Canada’s industrial property sector had an impressive first quarter with 7.3-million square feet of space brought onto the market, according to a recent report issued by Morguard Corporation.
The first-quarter industrial property results come on the heels of a strong 19.4-million square feet of new space in 2016, states the report released May 1.
As for office leasing, vacancy edged down 10 basis points to 13.1 per cent for all classes of space in Canada's major urban centres during the first quarter. Leading the way was Montreal, with Vancouver and Toronto also posting healthy progress.
Above average transaction volumes, persistent demand and foreign capital are all driving Canada's commercial investment property market, Morguard reports.
The abundance of capital available for investment, in combination with the overall attractiveness of the market, is resulting in multiple-bid scenarios and higher prices. While the Canadian market may appear small on the international stage, it is garnering significant attention from international investors, says Morguard. Investment volume hit a record high in 2016 and foreign capital continues to support above-average transaction volumes and prices.
There are risks to the market including the new U.S. administration's protectionist threat, possible interest rate hikes, a potential prolonged commodities slump and the knock-on effects of a breakup of the European Union, says Morguard. Despite these, in Canada, demand for commercial real estate continues to outstrip the supply.
"The outlook for the industrial sector remains bright as low vacancy rates indicate longer-term price support and we expect to see modest but healthy price appreciation in the office leasing sector," said Keith Reading, director of research at Morguard.
"We see the current phase of the commercial real estate as durable.
"Canada's federal budget contained few surprises. The national inflation rate was unchanged for the quarter and our continued confidence in the U.S. economy lead us to believe that current market conditions for commercial real estate will remain supportive for the foreseeable future."
Investors continued to favour Canada's office sector with growing interest in unique, creative and value add properties including connections to transit, Morguard reported.
Morguard Corporation is a North American real estate and property management company based in Mississauga.