- What Investment in Canada’s commercial real estate industry slipped nearly 35% in Q4 2024 year over year
- Why An uncertain economic climate and reticence of institutional investors were among the list of reported factors
- What next Morguard forecasts modest domestic growth in 2025 as the economy begins to rebound
Investment in Canadian commercial real estate dropped by 34.5% – or $2bn – in Q4 2024 year over year, Morguard said in a new economic outlook tracking quarterly and annual market performance.
Morguard attributed some of that loss to institutional investors – once among the largest domestic property transactors – continuing to resist large-scale trades despite successive rate cuts by the Bank of Canada beginning in June.
The Mississauga-based real estate investment company reported an 8% dip in overall market activity across commercial assets during the final quarter of 2024, representing a quarter-over-quarter loss of $330m.
For the quarter, Morguard reported $3.8bn in investment across commercial assets.
Signs of positivity
Even with depressed commercial investment, Morguard saw some reasons for optimism, suggesting Canadian commercial real estate could right-side itself in 2025.
The office sector rebounded in Q4, notching $812m in investment and representing a quarter-over-quarter rise of nearly 90%.
Industrial property investment also stayed strong during the fourth quarter, with activity rising almost 30% in Q4 compared to the previous quarter – the equivalent of $1.6bn in added value.
On the downside, multi-residential property investment slipped to $967m in Q4. The dip, attributed to property availability, reversed the 10-quarter high seen in Q3. Even so, investors remain bullish on the long-term prospects of the sector, Morguard said, as investor appetite has not yet waned.
Retail investment continued to be subdued, with $425m in sales volume reported in Q4 despite a few significant deals, like Westcliff Group’s $162m acquisition of a Kitchener shopping mall owned by Cadillac Fairview.
Changing leasing landscape
Morguard reported a leveling off in multifamily rents as demand slowed during Q4, a side effect of the federal government’s decision to lower immigration targets.
Although demand for leased office space was also weak, the Canadian market successfully absorbed around 2.6m sq ft of space in Q4, the first time in six years that a positive quarterly figure was recorded.
Industrial availability continued to rise in Q4 to nearly 5% as new supply hit the market and exceeded demand, a trend that’s expected to continue this year. It was the opposite in the case of retail property supply, which remains muted and has been impacted for years by financing issues, construction and development costs, and an uncertain economic outlook for the sector, Morguard said.
The company is expecting modest growth for the Canadian economy in 2025 but notes that tariffs will have an inflationary impact on consumer pricing.
Correction (3/19/25): Article and headline revised to reflect that Morguard’s report covers year-over-year data for the fourth quarter of 2024.
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