Above Average Transaction Volumes, Persistent Demand and Foreign Capital Driving Canada's Commercial Investment Property Market

Current phase of the real estate cycle considered durable

Canadian Economic Outlook & Market Fundamentals
First Quarter Update 2017

MISSISSAUGA, ON, May 1, 2017 /CNW/ - Above average transaction volumes, persistent demand and foreign capital are all driving Canada's commercial investment property market, according to a new report issued by Morguard Corporation ("Morguard") (TSX: MRC). 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. Consequently, there is downward pressure on yields, particularly regarding Canada's premium assets. Modest price increases are expected to persevere for the near-term.

While the Canadian market may appear small on the international stage, it is garnering significant attention from international investors. 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 which include 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. 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.

The Canadian industrial sector absorbed 7.3 million square feet of space in the first quarter of 2017, on the heels of a strong 19.4 million square feet in 2016. In regard to office leasing, vacancy edged down 10 basis points to 13.1% 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.

"We see the current phase of the commercial real estate as durable," added Reading. "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. In this environment, investors will look to enter into forward purchases, and pursue creative development and redevelopment opportunities."

Morguard has a strong track record for providing creative real estate solutions that drive performance. A successful example of this is Heritage Place in Ottawa's downtown core, located at 155 Queen Street. Morguard created value with a revitalization and remerchandising strategy at the 218,000 square foot Class A Office tower, including a negotiation with the City to secure a LRT station as part of the new  Confederation Line. The station, to be called Parliament Station, is scheduled for completion in 2018 and will have an entrance into the main lobby of Heritage Place.  Connection to transit is an important key market differentiator for tenants.

Investors continued to favour Canada's office sector with growing interest in unique, creative and value add properties including connection to transit.

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

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 Real Estate Investment Trust, Morguard North American Residential REIT and Temple Hotels Inc. Morguard also provides real estate management services to institutional and other investors.  Morguard's owned and managed portfolio of assets is valued at $21.6 billion.

For more information, please visit www.morguard.com

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SOURCE Morguard Corporation