Investment in Commercial Real Estate to remain strong

commercial real estate

Investment in commercial real estate around Canada reached record-high levels. In the first half on 2018, a total of $5.5billion in retail property was sold and this trend is thought to continue in 2019, according to a report published by Morguard.

As of Q3 of 2018, the Canadian economy was expanding at a rate of 2%, lower than the 3% rise in 2017 GDP. Although it was a slow start in 2018, the economy picked up the second half. With higher interest rates, tight lending rules, and provincial measures, the housing sector was the one driving the slow growth. However, in 2018 we are seeing a stronger labour market with wage growth and an unemployment rate below 6% in the second half of the year.

Office Space: investment will continue in 2019

Supply of office space was the main constraint on the progress of the office leasing market in GVA. It was extremely difficult for bigger tenants to find suitable office space and were forced to compete for the limited available space. The demand for office space was highly driven by shared workspaces and technology-related companies. At the end of Q2 2018, office vacancies reached 6.1% which is a historic low since 2008. Downtown even saw lower vacancies rates of 4.7%. It is expected for this performance to continue in 2019. The leasing market performance will boost investment in the sector and the investors’ confidence will remain stable.

As Morguard’s director stated, “It’s a real struggle both in Vancouver and Toronto to find office space[…] There is no shortage of capital […] and 2018 being a record year for investment will continue into 2019.” 

Retail Property

The retail property investment market was also very active in 2018. Transactions were all-time high for a 18 month period ending in June 2018, and this trend is expected to continue in 2019. Demand for riskier assets in 2019 will be positive, as investors try to capitalize on redevelopment or expansion projects.

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