Morguard released its 2025 outlook last week, predicting a positive upcoming 12 months for the commercial real estate industry.
Part of that story is growth for the multifamily sector in Western Canada, which initially received a positive outlook from Morguard but is being seen more cautiously in the wake of tariff threats.
Green Street News spoke with Keith Reading, senior director of research at Morguard, about the state of the western market and where it could be headed in what is now shaping up to be a tumultuous year.
Investor confidence in multi-suites in Canada remained resilient. What were the indicators over 2024 that led to that conclusion?
So, in 2024, up until near the end of the year, we had record-high rents and record rent growth in several regions. A lot of that was driven by immigration but also at the time moderately healthy economic growth and some surprisingly healthy job growth. Up until probably October or November, things were kicking along very nicely, and then rent growth started to slow and a big part of that was the delivery of new supply. I think the market was adjusting to these high rents, particularly in new buildings.
“A lot of demand is immigration-driven and most new arrivals tend to rent first when they come into the country.”
A lot of demand was immigration-driven and most new arrivals tend to rent first when they come into the country. In 2023 and 2024, we had record-high immigration, hence lots of demand pressure.
Did the federal government rollback of the temporary foreign worker program and student visas play a role in this?
I think not initially. I think it will this year, but I think in 2024, it didn’t have a really big impact because yes, students and temporary workers will leave, but it’s not like that changes on a dime. I see that more as a 2025 issue.
Has the west differed much from the east when it comes to dropping rents and things like that?
Well, it’s interesting because in the west, particularly Alberta, we had quite a bit of movement of people who, as Vancouver and Toronto became more and more expensive, looked for cheaper alternatives to rent or to live and to look for work. And Alberta was a great alternative, so we had record migration to Alberta from other provinces, and a lot of that was immigration-driven.
And does Alberta have the new supply coming online to keep this going?
Well, I think looking forward, yes, there is new supply coming to Alberta, which is a good thing. The question is what’s going to happen with the economy in terms of these tariffs? What will that do to job growth?
Where are we going to see the most growth in rents? What cities?
Vancouver and Victoria — they’re sometimes not so driven by the fundamentals. They more tend to be driven by things like the mainland China immigration to Vancouver — I mean, that hasn’t really slowed over the last couple of decades. And the issue in Vancouver and Victoria is there just isn’t enough new supply coming on board to meet that demand. So, demand will continue to exceed supply for rental apartments in British Columbia and that’s not going away any time soon.
Will this also be reflected in other parts of the province, like the Okanagan?
I think to a lesser extent, yes, it is also true there, but I think Vancouver and Victoria are the most sought-after areas. If you think about new development, there is some new development, but development particularly in Vancouver is challenging. You’ve got rising development costs, you’ve got significant approval times, and now we’re going to see with tariffs, potentially, the cost of development increase again and so that’s going to be a real challenge for new development in Vancouver specifically.
And over the next year, is it just a grab bag depending on these tariffs? Where do you see the market going?
Well, there’s already some damage being done to the economy in that a lot of businesses are looking at this uncertainty and so they’re putting off any expansion plans. They’re trying to reduce expenses where possible and that includes, unfortunately, labour, so we’re going to see a bit of certainly an economic slowdown over the six to 12 months. But if the tariffs are in place, it could get significantly worse.
Now, some provinces will do better than others, depending on what sectors are hit by tariffs. In the west, certainly, commodities could be hit fairly hard, but so far so good. I’m hearing stories that oil and gas companies are looking at other markets to export to, and I would think potash as well in Saskatchewan. If an agreement comes quickly, the damage will be modest, but if it doesn’t, we’re talking about a significant structural change in our economy and that will affect everybody coast to coast.
