1、NationalInvestmentForecast2024CANADACanadas commercial real estate industry was resilient in 2023.Healthy fundamentals across most property types and markets held,despite rapidly rising interest rates curbing investment activity.These healthy performance metrics,along with the expectation that borro

2、wing costs have peaked,are set to provide some optimism for investors over the coming year.Stabilizing financing conditions will aid in price recalibration,while record levels of deployable investment capital are currently sidelined,waiting for uncertainty to abate.These factors should align to boos

3、t sales activity over the course of the year.Industrial properties are expected to remain a preferred investment option.Limited supply,ongoing e-commerce activity,and nearshoring should all support performance.Multifamily assets will also continue to gain investor attention.Immigration is set to rea

4、ch new highs,while homeownership challenges remain,furthering the need for apartment rentals.Lastly,necessity-based,neighbourhood retail will generate positive sentiment,due to the sectors stability and its role in servicing communities seeing strong population growth.The uptick in immigration expec

5、ted this year will also benefit Canadas economy.This influx of new residents,combined with declining borrowing costs,will provide a boost to consumer spending.While growth is expected to be modest,commercial real estate should be well-positioned to benefit,given limited supply and ongoing demand acr

6、oss the property spectrum.As the coming year unfolds,opportunities are set to rise for both buyers and sellers.We hope this report provides useful insights to help you define your investment strategies and navigate the emerging landscape.As you adapt to ongoing and evolving trends,our investment pro

7、fessionals look forward to assisting you in meeting your goals.Sincerely,TO OUR VALUED CLIENTSJOHN CHANGSenior Vice PresidentDirector,Research ServicesMARK PATERSONFirst Vice PresidentRegional ManagerMontreal,Ottawa&TorontoMICHAEL HECKVice President Regional ManagerCalgary,Edmonton&VancouverLUKE SIM

8、URDADirector of Research,CanadaTABLE OFCONTENTSDeveloped by Marcus&Millichap Research Services.Additional contributions were made by Marcus&Millichap investment brokerage professionals nationwide.NATIONAL PERSPECTIVE Executive Summary.3Economic Overview.4Metro Economy Infographic.5Multifamily Overvi

9、ew.6Retail Overview.7 Office Overview.8Industrial Overview.9Hospitality Overview.10MARKET OVERVIEWS Calgary Multifamily.11 Retail.12 Office.13 Industrial.14 Hospitality.15Edmonton Multifamily.16 Retail.17 Office.18 Industrial.19 Hospitality.20Montreal Multifamily.21 Retail.22 Office.23 Industrial.24

10、 Hospitality.25Ottawa Multifamily.26 Retail.27 Office.28 Industrial.29 Hospitality.30Southwestern Ontario Multifamily.31 Retail.32 Office.33 Industrial.34 Hospitality.35Toronto Multifamily.36 Retail.37 Office.38 Industrial.39 Hospitality.40Vancouver Multifamily.41 Retail.42 Office.43 Industrial.44 H

11、ospitality.45CLIENT SERVICES Office Locations.46-47Contacts,Sources and Definitions.48CALGARY Affordability,elevated energy prices and evolving labour opportu-nities will promote another year of robust in-migration and pop-ulation growth.Multifamily will further benefit from these traits,maintaining

12、 the property type as a preferred investment option.Calgarys industrial market will remain healthy as it offers a more cost-effective alternative to gateway markets like Vancouver and Toronto.The metro also has access to deep-water ports in British Columbia and will continue to play an increasing ro

13、le as a center for distribution and logistics,servicing all of western Canada.EDMONTON Edmonton is becoming a major player in the artificial intelli-gence sector.Combined with the metros more affordable nature,the area is seeing historic in-migration and population growth.A younger demographic with

14、high income potential is forming from this trend,aiding upper-tier apartment demand.Albertas economy is poised to benefit from increasing oil produc-tion,diversification and continued in-migration over the next 12 months.Edmontons job market is expected to be well-cushioned against the impact of ele

15、vated interest rates due to these traits.The retail property sector will benefit as a result.MONTREAL Montreal holds a disciplined office construction pipeline.Along with stable demand for upper-tier space especially from the tech and life science sectors Class A vacancy rates could show further sig

16、ns of stabilizing over the coming year.Royalmount shopping center is slated to be delivered in 2024.It will become a new landmark for Montreal,highlighting the grow-ing want for experiential retail.The metros large student popula-tion and strong immigration will maintain an expanding consumer base,h

17、elping combat near-term economic headwinds.OTTAWA Ottawas geographic location between Canadas two largest cities Toronto and Montreal benefits the metros industrial sector.Along with lower rents,these factors attract large distribution and logistics firms looking to service Canadas most populated ar

18、eas.EXECUTIVE SUMMARY As Canadas capital city,the area holds a large public sector pres-ence,which will help cushion the impact of a prolonged period of elevated interest rates.Due to the citys more stable labour market,coupled with still-heightened population growth,multifamily and retail property

19、performance will be well-supported in 2024.SOUTHWESTERN ONTARIO Over the coming years,Southwestern Ontario will benefit from the ongoing trend of nearshoring.Clustering effects from the EV bat-tery boom happening within the region will likely result in robust employment and population growth,aiding

20、both industrial and apartment rental demand.Elevated borrowing costs will likely continue to place upward pressure on office vacancy.However,with limited new supply in recent years,coupled with the regions more suburban nature,va-cancy rates could stabilize by year-end.TORONTO While industrial deman

21、d is set to moderate amid high borrowing costs,rental rates still have room to grow.Rents in the metro sit roughly 30 to 50 per cent below other distribution hubs in North America.With vacancy also lower in Toronto,this suggests rent growth should continue to outpace inflation.Torontos global reputa

22、tion attracts a diverse rental pool,includ-ing job seekers,newcomers to the country and university students.Additionally,with homeownership remaining a challenge for many residents given still-high prices and elevated borrowing costs demand for apartments will hold above average this year.VANCOUVER

