Sales in Canadian investment property slowed in the second quarter, but industrial property continued its hot streak and rental rates for multi-suite residential buildings rose.
Second-quarter sales of office, industrial, retail and multi-suite residential rental property declined by almost 22% to $6.7 billion from $8.5 billion a year earlier, a report from Mississauga, Ont.-based Morguard Corporation said.
The report was based on property in Vancouver, Calgary, Toronto, Ottawa and Montreal with a minimum sale price of $1 million.
The sales decline had more to do with availability than softening demand, the report said. Retail and multi-suite residential saw the largest declines, while volume was down slightly in the industrial sector, the “darling of investors” over the past few years.
“Investment sales activity is expected to remain brisk over the near term, despite a heightened level of economic and financial market uncertainty,” the real estate and property management company’s Q2 update said.
Investors “competed intensely” for industrial properties as some rents doubled and even tripled since the onset of the pandemic. Low availability has allowed owners to raise rents, and Morguard said that “upward pressure” is likely to continue for the rest of this year. Transaction volumes in the sector were down only slightly from a record pace a year ago.
Residential rental rates in multi-suite buildings increased by 5.7% in May, the report said, the largest month-over-month increase in three years as immigration and students raised demand.
Office and retail property didn’t fare as well in the second quarter. Office vacancies rose by 20 basis points to 16.5% as organizations transitioned to remote or hybrid work, which Morguard expects to continue in the short term.
Transactions in retail investment properties, meanwhile, slowed to a decade low amid a cloudy economic outlook and more cautious lending environment, the report said.