Canadian Real Estate Market Update – Q3 2022

Published November 10, 2022

With the economy continuing to grow above trend and inflation still elevated, the Bank of Canada is likely to continue raising rates to push forward on its path to neutral, putting further pressure on risk assets’ valuations and future economic growth. According to Fiera Capital, the most probable scenario as a result of these dynamics continues to be a “Deep Recession.”

Despite all the changes arising in the commercial real estate market today due to the lingering effects of the pandemic, increasing interest rates, stubborn inflation and ongoing geopolitical uncertainty, the broad fundamentals underpinning real estate remain unchanged. The land that houses the economy is finite and increasingly scarce relative to intangible currency and financial assets, which can be created at will. Under the current uncertain macro-economic backdrop, it is highly likely that real estate will outperform other traditional assets, such as equities and especially fixed-income investments on a long-term basis. This dynamic is likely to accelerate the trend toward more alternatives, particularly “real assets” in pension plan portfolios. It is the Manager’s primary objective to manage through these times with its tenants and ensure that the Fund’s income return remains at a stable level and maintained as high as possible. As consistently reiterated, occupancy is paramount to ensuring robust income returns are delivered.

In addition to being experienced real estate professionals with a strong asset management focus, the Manager’s proprietary Target Markets Model continues to objectively guide the Fund’s allocation decisions with predictive analytics by helping it select markets and property types within opportune times in their growth cycles relative to their market prices. Capital allocations to “real assets” with an experienced manager matters more now than ever.

Read our quarterly Canadian Real Estate Market Update, produced by our Strategy, Planning and Analytics team, to learn more about the current state of the office, industrial, retail and multi-residential asset classes, and what to expect for 2022.

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