23、Vancouver is one of the most important retail markets in Canada.The metro hosts a robust tourism industry,given its natural beau-ty,and has experienced record population growth in recent years.These factors,along with limited supply,will cushion a short-term slowdown in consumer spending brought on

24、by a prolonged period of elevated interest rates over the first half of 2024.Despite the pandemics impact on Vancouvers office sector,the metro remains one of the top-performing markets in North Amer-ica.While downtown has seen a larger rise in vacancy due to ele-vated new supply,suburban and periph

25、eral submarkets have per-formed better.These areas have had less new supply and are seeing more leasing activity from the healthcare and technology sectors.4ECONOMIC OVERVIEWEconomic Growth is Slowing and Inflation is Cooling,Supporting the Belief that Interest Rates Have PeakedEconomy has absorbed

26、rising borrowing costs better than expected.Over the past two years,Canadas economy has undergone one of the most rapid tightening cycles in the na-tions history.The Central Bank increased its policy rate by 475 basis points in the span of 18 months,bringing it to 5.0 per cent.Despite this,Canadas e

27、conomy remained relatively resilient over the first half of last year.While real GDP did contract in the third quarter of 2023,the economy has not yet entered into a technical recession.The unemployment rate ended last year near 6.0 per cent,below the nations pre-pandemic average of 6.5 per cent.Hou

28、sehold consumption,while stagnating,has also not witnessed a significant pullback,largely owing to record population growth amid historic immigration.However,some signs of underlying weakness began to show in the latter parts of last year.The un-employment rate increased roughly 100 basis points,and

29、 GDP per capita has declined for five consecutive quarters as of September 2023.Consequently,economic growth is likely to remain soft over the first half of 2024,and could even contract further if borrowing costs do not fall as much as expected.Interest rates have likely peaked.Inflation sat at 3.1

30、per cent as of November 2023,down from the peak reading of 8.1 per cent seen in June 2022.It is likely that inflationary pressures will continue to cool over the coming year.The nations unemployment rate has been trending up since the second quarter of 2023,suggesting that wage pressures will contin

31、ue to ease through 2024.Growth prospects will remain muted as both business and consumer spending are set to moderate further,with consumption re-balancing after the economic contraction seen in the third quarter of last year.As a result,the Bank of Canada has likely reached the end of its monetary

32、tightening cycle.After bond yields stabilized in the latter parts of last year,money markets began pricing in rate cuts as early as the start of the second quarter.Despite this,the magnitude of cuts remains uncertain.If borrowing costs do not drop as much as expected,growth prospects may be hindered

33、.2024 ECONOMIC OUTLOOK Historic immigration to aid long-term prospects.Canadas population grew by a re-cord pace of 3.2 per cent annually as of October 2023 amid outstanding immigration.This influx of new residents has been the main provider of resilience for Canadas econ-omy as it has expanded the

34、nations consumer base,propping up household spending.The federal government is set to welcome even more permanent residents in 2024.As the worlds third-leading destination for international students,Canada will also wel-come a surge in temporary residents.This rapid growth will likely act as a backs

35、top to a softening economy,creating optimism for healthy long-term performance.Economic risk remains if higher borrowing costs are prolonged.Despite interest rates likely being at their peak,Canadas economy still faces elevated risks of a down-turn.With the nation holding the highest household debt

36、levels in the G7,coupled with mortgages renewing on a more frequent basis,rising interest rates have a much great-er impact on the Canadian economy.It is estimated that roughly 70 per cent of mort-gage-holders will be faced with higher payments by the end of 2024.If financing costs do not fall by as

37、 much as the market expects,the Canadian economy could experience a much more significant pullback in consumption and a noteworthy deterioration in its housing market,curbing economic growth prospects.*Forecast;*Through NovemberSources:Bank of Canada;Capital Economics,Statistics Canada;TD EconomicsC

38、anada ImmigrationImmigration Target(000s)-1,,00024*22208060402Employment Change(000s)Employment vs.UnemploymentUnemployment RateEmployment ChangeUnemployment Rate2%4%6%8%10%GDP ChangeAnnual Change-6%-3%0%3%6%24*2220806040222530037545052526*25*24*23222120Rate-3%0%3%6

39、%9%23*222Headline InflationOvernight Rate10-Year Government Bond YieldInflation and Monetary Policy Trends5METRO ECONOMYSources:CMHC,Environics,Statistics CanadaEdmontonGEA5.7%TorontoGTA3.6%VancouverGVA3.9%OttawaGOA4.6%MontrealGMA1.0%Canada 2.5%Canada Average 19.8%Canada 6.0%Canada$90,689

40、Canada-6.8%Canada 27.2%JOB GROWTH(2023)2023 POPULATIONAGE 20-34FIVE-YEARHOUSEHOLD GROWTH(2023-2028)2023 MEDIANHOUSEHOLD INCOMEHOUSING STARTS(2022-2023 change)PERCENT WITHBACHELORS DEGREEOR HIGHER(15 years+)CalgaryGCAAlberta2.0%SW OntarioSWO2.5%4.1%Alberta4.1%Qubec1.3%Ontario2.6%Ontario2.6%Ontario2.6

41、%British Columbia2.3%25.7%26.7%26.2%26.3%23.8%24.7%26.1%24.5%24.5%22.0%25.2%25.2%25.2%24.0%10.6%8.3%8.2%7.7%4.8%11.2%6.9%8.9%8.9%3.3%6.8%6.8%6.8%6.9%$104,110$107,413$101,357$105,887$83,426$106,494$93,338$101,569$101,569$79,019$98,919$98,919$98,919$93,585-23.2%22.0%37.1%-25.7%-44.1%11.5%-6.2%-1.8%-1.

