Canadian Commercial Real Estate Market Performs Despite Turbulent International Backdrop
MISSISSAUGA, ON, Jan. 24, 2013, 2013 (Canada NewsWire via COMTEX) --
Morguard Corporation (TSX: MRC)
("Morguard") released its 2013 Canadian Economic Outlook and Market
Fundamentals Research Report at www.morguard.com and predicts a repeat of 2012,the second most active real estate
investment year on record, with favourable returns for investors in the
Canadian commercial real estate market.
"We anticipate strong interest in Canadian real estate from a broad
cross section of investors in 2013, with the REIT sector dominating
transactions," said Keith Reading, Director of Research at Morguard.
"Canadian property values will remain at the peak, given access to low
cost capital and attractive yields."
Annual investment capital flow into the Canadian real estate sector is
predicted to be close to CDN$30 Billion in 2013. This is a slight dip
from the previous cyclical high of CDN$32.1 Billion in 2007, but above
the long term average of CDN$19.3 Billion.
2013 Real Estate Investment Trends to Watch in Canada
-- Solid fundamentals will continue to characterize Canada's real
estate market despite a turbulent backdrop of uncertainty in
international economies and financial markets
-- Property values will continue to range at the cycle peak
supported by robust investment demand, low interest rates, and
historically low long-term bond yields
-- Income performance strength will remain a fixture over the near
term as rental markets in all sectors post strong occupancy
characteristics, positive demand trends, and modest increases
in rental rates
-- Robust purchasing activity in the investment sector will
continue to feature a significant REIT sector component,
however pension funds and private capital will remain active
-- Conservative construction volume in the office and industrial
sectors over 2013 will ensure rental market conditions improve
however, as 2013 ends risk levels will rise with the increase
in office development in Vancouver, Toronto and Calgary
-- The arrival of U.S. retailer Target will continue to impact the
retail sector, as the discounting sector adjusts to new
competition. The broader retail sector will also govern itself
in light of technological and overall shopping behavior
-- The multi-family residential real estate sector will be the
market's most stable sector, with occupancy ranging at or above
the 98.0% mark nationally in 2013, given healthy demand
supported by demographic trends
Real Estate Investment Overview
In 2012, the Canadian real estate investment market registered strong
results across all sectors and jurisdictions, in the face of continued
uncertainty outside of the nation's borders and a slowing trend in the
This year, the Canadian real estate market will be forced to continue to
contend with the ongoing uncertainty and sluggish results in Europe. At
the same, time it will benefit from increased stability in the U.S.
economy, assuming the negative impacts of the "fiscal cliff" are
negligible at worst. Canada's economy will likely generate moderately
healthy expansion, due to a less than firm global growth trend.
Consequently, business cycle dependent sectors, like office and
industrial, will experience somewhat muted demand. On a national scale
however, commercial real estate fundamentals are expected to continue
to stabilize. Consequently, investors will continue to allocate funds
to Canada's real estate sector, in an effort to attain satisfactory
yields in a market that will continue to be characterized by stability
and moderate growth.
Owners of Canadian commercial real estate benefited from positive
investment market fundamentals over 2012, a trend that is expected to
continue in 2013. Volatility in the broader investment market will
continue to place real estate in a favoured position for investors.
Property values, on the rise for much of the past few years, will test
their current peaks. Rising occupancy levels and stable and positive
income performance have also benefited investors. Demand will continue
to outpace the supply of assets for sale, which will produce strong
real estate capital flow in 2013. This will translate into added
pressure on what has already been peak pricing for the cycle.
Transaction volume will continue to range above the long-term average
in 2013, as investors chase yield in a low interest rate environment.
The strength of return performances over 2012, which will continue into
2013, will drive robust bidding activity on available asset offerings.
In short, Canada's owners of commercial real estate will continue to
reap the rewards of strong fundamentals in the coming year, which will
draw increased investment from both existing and new entries to the
The Canadian office sector is poised for continued strength and
stability in 2013, having racked up another year of positive results in
2012. Returns settled in the mid-teens on an annualized basis in 2012.
Next year, slightly less robust results are expected, though they will
remain attractive nonetheless. Occupancy levels will remain strong in
2013, in particular for the nation's leading Central Business
Districts. At the same time, landlords will continue to achieve rental
growth, despite more modest space demand trends. Toward the end of
2013, the first of a number of new developments in market's like
Vancouver and Toronto will be delivered to market. This will put
pressure on the market, however, the expectation is for business
activity to pick up and offset much of the associated leasing risk.
