Tight supply is driving up prices says Morguard
A shortage of Class A offices and industrial space in Canada’s major markets is driving up rents, while apartments bring good yields.
A new market report from Morguard Corporation shows that record-low vacancy rates at a time when the economy is fuelling demand for space is a winning combination for investors in these commercial real estate sectors.
"Office and industrial tenants who are looking to expand or move to new premises are being forced to make do with what they have due to a lack of alternatives in the downtowns of certain metros," said Reading. "Landlords of prime assets are enjoying record occupancy levels and steadily increasing rents as supply remains tight."
Meanwhile, transactions in Canadian CRE was weaker in the second quarter of 2018 compared to a year earlier.
Sales of office and industrial transactions were slower but multi-suite residential transactions bucked the trend with a 17.5% year-over-year rise in volumes as demand for rental apartments continued to increase.
"A drop in transaction volume in the second quarter is very much a function of low product availability rather than a drop in demand," said Keith Reading, Director of Research at Morguard. "With quality office and industrial space at a premium, apartments are a crowd favourite as investors search for yield."