42、8%-35.7%0.3%0.3%0.3%14.2%28.3%37.8%35.1%37.3%29.4%36.0%25.3%27.3%27.3%24.1%30.1%30.1%30.1%28.6%6MULTIFAMILY OVERVIEWImmigration-Fueled Demand Set to Face Off Against Government-Led Building EffortsRecord population growth fuels multifamily fundamentals.Canadas population has grown at a record-settin

43、g pace,expanding 3.2 per cent annually as of the end of the third quarter of last year,pushing the nations total population above 40 million and causing a surge in apartment rental demand.This robust growth was primarily driven by historic immigration.In 2022,the country welcomed over 435,000 new pe

44、rmanent residents and more than 465,000 last year.Canada also offers many high-quality,post-secondary edu-cation institutions,making it the worlds third-leading destination for foreign students.International study permits were up 77 per cent annually in 2023,bringing Canadas total international stud

45、ent count to roughly 900,000.Further aiding demand,homeownership remained a challenge for many households,despite the average price of a single-family home softening after the Bank of Canada hiked its policy rate 475 basis points over the past two years.Potential homebuyers continued to find better

46、value within Canadas apartment rental market.As a result,the nations apartment sector has been extremely tight over the past two years.Canadas vacancy rate hovered just below 2.0 per cent to end 2023,helping annual rent growth reach roughly 7.0 per cent.Supply shortfalls further prop up apartment re

47、ntal sector.Due to various rent control policies in many provinces,the feasibility of apartment rentals discouraged building activity over the past decade as for-owned condos generally yielded a better return.As a result,the supply of purpose-built rentals has remained relatively scarce as almost al

48、l of Canadas major metros have fewer rental units per capita than 30 years ago.Given Can-adas tight vacancy supporting above-average rent growth in recent years,construction activity has significantly picked up.Even so,demand has outpaced supply,which helped support robust apartment performance in 2

49、023.2024 HOUSING OUTLOOK Demand tailwinds sustain throughout 2024.With Canadas federal government set to welcome 485,000 new permanent residents this year,followed by an additional 500,000 in 2025 and 2026,population growth is expected to remain well above the nations long-term average.On top of the

50、se historic population tailwinds,the expectation of a pro-longed period of higher borrowing costs is likely to create further affordability hurdles within Canadas homeownership market.Housing demand,as a result,is set to continue to be redirected toward the apartment rental sector.While an uptick in

51、 construction activity in recent years is likely to alleviate some vacancy pressures,the market will re-main well below equilibrium levels.Canadas multifamily sector should hold extremely tight,maintaining the property type as a preferred investment option.Government action to aid development.As hou

52、sing affordability has increasingly be-come an area of concern,the federal government has taken steps to balance Canadas housing market by announcing the Enhanced GST Rental Rebate.This is a tax incentive created in a bid to kickstart purpose-built rental construction by fully eliminating GST and th

53、e federal portion of HST.This will account for a minimum 5.0 per cent tax reduc-tion and could spur development as many builders have paused ongoing projects,due to rising costs and limited financing options.The federal government also increased the Canada Mortgage Bond issuance limit by$20 billion

54、per year,ensuring that builders and investors continue to have access to low-cost financing provided by the CMHC.Price and Cap Rate Trends$140$160$180$200$220232221201918Average Price per Unit(000s)Average Cap RateAverage Price per UnitAverage Cap Rate2%3%4%5%6%Single-Family Detached Benchmark Price

55、Median Single-Family Price(Millions)$0.3$0.8$1.3$1.8$2.323*222Apartment Transactions Over$20 MillionNumber of Transactions23 Vacancy RateMultifamily Vacancy Trend015304560VancouverTorontoSW OntarioOttawaMontrealEdmontonCalgaryCalgaryCanadaMontrealEdmontonSW OntarioOttawaVan

56、couverToronto1%2%3%4%5%24*2220181614*Forecast;*Through October;v Trailing 12 months through 3QSources:Altus Data Solutions;CMHC;CoStar Group,Inc.;Statistics Canada7RETAIL OVERVIEWExpanding Product Offerings Cater to Evolving Demand;Potential for Rate Cuts to Spur Consumption Resilient consumers help

57、ed strengthen sector fundamentals.Supported by a healthy job market and record-high population growth,consumer spending in Canada continued to increase last year,despite rising interest rates.Total retail sales rose 2.1 per cent year-over-year as of September 2023.Leasing demand remained robust as a

58、 result,outpacing an increase in completions and suppressing the national vacancy rate below 2.0 per cent,a post-pandemic low.Tenants acted fast to expand their operations once spaces became available.Soon after the exit of Bed Bath&Beyond,for instance,several large retailers including Canadian Tire

59、,Toys“R”Us,Babies“R”Us and Mountain Equipment Company quickly announced takeovers of these vacated spaces.Tight vacancy kept rents on an upward trajectory.The average asking rent increased 3.4 per cent year-over-year,which ended 2023 above$30 per square foot.Retail product diversification meeting ch

60、anging consumer preferences.Consumer be-haviour has changed.Compared to the pre-pandemic trend,shoppers spent more on dis-cretionary goods and services in 2023,such as motor vehicles,restaurant dining,personal care and travel.Retail product diversification is also underway to meet growing demand for

61、 experiential retail.The Well retail podium in Toronto,The Post in Vancouver and the Royalmount project in Montreal are such developments that enrich consumers shopping experiences.The former Nordstrom and Nordstrom Rack locations are also expected to be re-purposed for more food and beverage offeri

62、ngs,as well as entertainment uses.2024 RETAIL OUTLOOK Short-term headwinds to soften retail activity;long-term outlook remains positive.In late 2023,while total retail sales remained up 2.2 per cent annually,inflation-adjust-ed retail sales contracted for four consecutive months as of September.Cons

63、umers be-gan to pull back on spending amid rising debt-servicing liabilities.This trend is likely to continue,at least through early parts of 2024.Consumption in essential retail products,however,should remain healthy,especially in the densely-populated suburbs.In urban areas,downtown foot traffic m

