Canadian Commercial Real Estate Market Remains Steady in Q3 2023: Morguard

Nov 14, 2023

  • Rent growth accelerated in the multi-suite residential rental sector during the third quarter.
  • Industrial warehouse and logistics properties continued to attract market interest with relatively attractive selling prices.
  • Class A segment of Toronto's downtown submarket recorded the strongest performance this quarter in the office leasing market.
  • Commercial property investment sales activity remained muted, in line with a year-long trend.

MISSISSAUGA, ON, Nov. 14, 2023 /CNW/ - The multi-suite residential rental sector saw rental demand outpace supply resulting in accelerated rent growth across the country during the third quarter of 2023, according to Morguard's 2023 Canadian Economic Outlook and Market Fundamentals Third Quarter Update ("Morguard") (TSX: MRC). By and large, the major Canadian commercial property sectors remained stable in the third quarter. Although Canada's economic growth is expected to soften in the near term, the Canadian economy is forecasted to strengthen from the second half of 2024 onwards.

"The industry has the potential to rebound in early 2024 depending on the central bank's rate decisions and the effects of the monetary policy," said Keith Reading, Senior Director, Research at Morguard. "The alleviation of inflationary pressures and adjustments in interest rates will remain pivotal in shaping the trajectory of Canada's economy going forward."

Multi-Suite Residential Real Estate
The multi-suite residential rental sector experienced accelerated rent growth with the average asking rent for purpose-built units in the country's 35 top markets rising by 14.6% year-over year as of September 2023, a nine-month high, according to Urbanation Inc.'s network. Stronger-than-expected job growth in early 2023, along with a spike in immigration, contributed to increased rental demand pressure.

Rent growth is expected to moderate in the near term following the acceleration in the third quarter. This can be attributed to significant deceleration in job growth for the remainder of this year and into early 2024. Additionally, international migration volume is projected to moderate, and young workers will hesitate to secure rental accommodation amid economic and labour market uncertainty.

Commercial Real Estate
Investment sales activity in the commercial property sector remained muted in the third quarter, consistent with a year-long trend. Industrial property sales slowed once again in the third quarter, following a surge in sales during the second quarter. Core-quality warehouse and logistics properties continued to sell at relatively attractive pricing levels. Nonetheless, industrial property sales volume is expected to remain below the medium-term average for the foreseeable future, as buyers stay on the sidelines while interest rates remain high, and the national economy slows.

The third quarter also witnessed a sluggish office leasing market, continuing the trend of the past few years. Leasing demand fell short of supply during the three-month period with the strongest demand observed for high-quality space in the country's class A buildings. Some businesses were able to upgrade their space at a reasonable cost, continuing the market's flight-to-quality trend.

The retail investment sector reported very few significant transactions during the third quarter, aligning with the year-to-date trend. Owners of retail assets have prioritized operations, leasing, and value enhancement through density additions in recent years. Properties with grocery store anchors and tenants selling necessities continued to attract interest, but the availability of properties fitting this profile was limited.

Economic Factors
Canada's economy was relatively stable in the third quarter, a period during which significant increases in employment levels and wages were recorded. Output varied due to special circumstances; mining, quarrying and oil and gas production increased after declining in the second quarter due to wildfire-related shutdowns while strikes at ports contributed to output reductions. Looking ahead, economic growth is expected to begin firming up in the second half of 2024 and strengthen in 2025 after a period of relatively slow growth that continued throughout the third quarter.

The Bank of Canada continued to focus on the restoration of pricing stability during the third quarter. Considering the easing of excess demand in the domestic economy and more time needed for the monetary policy tightening to take effect, the bank maintained the overnight rate at 5.0% in October. However, the healthy growth in employment and wage increases were seen as potential drivers of increased consumer price inflation, and the bank may be compelled to implement another rate hike in the near term.

The third quarter update released today by Morguard of the 2023 Economic Outlook and Market Fundamentals Research Report provided a comprehensive assessment of the 2023 real estate investment trends to watch in Canada. The full report is available at

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 and Morguard North American Residential REIT. Morguard also provides real estate management services to institutional and other investors. Morguard's owned and managed portfolio of assets is valued at $18.6 billion. Please visit or follow us on LinkedIn.

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SOURCE Morguard Corporation

For further information: K. Rai Sahi, Chief Executive Officer, T 905-281-3800; Keith Reading, Senior Director of Research, T 905-281-3800; or email