Much of the next 12 months will see a continuation of many of the
positive trends observed over 2012, which will act as a driver of
healthy investor interest and performance for parties with assets in
Moderately positive trends are forecast for Canada's industrial sector
in 2013, with the expectation of outperformance in Western Canada.
Economic expansion of 2.0% or less will produce a slow recovery pace in
leasing markets. Resource related companies will continue to drive
above-average results in Western Canada, while a less robust
improvement in Eastern markets is likely. National occupancy will see
little change, ranging between 150 and 200 bps above the year end
market of 6.3%. Consequently, rents will see only slight increases in
most jurisdictions, resting below 2008 levels. Positive demand
characteristics will prevail for much for the next year, a less than
robust recovery in the U.S. will dampen export related activity.
Development will remain below the long term average, though up from the
previous few years. Speculative activity will surge in markets like
Calgary and Edmonton, with most other markets registering mostly
build-to-suit projects. The investment sector will feature continued
strength, which will include attractive returns, healthy demand, and
limited availability of assets for sale. Pricing is expected to remain
at the cycle peak, with the possibility of modest increases. In short,
the outlook for 2013 is one of gradual improvement, with most
indicators pointing in a positive direction.
Canada's ever-changing and healthy retail fundamentals will be on
display once again in 2013 and beyond. Occupancy levels will remain
strong, in particular for the country's best regional centres and
nodes. Strong interest being shown by U.S. retailers in our nation will
translate into positive demand trends. A broadly positive 2013 economic
outlook will furnish consumers with the wherewithal to continue to
spend, thereby driving the ongoing health of the sector. Record high
debt levels will curtail spending activity, but not to a point where it
will materially impact the market. The broadly positive rental market
outlook will boost investment performance, which will continue to
elevate the sector to the top of the investment food chain. As such,
pricing will remain at the peak, with strong demand from all purchaser
groups. The Canadian retail sector will exhibit continued resilience in
2013, in keeping with recent performances.
The multi-family residential rental sector will see largely stable and
healthy performances in the coming year, as was the case through all of
2012. Steady growth in property values over the past few years may ease
in 2013, however values will continue to range at the peak. The
strength of the sector will be fuelled by strong demand drivers and
constrained supply characteristics. Negligible new construction will
also act as a booster of generally tight conditions in the rental
market, as occupancy hovers close to the 98.0% mark nationally. Rents
will continue to rise, capped to some degree by markets with rental
control legislation. Increased availability of condominium units for
rent will have only modest impact on the sector, as the sale market
slowly stabilizes in the second half of 2013. Investment demand will
remain healthy, given broadly attractive return expectations. Healthy
immigration volume and an aging population will ensure stable rental
demand. Indeed, the sector's trademark stability and moderate growth
will continue to characterize the market in 2013.
Morguard's 2013 Canadian Economic Outlook and Market Fundamental
Research Report summarizes economic, demographic and capital market
influences, major trends and forecasts for each major commercial real
estate property class, both at the national and metropolitan level. The
Report provides investors with information and data required to develop
investment strategies for 2013 and beyond.
You can download the Report at www.morguard.com.
Morguard (TSX: MRC) is an expert in North American real
estateownership,investment and management. With a strategic focus on
high-quality assets and diversification,Morguard has a proven track
record of realizing the potential of real estate through consistent
investment performance. Morguard has more than $12 Billion of assets
owned and under management.The integrated real estate services company
manages its own real estate portfolio, as well as invests and manages
on behalf of third-party institutional and private real estate
investors. Morguard offers integrated real estate services, including
investment management, asset management and property management.
Morguard Corporation owns a 42.8% interest in Morguard Real Estate
Investment Trust (TSX: MRT.UN) and a 56.8% effective interest in the
Morguard North American Residential Real Estate Investment Trust (TSX:
SOURCE: Morguard Corporation
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/January2013/24/c8358.html
SOURCE: Morguard Corporation
K. (Rai) Sahi Chief Executive Officer (905) 281-3800 Keith Reading Director,
Research (905) 281-3800
[ Back To HTML5's Homepage ]