64、ay normalize only gradually due to still-elevated office vacancy rates.This will continue to be the main challenge for downtown retailers.In the latter part of the year,financial conditions may ease following possible rate cuts from the BoC.A recovery in consumer spending will likely ensue.Combined

65、with historic population growth,the retail sector will remain well-positioned for long-term growth.Vacancy to remain stable.Moderating consumer spending will weigh on leasing ac-tivity for at least the first few months of 2024,which may cause a short-term uptick in the vacancy rate.However,an antici

66、pated recovery in private consumption toward the second half of the year,still-elevated population growth,and a projected annual de-crease in completions should eliminate this upward pressure.Out of the seven major markets,Montreal will see the greatest increase in vacancy due to the delivery of the

67、 Royalmount mall.Fundamentals in Calgary and Edmonton will remain sound thanks to Albertas high-performing energy sector,as well as record in-migration patterns.In other markets,the vacancy rate will end 2024 roughly unchanged from last years level.For investors,while the potential for rate cuts in

68、2024 should improve sentiment,buy-ers may increasingly favour property types with more robust fundamentals,such as sin-gle-tenant assets and properties that offer suburban essential retail,to minimize risks.*Estimate;*Forecast;v Trailing 12 months through 3QSources:Altus Data Solutions;CoStar Group,

69、Inc.;Statistics CanadaRetail Supply and DemandCompletions/Absorption(Millions)02.55.07.510.024*23*222120191.5%2.0%2.5%3.0%3.5%Vacancy Rate Completions SFVacancy RateNet Absorption SF$400$500$600$700$800232221201918-5%0%5%10%15%Retail Sales(Billions)Y-O-Y Percent ChangeRetail Sales Growth SlowingReta

70、il SalesY-O-Y Percent ChangeAnnual Vacancy Rate Changes in 2024Basis Points00VancouverTorontoSW OntarioOttawaMontrealEdmontonCalgaryRetail TransactionsNumber of Transactions23-40-2002040VancouverTorontoSW OntarioOttawaMontrealEdmontonCalgary8OFFICE OVERVIEWVacancy Drifting

71、Higher Amid Waning Office Needs;Sales Activity May Improve,Albeit with Downside RisksSoft demand to keep vacancy rates on upward trajectory.In 2023,Canadas office sec-tor showed few signs of stabilizing as the national vacancy rate increased at a faster pace compared to the prior year.The share of u

72、noccupied spaces reached all-time highs in Toronto,Montreal and Southwestern Ontario,while registering post-pandemic records in Ottawa and Vancouver.Higher interest rates curbed business expansion,which di-minished the need for office space.Businesses also consolidated their office footprints as hyb

73、rid work arrangements became the new norm.Canadas economic growth is expected to remain soft in early 2024,with a greater number of businesses being affected by elevat-ed interest rates.This will likely cut the need for office spaces further.On the supply side,Toronto is projected to see a surge in

74、completions,while other metros are expected to experience more disciplined construction activity.The national vacancy rate,as a result,will continue to trend higher,but may begin to show early signs of stabilizing toward the latter months of the year as the nations historic construction cycle nears

75、completion.Conversion programs becoming a national trend.Following Calgarys implementation of its downtown office conversion initiative,other major metros followed suit.Local gov-ernments are looking into providing public funding for such programs.City councillors in Edmonton,for instance,have consi

76、dered the Downtown Community Revitalization Levy as a potential source of capital to support these re-development projects.Ottawas gov-ernment is also in the process of piloting a financial incentive program for office-to-res-idential conversions within the Somerset Ward region.These programs will n

77、ot only cut unused office inventory,but also help address Canadas housing shortage.2024 OFFICE OUTLOOK Lower rents to end 2024.Toronto and Vancouver,which hold more than 40 per cent of Canadas total office stock,are estimated to contribute disproportionately to over 80 per cent of Canadas total inve

78、ntory growth this year.Vacancy rates in these two regions,as a result,will register the greatest increases among all major markets.Other metros will experience more subdued supply growth,with just 300,000 square feet to be complet-ed in Calgary,Edmonton,Ottawa and Southwestern Ontario combined.Vacan

79、cy rates are still forecast to increase due to weak demand,but at a milder pace in these markets.Tenants seeking top-of-the-line spaces for relocation will continue to face strong com-petition,leaving more Class B and C buildings on the market.Due in part to greater va-cancy among these older assets

80、,office rents are forecast to register a mild decline,with the national average asking rent hovering around$19 per square foot by the end of 2024.Cautiously optimistic outlook for investors.Office investment ended 2023 on a soft note amid elevated financing costs and weakening fundamentals.However,i

81、nvestor sentiment could recover in 2024,as possible rate cuts may improve credit conditions toward the second half of the year.Office conversion programs across Canada will likely also introduce new investment pathways to tap into the multifamily market,which now benefits from booming demand due to

82、record population growth.Yet,transaction vol-ume may remain subdued if Canadas economic growth deteriorates more than expect-ed in 2024.Office vacancy rates will likely rise at a fast clip in this scenario,which can continue to weigh on sales activity.Investors may choose to minimize risks by pursui

83、ng top-tier Class A properties that tend to offer more robust fundamentals.*Estimate;*Forecast;v Trailing 12 months through 3QSources:Altus Data Solutions;CoStar Group,Inc.;Statistics CanadaPrice and Cap Rate Trends$260$300$340$380$420232221201918Average Price per Square FootAverage Cap RateAverage

84、Price per Sq.Ft.Average Cap Rate6.0%6.5%7.0%7.5%8.0%Ofce Supply and DemandCompletions/Absorption(Millions)-9.0-4.504.59.024*23*222120198%10%12%14%16%Vacancy Rate Completions SFVacancy RateNet Absorption SF 075150225300VancouverTorontoSW OntarioOttawaMontrealEdmontonCalgaryOfce TransactionsNumber of

