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Canadian Commercial Real Estate Market Performs Despite Turbulent International Backdrop

Stocks in this article: MRC

MISSISSAUGA, ON, Jan. 24, 2013 /CNW/ - Morguard Corporation (TSX: MRC) ("Morguard") released its 2013 Canadian Economic Outlook and Market Fundamentals Research Report at www.morguard.com and predicts a repeat of 2012,the second most active real estate investment year on record, with favourable returns for investors in the Canadian commercial real estate market.

"We anticipate strong interest in Canadian real estate from a broad cross section of investors in 2013, with the REIT sector dominating transactions," said Keith Reading, Director of Research at Morguard. "Canadian property values will remain at the peak, given access to low cost capital and attractive yields."

Annual investment capital flow into the Canadian real estate sector is predicted to be close to CDN$30 Billion in 2013.  This is a slight dip from the previous cyclical high of CDN$32.1 Billion in 2007, but above the long term average of CDN$19.3 Billion.

2013 Real Estate Investment Trends to Watch in Canada

  • Solid fundamentals will continue to characterize Canada's real estate market despite a turbulent backdrop of uncertainty in international economies and financial markets
  • Property values will continue to range at the cycle peak supported by robust investment demand, low interest rates, and historically low long-term bond yields
  • Income performance strength will remain a fixture over the near term as rental markets in all sectors post strong occupancy characteristics, positive demand trends, and modest increases in rental rates
  • Robust purchasing activity in the investment sector will continue to feature a significant REIT sector component, however pension funds and private capital will remain active
  • Conservative construction volume in the office and industrial sectors over 2013 will ensure rental market conditions improve however, as 2013 ends risk levels will rise with the increase in office development in Vancouver, Toronto and Calgary
  • The arrival of U.S. retailer Target will continue to impact the retail sector, as the discounting sector adjusts to new competition. The broader retail sector will also govern itself in light of technological and overall shopping behavior changes.
  • The multi-family residential real estate sector will be the market's most stable sector, with occupancy ranging at or above the 98.0% mark nationally in 2013, given healthy demand supported by demographic trends

Real Estate Investment Overview

In 2012, the Canadian real estate investment market registered strong results across all sectors and jurisdictions, in the face of continued uncertainty outside of the nation's borders and a slowing trend in the domestic economy.

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