- Performance in the multi-suite residential rental sector will
remain healthy, bolstering investor confidence
- Industrial real estate will continue to outperform, driven by
increased online shopping and demand for delivery and logistics
space
- Retail segment performance will continue to be impacted by
COVID-19 restrictions, changes in consumer shopping behaviour, and
structural changes in the broader retail industry
- A further softening of office market fundamentals will unfold
in 2021 as tenants continue to rationalize how they use space,
especially in the country's major business centres
MISSISSAUGA, ON, Jan. 26, 2021 /CNW/ - Morguard Corporation
("Morguard") (TSX: MRC) today released its 2021 Canadian
Economic Outlook and Market Fundamentals Report, providing
a detailed 2020 Canadian real estate market analysis and an
overview of 2021 Canadian real estate investment trends to watch.
The report, Morguard's 23rd annual edition, revealed
that for 2020 investor confidence in the multi-suite residential
and industrial property sectors remained robust. Meanwhile, sales
of retail and office property softened as a result of heightened
sector uncertainty. For 2021, Morguard forecasts investors will
continue to approach investments with caution while monitoring the
national economic recovery. The full report, with regional insights
and video, is available at morguard.com/research.
"The outperformance of industrial and multi-suite residential
assets was driven in part by relatively stable rental fundamentals,
boosted by demand for warehouse and logistics space and government
transfer payments to renter households, respectively." said
Keith Reading, Director, Research at
Morguard. "Investors will continue to tread carefully with regard
to acquisitions in 2021, given a heightened level of uncertainty
surrounding the economic outlook."
Multi-Suite Residential Real Estate
Despite the
uncertainty surrounding the effects of COVID-19, investor
confidence in the multi-suite residential segment was maintained,
resulting in the segment's healthy investment activity levels
following the trend seen over the past several years. Over
$3.9 billion in transaction volume
was reported during the first six months of 2020, comparable to the
record-high $4.0 billion in sales
tallied in the first six months of 2019. A reduction in rental
demand resulted in increased vacancy compared with the pre-pandemic
record lows reported in several cities and submarkets. The segment
is expected to experience a steady recovery in tandem with the
anticipation and distribution of a COVID-19 vaccine that will ease
restrictions for physical distancing, and as a result, boost rental
demand.
Commercial Real Estate
The industrial segment showed a
significant level of resilience in 2020. The national availability
rate stood at a healthy 3.5 per cent by the end of September 2020, up slightly from the record low
2.9 per cent reported in September
2019. Increased online shopping and demand for delivery and
logistics services supported the segment's outperformance when
compared with retail and office real estate. Investment demand
remained healthy during 2020, as institutional and private capital
investment groups were attracted by the segment's durability
through the pandemic-driven economic downturn. Looking ahead,
strong e-commerce-related activity and a gradual economic recovery
will continue to boost demand in the industrial segment in
2021.
The retail segment continued to adapt to industry change and
COVID-19-related restrictions in 2020. The closure of non-essential
stores throughout the first and second waves of the pandemic
resulted in significant losses of revenue for business owners, who
pivoted to e-commerce platforms and various curbside and delivery
strategies to generate sales revenue. New shopping dynamics and
lockdowns across the country in the fall of 2020 led to additional
brick-and-mortar store closures, adding to the upward vacancy
trajectory. During the first six months of 2020, $2.1 billion in retail property sales volume was
recorded in the country's largest urban centres combined, down 30.6
per cent from the same time period a year earlier. Going forward,
managing to increase vacancy and adapting to tenants' changing
needs will continue to represent key challenges for landlords.
Retail redevelopment, changes to the tenant mix, the introduction
of more service retail and the consideration of alternative uses
are expected to continue in 2021.
Following an extended period of healthy performance, the office
segment softened throughout 2020 due to the economic contraction
and work-from-home dynamics brought on by COVID-19. The decline in
economic activity eroded private-sector confidence, resulting in
the delay or cancellation of expansion plans and leasing-related
decisions. Some organizations reduced their office space footprints
and looked to offload space in the sublease market in order to
reduce costs. During the first six months of 2020, $3.0 billion of office property was sold in the
major Canadian urban centres combined, down 46.0 per cent from the
same time period a year earlier. Leasing market conditions will
soften over the near term, during a period of gradual economic
recovery.
Economic Factors
Efforts from the federal government
and Canada's central bank to
support Canadian households and businesses during COVID-19 led to
an economic rebound from the historic decline at the beginning of
2020. Meanwhile, the Bank of Canada implemented cuts to the overnight
interest rate to offset the negative impacts of the pandemic on
Canada's businesses and consumers.
These measures bolstered consumer confidence levels, resulting in
increased levels of spending during the summer and early fall of
2020.
By the end of September 2020, more
than two-thirds (76 per cent) of the job losses suffered as a
result of the pandemic lockdown had been recovered. The optimistic
employment landscape in early fall was a by product of the
reopening of non-essential businesses after the first wave of the
pandemic. Despite this strengthening, Canada's labour market remained weak in 2020
when compared to the pre-pandemic period. More than 700,000 people
remained on layoff at the end of September and youth employment
stood below pre-pandemic levels.
Canada's labour market is
expected to strengthen at a moderate pace in 2021. The pace at
which the country's economy recovers will be relatively slow, given
an increase in the number of COVID-19 infections and the targeted
lockdowns that began in the fourth quarter of 2020.
The 2021 Canadian Economic Outlook and Market Fundamentals
Report is a detailed analysis of the 2021 real estate
investment trends to watch in Canada. The full report, including analysis
for the real estate markets in Halifax, Montreal, Ottawa, Toronto, Winnipeg, Regina, Saskatoon, Calgary, Edmonton, Vancouver and Victoria is available at
morguard.com/research.
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 $19.4 billion. Please visit
http://www.morguard.com or follow us on LinkedIn.
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"forward-looking statements." Such forward-looking statements
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SOURCE Morguard Corporation