85、Transactions23 4*2220181614-6%-3%0%3%6%Total Jobs(Millions)Y-O-Y Percent ChangeEmploymentEmploymentY-O-Y Percent Change9INDUSTRIAL OVERVIEWCanadas Industrial Market Inching Toward a More Balanced State as Demand Moderates and Supply Rises Demand to hold above nations long-t

86、erm average.Canadas industrial market has witnessed record performance in recent years.The nations vacancy rate hit an all-time low of 1.0 per cent in 2022,helping annual rent growth average 12 per cent between 2021 and 2023.This was mainly due to surging e-commerce spending brought on by the global

87、 health crisis.While online shopping activity as a share of total retail sales has eased from nearly 12 per cent seen during the pandemic to roughly 6.0 per cent as of the third quarter of 2023,it remained well above the long-term average of 3.0 per cent.In 2024,industrial space needs are set to mod

88、erate from the historic levels seen in recent years as rising borrowing costs curb both business and consumer spending.Intermodal rail and port traffic declined over the latter half of last year,a signal that demand for space is primed to cool.However,these indicators along with still elevated e-com

89、merce-related activity continue to sit above historic standards,which should keep underlying fundamentals healthy despite some balance returning to the market.Supply and demand forces work in tandem to alleviate some vacancy pressures.Rising interest rates over the past two years have caused nationa

90、l leasing volumes to cool.Quarterly absorption over the first nine months of 2023 averaged roughly 3.6 million square feet,nearly half of the level seen over the prior three-year period.While moder-ating absorption can also be attributed to limited available space,a decline in pre-leasing indicates

91、cooling demand.New supply over the coming year,meanwhile,will exceed re-cent annual averages,as the under-construction pipeline sits at roughly 30 million square feet as of the end of September 2023.Combined,these forces should help alleviate some of the tightness in the market and push up the vacan

92、cy rate,without it escalating too high.Demand is still expected to hold above long-term standards,and new product under construction only sits at 1.5 per cent of current stock.As a result,industrial rent growth in Canada should continue to outpace inflation over the coming year.2024 INDUSTRIAL OUTLO

93、OK Nearshoring to aid industrial demand.Due to ongoing global insecurity,many firms are looking to localize supply chains.This process of nearshoring is likely to benefit Canadas industrial sector over the coming years as the nation is beginning to carve out a key spot in the global supply chain of

94、electric vehicle battery manufacturing.Given the countrys established automotive network,as well as the abundance of key input mate-rials needed for EV battery production,numerous automotive and battery manufactur-ers are choosing Canada,with notable investments in Ontario,Qubec and British Co-lumbi

95、a.This is set to directly impact manufacturing demand,together with distribution and warehousing demand.Such large corporate investments will facilitate clustering effects,which will drive robust job creation and growth over the long-term.Positive investor sentiment to hold.The share of total invest

96、ment dollars going to-ward industrial properties has been trending up since 2020,increasing from roughly 25 per cent to 42 per cent as of September 2023.As the average asking rent has grown by 45 per cent during that time,industrial has become a sought-after asset.With fundamen-tals to remain favour

97、able in 2024,financing will be relatively more available.Coupled with the expectation of declining interest rates over the latter half of the year,industrial real estate should continue to capture a large share of investment dollars.*Estimate;*Forecast;v Trailing 12 months through 3QSources:Altus Da

98、ta Solutions;CoStar Group,Inc.;Statistics CanadaPrice and Cap Rate Trends$100$150$200$250$300232221201918Average Price per Square FootAverage Cap RateAverage Price per Sq.Ft.Average Cap Rate3%4%5%6%7%Industrial Supply and DemandCompletions/Absorption(Millions)01428425624*23*222120190%1%2%3%4%Vacancy

99、 Rate Completions SFVacancy RateNet Absorption SF Industrial TransactionsNumber of Transactions23 02505007501,000VancouverTorontoSW OntarioOttawaMontrealEdmontonCalgaryE-Commerce ActivityTotal Retail Sales(Billions)$0$17$34$51$68232221201918Share of Total Retail Sales0%4%8%12%16%Retai

100、l SalesShare of E-Commerce Sales10HOSPITALITY OVERVIEWBooming Tourism to Feed Further Revenue Gains;Investors on Standby for Future Openings Broad-based recovery in full swing,with leisure travel taking centre stage.In the first post-pandemic year free of travel restrictions,upward momentum in the h

101、ospitality sector continued to build.The national occupancy rate climbed back to the pre-pandemic level in 2023,with ADR and RevPAR both rising at double-digit rates.A shift in consum-ers preference toward discretionary goods and services led to a considerable increase in leisure travel spending,whi

102、ch drove the recovery in the hospitality sector.Corporate and group travel also continued on an upward trajectory,which was evident in rising weekday occupancy rates.However,demand in this segment still lagged behind the pre-pandem-ic measure as overall business travel needs have been reduced,due to

103、 the adoption of remote meetings,ESG compliance and businesses cost-cutting efforts.Among all chain scales,luxury,upper upscale and upscale hotels enjoyed the greatest occupancy and RevPAR gains,which suggests that travelers sought top-of-the-line experiences,despite heightened inflation in the post

104、-pandemic era.Leisure demand still dominates in next phase of growth.Despite elevated interest rates exerting downward pressure on global economic growth in 2024,a further improve-ment is expected in Canadas hospitality sector.While corporate and group travel could remain lacklustre,leisure travel w

105、ill likely continue to be a priority for many people.Overseas flight routes may continue to normalize,which should bring more foreign visitors to Canada.A stronger U.S.economy and its currency,compared to the Canadian counterparts,have the potential to further boost inbound trans-border tourism as w

106、ell.Additionally,many metros have received public funding to enrich local tourism resourc-es,which will help create more capacity in the tourism sector.These factors will be the main drivers for hotel demand over the near term,lifting revenues once again this year.2024 HOSPITALITY OUTLOOK Key revenu

