Canadian apartment market boosted by demand, overseas capital - report

Higher prices and multiple-bid transactions in Canada’s apartment sector are becoming more prevalent, Morguard says

Canadian apartment market boosted by demand, overseas capital - report
The Canadian apartment market has seemingly entered a renaissance as steady demand, sustained entry of foreign capital, and record-breaking sales volume continue to intensify activity in the commercial investment property sector, according to a recently released study from Morguard Corporation.

The report found that for the first two quarters of 2017, higher prices and multiple-bid transactions are becoming more prevalent amid the apartment segment’s desirability among overseas investors.

Other major contributors to this development are the possibility of interest hikes, the likely prolonged decline of commodities, and the increased fears amid a probable dissolution of the European Union.

Amid these factors, demand for Canadian commercial real estate continues to outpace supply, according to Morguard director of research Keith Reading.

“We see the current phase of the commercial real estate as durable,” Reading wrote in the report, as quoted by REMI Network.

He added that while development activity will continue to increase over the next few months, the risk of oversupply remains low

“Canada’s federal budget contained few surprises. The national inflation rate was unchanged for the (first) 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.”

Reading explained that a growing number of investors are using forward purchases and development as vehicles for acquiring core investments.

“Yields are holding at record lows for assets in prime locations. Investment demand continues to outdistance the supply of assets available for acquisition in major markets,” Reading concluded.

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