in volumes.

The demand for rental apartments in Canada has led to rising values for apartment buildings in major markets; investors are also reaping rewards from healthy fundamentals in the US rental apartment market.

Class A office, industrial shortage driving up prices
For offices and industrial properties, the imbalance of supply and demand has seen prices rise, especially for Class A new-builds.

"Office and industrial tenants who are looking to expand or move to new premises are being forced to make do with what they have due to a lack of alternatives in the downtowns of certain metros," said Reading. "Landlords of prime assets are enjoying record occupancy levels and steadily increasing rents as supply remains tight."


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