107、e metrics remain on an upward trajectory.Supported by strong leisure demand,the national occupancy rate is forecast to increase by 100 basis points in 2024.Out of the seven major metros,Edmonton is expected to enjoy the greatest annual oc-cupancy increase of 400 basis points,while Vancouver will be

108、the first market to see its annual occupancy rate reach 80 per cent post-pandemic.Given these still-healthy demand drivers,daily rates are set to continue growing;however,as operating costs are set to stabilize amid easing inflation,ADR will increase at a slower pace compared to last year.With the o

109、ccupancy rate and ADR both registering an advancement,the average RevPAR is projected to end 2024 with a 4.9 per cent annual increase.Sales muted amid strong buyer interest.Canadas generational ownership structure continued to be the main reason for hoteliers reluctance to trade in 2023.Many owners

110、also opted to capitalize on fast-improving operating fundamentals instead of selling.A number of small-sized and independent hotels,however,changed hands in select met-ros like Calgary and Southwestern Ontario last year,as rising incomes provided an exit strategy for some owners who suffered from si

111、gnificant losses during the pandemic.De-spite muted trading activity,it is worth noting that Torontos Hazelton Hotel was sold at the highest price per room ever recorded nationwide in June 2023.Any openings this year will likely gather great buyer enthusiasm thanks to a positive sector outlook,espe-

112、cially toward the second half of the year as financing conditions are expected to ease.Occupancy Recovery by Metro2019-2024*Change in Occupancy(Basis Points)Annual Occupancy TrendsOccupied Room Nights(Millions)07142128VancouverTorontoSW OntarioOttawaMontrealEdmontonCalgaryHotel TransactionsNumber of

113、 Transactions0357010514024*2220806040230%40%50%60%70%Occupancy RateRoom NightsOccupancy Rate23*$50$100$150$200$25024*22208060402$20$50$80$110$140Annual ADRAnnual RevPARAnnual Revenue TrendsADRRevPAR-VancouverTorontoSW OntarioOttawaMontrealEdmontonCa

114、lgary*Forecast;*Trailing 12 months through 3QSources:Altus Data Solutions;Statistics Canada;STR,a CoStar Group Company11CALGARY|MULTIFAMILYHealthy Migration Patterns and Evolving Job Opportunities Fuel Multifamily DemandDemand tailwinds to continue this year.Albertas population growth approached new

115、 heights in 2023,expanding 4.3 per cent year-over-year as of the third quarter.Inter-provincial migration hit a historic level of 56,000 people,and international immigration reached 54,000 a near record high.This largely reflects Albertas lower cost-of-living and the increasing willingness for peopl

116、e to relocate to more affordable regions.With the federal government set to welcome 1.5 million new permanent residents by 2026,this apart-ment demand driver is likely to continue throughout 2024.This holds especially true for Calgary,as roughly 10 per cent of all new-comers move to the metro.Additi

117、onally,multifamily demand is set to benefit from heightened oil prices and the expected completion of the Trans Mountain Pipeline,further fueling employment gains in the energy sector.New industries are also beginning to evolve.Am-azons AWS and IBM have set up innovation hubs within the region,as Ca

118、lgary is seeing some of the fastest growth in tech talent across Canada.With ongoing population gains being complemented by both traditional and high-tech job opportunities,apartment demand is likely to remain well-supported over the coming year.INVESTMENT TRENDS The Downtown Calgary Development Inc

119、entive Program has 13 approved projects and an additional four under review to convert underutilized office space to residential and alternative uses.Demand for multifamily assets is likely to continue,with investors hunting for higher yields,as cap rates sat around 4.8 per cent as of the third quar

120、ter of 2023.2024 Multifamily TrendsCONSTRUCTION:With rental starts running above average in recent years,coupled with delayed projects wrapping up amid rising costs,new supply is forecast to increase compared to last year and near record levels.VACANCY:Vacancy is expected to inch up slightly and end

121、 the year hovering around 2.0 per cent,due to an influx of new supply over the past few years.The rate,however,will remain 200 basis points below its 2019 level.RENT:Robust demand due to historic population growth,coupled with the arrival of new,amenity-rich supply and non-existent rent control poli

122、-cies,are likely to sustain near-record high annual rent growth.Average Price per Unit(000s)Vacancy RateVacancy TrendPrice and Cap Rate TrendsAverage Cap RateAverage Price per UnitAverage Cap Rate$100$125$150$175$20023*22212019184.0%4.5%5.0%5.5%6.0%0%2%4%6%8%24*22201816144,500UNITSwill be completed2

123、0BASIS POINTincrease in vacancy10.2%in effective rentINCREASE*Forecast;*Through 3Q Sources:Altus Data Solutions;CMHC;CoStar Group,Inc.;Statistics Canada12CALGARY|RETAILRetail Market Well-Supported as Energy Sector Tailwinds Aid Local EconomyRetail fundamentals to remain healthy.In 2023,elevated oil

124、prices and the continued diversification of the local economy supported Calgarys job market and household income.This provided the backbone for growing consumer spending in the metro.Additionally,an influx of new residents helped solidify the local consumer base,which encouraged retailers to expand

125、their presence.The vacancy rate remained on a downward trajectory as a result,dropping to the pre-pandemic level in the final quarter of the year.Looking ahead,oil production is forecast to increase notably in the next 12 months.This will act as a shield against near-term economic headwinds caused b

126、y elevated interest rates.Coupled with a further increase in the local population,the metros retail sector is expected to record another year of robust performance.The vacancy rate is projected to remain relatively stable,causing rent growth to accelerate.On the supply side,construction activity wil

127、l soften,as total completions are estimated to drop below 1 million square feet for the first time since 2015 as rising costs curb building activity.Similar to 2023,almost all new projects will be completed in suburban areas,with the majority of additions being mixed-use properties.INVESTMENT TRENDS

128、 Despite rising interest rates,overall transaction activity recovered last year.The first three months saw total dollar volume exceed$300 million,which was the strongest quarter since 2012.Stabilizing interest rates may lead to a further increase in invest-ment in 2024;however,investors will likely

