Morguard - 2017 Real Estate Investment Trends to Watch in Canada

MISSISSAUGA, ON, Feb. 2, 2017 /CNW/ - Morguard is projecting another year of stable real estate investment performance in 2017 as investors look to the Canadian market for relatively stable yields. While there is a dichotomy between the financial and technology driven economies and resource-based economies in Canada, there remains attractive opportunities for investment. 

By the end of 2016, a record amount of capital, both debt and equity, was projected to flow into Canadian commercial real estate. Canadian investment transaction volume surged this past year reaching $27.4 billion in total over the first three quarters of 2016, compared with $16.9 billion over the same period in the previous year. Annual 2016 sales are projected to surpass the most recent annual peak of $32.1 billion in 2007. This immense growth in purchasing power, against a backdrop of moderately healthy Canadian economic fundamentals, was somewhat unique.  

"For many domestic and foreign investors, Canada's commercial property market represents stability over the long term resulting in a willingness to place capital in this market," said Keith Reading, Director of Research at Morguard. "This sector has a solid record of performance which we anticipate will continue to drive investment decisions, against a backdrop of global political uncertainty."

The 2017 Economic Outlook and Market Fundamentals Research Report, released today by Morguard Corporation (TSX: MRC), provides a detailed analysis of the 2017 real estate investment trends to watch in Canada. The full report is available at www.morguard.com 

Highlights - 2017 Real Estate Investment Trends 

• The financial and technology based economies of British Columbia and Ontario will drive real estate investment
• In contrast, markets supported by the resource sector, which have been negatively impacted, are expected to improve gradually over time
• The forecast for Canada's national economic expansion over the next few years should support demand for industrial and office space in the country's major markets
• Consumer spending habits are expected to remain fairly healthy. Prime retail assets will generate strong interest from both investors and retailers, despite an evolving environment. Vacancy will slowly rise over the next 12 months, which will present moderate performance headwinds.
• A combination of international migration, an aging population and gains in the national labour market will drive demand for multi-suite residential
• Investors will look to spread their risk by diversifying investments across asset classes and regions to protect against economic downturns in Canada and globally

Financial and Technology Driven Sector: British Columbia and Ontario Remain Strong

While the Canadian economy as a whole has experienced relatively weak economic growth, British Columbia and Ontario continue to perform well above the national average. The Vancouver and Toronto markets have emerged and cemented themselves as the business hubs of the new Canadian economy. Both cities' financial and technology driven economies will continue to support high levels of interest from foreign and domestic investors, creating a real estate market fueled by strong competition, aggressive bidding and the potential to push prime asset values slightly higher. 

Following this trend, technology companies located in the North East or along the West Coast of the U.S. are expanding or setting up offices in Canada given cost advantages. The less expensive Canadian dollar, coupled with the tremendous growth in the technology sector over the past year, has driven a significant portion of the office leasing demand in Vancouver and Toronto.

In contrast, markets supported by the resource sector continued to experience tepid economic activity in 2016, which is expected to improve gradually over the next few years with annual forecast expansion of roughly 2.0%. The commodities slump in Alberta, coupled with the weak growth in Quebec, Saskatchewan and parts of the Eastern provinces, has indicated that Canada's reliance on resources as an economic driver is decelerating in favour of the financial and technology markets in Vancouver and Toronto. However, there remains opportunity to find solid returns within these markets. Resource-driven market investors can expect continued stabilization in the retail sector. Leasing conditions will drive investment performance and draw capital back into the market. Demand is expected to increase in Winnipeg, Montreal, Edmonton and Calgary. 

"Bottom line is that quality investment opportunities will be found in markets across the country," said Reading. "Low risk investors will continue to look to Vancouver and Toronto, especially at strategic locations for acquiring multi-suite residential properties. Opportunistic investors will look to markets that are depressed with the potential for longer-term success."

Investors looking to mitigate risk and increase returns are adapting to market conditions in practical ways. A significant number of larger investors continue to assess diversifying ownership of assets they already hold across regions and asset classes, against a backdrop of upward pricing pressure for the country's core assets.

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 REIT 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 $20.7 billion.

For more information, please visit Morguard.com.

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K. Rai Sahi, Chairman and CEO, T 905-281-3800; Keith Reading, Director, Research, 905-271-3800