Toronto, Canada - November 16, 2016: Old and new buildings in Toronto downtown
© bakerjarvis / 123RF Stock Photo

Demand for Canadian commercial real estate is expected to remain “robust” next year, says Morguard Corporation’s 2019 economic outlook report.

Over the last 18 months, investors placed capital into the market with confidence, resulting in record-high transaction volume, says the report. During the first six months of 2018, a total of $26.8 billion in transaction closing volume was reported, following a record annual high of $43.1 billion in 2017, it says.

“Debt and equity funds continued to flow freely into Canada’s commercial investment property market over the recent past, indicating the ongoing resilience of the current phase of the cycle,” says the report.

The Greater Toronto Area was the most active region over the 18-month period, with $15.7 billion in property sales completed in 2017, followed by a further $9.6 billion in the first half of 2018. The Greater Vancouver Area and Greater Montreal Area were also highly active during the same period, with $17.4 billion and $8.2 billion in transaction volume recorded, respectively.

The report says rental market conditions will continue to gradually strengthen, in part because of tight market conditions and a solid economic growth outlook.

Further, leasing market fundamentals are expected to stabilize following a period of rising vacancy levels after the closure of Sears stores across Canada.

On the downside, Edmonton and Calgary are expected to exhibit effects from the recent oil downturn, but their respective industrial and office markets should strengthen by the second half of 2019, says the report.

Overall, “the generally positive leasing market performance forecast for the near term will attract investors to the asset class,” says the report. “For the most part, private and public groups will continue to exhibit high levels of confidence in the Canadian market at prevailing yield.”

As a result, the firm expects transaction closing volume will continue to peak, assuming product availability.

For full details, including specifics for various regions, download the full report.