129、prefer suburban es-sential retail for its robust fundamentals amid a slowing economy.Average Price per Square FootEmployment Change(000s)Employment vs.Retail Sales TrendsEmployment ChangeAlberta Retail Sales Growth-40-200204023*2221201918-60%-30%0%30%60%Price and Cap Rate TrendsAverage Cap Rate$300$

130、350$400$450$50023*22212019185.5%6.0%6.5%7.0%7.5%Year-Over-Year Retail GrowthAverage Price per Sq.Ft.Average Cap Rate2024 Retail TrendsCONSTRUCTION:Completions will continue to trend lower,falling below 1 million square feet.Elevated financing and building costs are major concerns hindering construct

131、ion activity.VACANCY:Despite elevated interest rates cre-ating potential headwinds,robust demand drivers and limited new supply should support a relatively stable vacancy rate,ending the year hovering around 2.5 per cent.RENT:Retail rents are expected to climb amid still-healthy demand and declining

132、 new supply.The average asking rent will approach$29 per square foot by the end of 2024.940,000SQUARE FEETwill be completed10BASIS POINTdecrease in vacancy3.5%in asking rentINCREASE*Employment through October,retail sales through September;*Through 3QSources:Altus Data Solutions;CoStar Group,Inc.;St

133、atistics Canada13CALGARY|OFFICEOffice Momentum to Slow;Conversion Program Could Stabilize VacancyNear-term headwinds to curb momentum.Aided by a high-per-forming energy sector and a diversifying local economy,Calgarys office net absorption turned positive in 2023,after remaining below zero during th

134、e prior four-year period.The metro is also tackling office underutilization via its downtown conversion program,which provided funding for 13 projects to transform unused offices into residential buildings,hotels,schools and performing arts spaces before funding was exceeded.As a result,the vacancy

135、rate declined slightly in 2023,sitting just above 21 per cent.With very limited new construction,the metros office fundamentals now almost solely de-pend on demand dynamics.Over the coming year,elevated interest rates are expected to slow the metros economic growth and weaken office demand,albeit at

136、 a softer level compared to other metros,given elevated oil prices over the latter half of last year.The vacancy rate will remain relatively stable,potentially increasing slightly.If the metro resumes its office conversion program,the initiative could slash office vacancy in the coming years.Without

137、 a significant im-provement in demand,however,Calgarys office vacancy will remain at elevated levels.INVESTMENT TRENDS Transactions among private buyers were scarce in 2023.The Min-istry of Infrastructure,however,made the largest purchase,ac-quiring a$75 million office building in Northwest Calgary.

138、If resumed,the downtown conversion program could lead to more transactions in 2024,given an expected easing of financial condi-tions,as well as ongoing population growth and housing demand.2024 Office TrendsCONSTRUCTION:Given the metros office vacancy rates of over 20 per cent,new development is alm

139、ost non-existent.Almost all new supply in 2024 is set to be delivered in the Northeast.VACANCY:The vacancy rate is set to hold relatively stable as elevated energy prices and ongoing tech growth sup-port leasing.Heightened borrowing costs,however,are expected to slow business expansion,putting sligh

140、t upward pressure on vacancy.RENT:Office rents will likely stagnate in 2024 amid elevated vacancy rates.However,as more tech companies move into the metro,the average asking rents may see some upside potential in the years ahead.Average Price per Square FootCompletions/Absorption(Millions)Supply and

141、 DemandVacancy Rate-1.4-0.700.71.424*23*2221201918%20%22%24%26%Completions SFVacancyNet Absorption SFPrice and Cap Rate TrendsAverage Cap Rate$100$150$200$250$3002322212019186%7%8%9%10%Average Price per Sq.Ft.Average Cap Rate70,000SQUARE FEETwill be completed10BASIS POINTincrease in vacancy0.6%in as

142、king rentINCREASE*Estimate*Forecast;v Through 3Q Sources:Altus Data Solutions;CoStar Group,Inc.;Statistics Canada14CALGARY|INDUSTRIALInfluence of Energy Sector and Expanding Distribution Hub Aid Industrial OutlookUnique drivers pave growth path,despite broader uncertainty.Albertas economy is set to

143、outperform the national average in 2024 as elevated energy prices in the latter half of last year support an ex-pansion in the natural resources sector.Canada is anticipated to lead the world in oil production growth as the nation is expected to add another 500,000 daily barrels.With Alberta being C

144、anadas energy capital,industrial-related space demand is set to benefit.Additional-ly,with industrial rents in Calgary roughly 40 per cent below that of Vancouver,the metro continues to play an increasing role as a center for distribution and logistics,servicing all of western Canada.Given these low

145、er rental rates,transportation and warehousing companies find it more cost effective to ship goods from ocean ports in Brit-ish Columbia to Alberta,before distributing them to its end user.Coupled with near-record population growth witnessed in 2023 sup-porting e-commerce-related activity,distributi

146、on and logistics space demand will remain healthy albeit at subdued levels compared to recent highs witnessed over the past two years,given ongoing eco-nomic uncertainty.These demand drivers indicate industrial growth will likely continue throughout the year.INVESTMENT TRENDS With rental rates laggi

147、ng Vancouver and robust population growth supporting distribution demand,positive investor sentiment should hold as the market offers a potential growth opportunity.Due to Calgarys relatively abundant amount of lower-cost land,and higher cap rates,the metro will continue to attract investors from Ca

148、nadas other major markets searching for yields.Average Price per Square FootCompletions/Absorption(Millions)Supply and DemandVacancy Rate0246824*23*222120190%2%4%6%8%Completions SFVacancyNet Absorption SFPrice and Cap Rate TrendsAverage Cap RateAverage Price per Sq.Ft.Average Cap Rate$120$145$170$19

