Investor Demand Exceeded Acquisition Opportunities in Multi-Suite Residential Rental Property Market in Q1 2025: Morguard
MISSISSAUGA, ON, June 10, 2025 /CNW/ - Investors continued to exhibit strong interest in acquiring core-quality multi-suite residential rental property that were expected to generate attractive yields. However, the availability of properties for acquisition was limited, according to Morguard's 2025 Economic Outlook and Market Fundamentals First Quarter Update ("Morguard") (TSX: MRC).
"The multi-suite residential rental sector's continued resilience was observed in the first quarter, amid global trade tensions," said Angela Sahi, President and Chief Operating Officer of Morguard. "Although the shifting global economic and financial landscape may further reshape the market, Canada's real estate sector is underpinned by solid fundamentals that should support it through periods of uncertainty."
Multi-Suite Residential Real Estate
Demand for multi-suite residential rental property acquisitions outpaced supply in the first quarter. Investors maintained strong interest in acquiring core-quality individual assets and portfolios expected to generate attractive yields. However, supply constraints continued to limit sales closings.
Asking rent growth for the largest multi-suite residential rental units was the strongest in the first quarter of 2025. A combination of factors including the high cost of homeownership, persistent inflation, and economic volatility supported demand for larger rental units. These dynamics contributed to above-average asking rent growth for three-bedroom units over the past year. Looking ahead, demand and rent growth for larger units are expected to remain elevated amid intensifying economic uncertainty.
Commercial Real Estate
There was little change in office leasing market conditions in the first quarter of 2025, continuing the trend observed throughout 2024. The national average vacancy rate stood at 18.7% at the end of March, down 10 bps quarter-over-quarter. The national downtown vacancy rate edged down by 10 bps to 19.9% while the suburban vacancy rate was unchanged.
Upward pressure on the national industrial leasing market availability rate eased in the first quarter, driven by a slowdown in new supply deliveries and a notable increase in occupancy. Overall, leasing market fundamentals are projected to moderate with availability expected to rise modestly following a temporary reprieve in the first quarter.
Retail investment property sales activity ticked higher, driving an increase in quarter-over-quarter transaction volume. The uptick was largely attributed to an acquisition of 50% interest in Southgate Centre in Edmonton and 100% interest in the Oshawa Centre for a combined $585 million.
Looking ahead, commercial real estate investment sales activity is expected to remain muted as investors focus on lower risk acquisitions in light of heightened uncertainty and the looming risk of a potential recession.
"The Canadian real estate market is facing one of the most pivotal moments in its history as tariff threats continue to shift the global economic narrative," said Keith Reading, Senior Director, Research at Morguard. "While the current real estate landscape carries a degree of uncertainty, Canada's market is expected to exhibit a measure of resilience with new opportunities emerging on the horizon."
Economic Factors
The Bank of Canada continued its rate-cutting cycle in the first quarter, in consideration of the nation's relatively strong economic position at the beginning of 2025. However, as the U.S. imposed tariffs on Canada and other countries, economic uncertainty and downside growth risk increased.
In its decision to lower interest rates, the Bank of Canada considered the nation's relatively strong economic position at the beginning of 2025. Notwithstanding, both economic growth and inflation are expected to face headwinds due to the ongoing impacts of global trade tensions and the imposition of U.S. tariffs, which continue to influence the broader economic landscape.
Given the rising business costs and diminishing levels of confidence stemming from these trade disruptions, job growth in Canada began to moderate in the first quarter after witnessing some strengthening in late 2024. By and large, the U.S. tariff will remain a key driver of market volatility in the near term.
Released today by Morguard, the 2025 Canadian Economic Outlook and Market Fundamentals First Quarter Update provides a detailed analysis of the real estate investment trends and outlook to watch in Canada. The full report is available at morguard.com/research.
Investors maintained strong interest in multi-suite residential acquisition opportunities.
Canada's office leasing market stabilized in the first quarter of 2025, in keeping largely with the previous year's trend.
Retail investment transaction volume increased
The country entered 2025 in a relatively strong economic position while the Bank of Canada reiterated that monetary policy would have limited influence on the effects of a global trade war.
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 $18.7 billion. This year, Morguard proudly celebrates 50 years of leadership, innovation, and growth in the real estate industry.
For more information, visit www.morguard.com or follow us on LinkedIn and Instagram.
Forward Looking Statement Disclaimer
Statements contained herein that are not based on historical or current fact, including without limitation statements containing the words "anticipates," "believes," "may," "continue," "estimate," "expects" and "will" and words of similar expression, constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments, to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and regionally; changes in business strategy; financing risk; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; liability and other claims asserted; and other factors. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Publisher does not assume the obligation to update or revise any forward-looking statements.
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