149、5$2202322212019184%5%6%7%8%2024 Industrial TrendsCONSTRUCTION:New supply is set to remain ele-vated in 2024 as Calgarys historic construction cycle,which began in late 2021,nears its end.However,deliveries will drop compared to last years record level.VACANCY:Historic supply growth and soften-ing de

150、mand amid elevated interest rates will cause vacancy to end the year sitting just below 4.0 per cent,roughly 100 basis points under the metros long-term average.RENT:Sitting below the national average,rents still have room to grow as space demand is tempering,but still above the long-term standard.T

151、he rate of growth will ease com-pared to last year as vacancy inches up and tenants have more options.4.0 MILLIONSQUARE FEETwill be completed60BASIS POINTincrease in vacancy3.8%in asking rentINCREASE*Estimate;*Forecast;v Through 3QSources:Altus Data Solutions;CoStar Group,Inc.;Statistics Canada15CAL

152、GARY|HOSPITALITYRevenue Continues to Improve Amid Stabilizing Travel DemandKey metrics to see modest improvement in 2024.A return of visitors benefited Calgarys hospitality sector last year.Flight data shows that domestic and international passenger volumes all regis-tered double-digit percentage in

153、creases,with a roughly 70 per cent annual advancement from overseas visitors.Momentum continued to build in all revenue metrics as a result,with the occupancy rate during the peak summer season exceeding 80 per cent for the first time since 2013.Leisure travel still dominated the market,which was ev

154、ident in higher occupancy rates in the submarkets surround-ing the airport,as compared to the downtown area.Labour shortag-es also improved last year,which helped hoteliers provide better ser-vices.A slowing economy in 2024,both domestic and abroad,could hold back the pace of growth in travel spendi

155、ng.Transient leisure travel demand is expected to stabilize,with relatively limited upside gains in hotel revenues.Downtowns annual average occupancy rate is projected to rise above 60 per cent,but will still lag behind other regions,as reduced needs for in-person meetings will continue to weigh on

156、corporate travel expenditures.INVESTMENT TRENDS Most sales last year took place in the first six months,as a brief pause in interest rate hikes aided financing.The largest transac-tion was the sale of MTN House By Basecamp in Canmore.Beyond the pause in rate hikes,deals in 2023 were partly driven by

157、 strong revenue gains facilitating exit plans for some owners.Most of these were sales falling within the$10 million category.2024 Hospitality TrendsOCCUPANCY:The occupancy rate is set to stabi-lize,after rebounding at a fast pace between 2021 and 2023.Occupancy near the airport and surrounding subm

158、arkets will continue to exceed that metric in the downtown core.ADR:Most of the gains in ADR are project-ed to be front-loaded in the first half of the year.This is due to lower rates recorded within the same period in 2023.The annual average ADR is forecast to rise above$130.RevPAR:An increase in t

159、he occupancy rate and ADR will result in RevPAR not-ing an improvement.The revenue gain is expected to be most visible in the downtown area,followed by the Airport submarket.Total Dollar Volume(Millions)Transaction TrendsOccupancy RateOccupancy and Revenue Metrics0%20%40%60%80%24*22208$0$

160、50$100$150$200ADR/RevPAROccupancy RateADRRevPAR$0$30$60$90$12023*222120191895BASIS POINTchange in occupancy4.2%INCREASEin ADR5.8%in RevPARINCREASE*Forecast;*Trailing 12 months through 3Q Sources:Altus Data Solutions;Statistics Canada;STR,a CoStar Group Company16EDMONTON|MULTIFAMILYHigher-Paying Job

161、Opportunities Support Upper-Tier Apartment DemandEmergence of high-tech boosts multifamily outlook.For many years,Edmonton has offered the lowest multifamily rents among major Canadian metros,serving as a lower-cost alternative to the gateway markets.With growing affordability challenges in British

162、Columbia and Ontario,the metro has benefited from record levels of inter-provincial migration.Alberta welcomed 56,000 fellow Canadians over the past year ending in September 2023.On top of near-record population growth,job opportunities are continuing to grow.Traditional sectors,such as oil and gas,

163、are set to expand,due to energy prices seeing healthy gains in the latter half of last year.Additionally,the metro is also becoming a major player in the international technology sector.The University of Alberta,which is located in Edmonton,is one of the top three artificial intelligence research in

164、stitutions in the world,while the Alberta Machine Intel-ligence Institute was named a Center of Excellence.The region has attracted large corporate investments from global entities like IBM and Microsoft.With this,a younger demographic with high-income potential is beginning to emerge,supporting ele

165、vated rent growth and causing new,highly-amenitized supply to be absorbed quickly.INVESTMENT TRENDS Price growth began to stagnate in 2023.Coupled with rising inter-est rates and healthy rent growth,cap rates inched up and sat just above 5.0 per cent the highest among major Canadian metros.Dollar vo

166、lume sold over the trailing 12 months ending in Septem-ber 2023 was up 22 per cent annually as strong tenant demand and relatively higher cap rates attracted investors searching for yields.Average Price per Unit(000s)$100$110$120$130$14023*2221201918Vacancy RateVacancy TrendPrice and Cap Rate Trends

167、4.0%4.5%5.0%5.5%6.0%Average Cap RateAverage Price per UnitAverage Cap Rate0%2%4%6%8%24*22201816142024 Multifamily TrendsCONSTRUCTION:Apartment rental starts have been trending up since 2018,with 2021 and 2022 reaching new heights.As a result,completions for this year are set to remain well above the

168、 metros long-term average.VACANCY:Despite a surge in deliveries,new supply is forecast to lag behind demand.The metros vacancy rate will continue to trend down,ending the year just below 3.0 per cent.RENT:Ongoing demand and Edmontons younger demographic targeting new builds are likely to support nea

169、r-record high rent growth.This will be further aided by the absence of rent control policies.4,200UNITSwill be completed30BASIS POINTdecrease in vacancy7.1%in effective rentINCREASE*Forecast;*Through 3Q Sources:Altus Data Solutions;CMHC;CoStar Group,Inc.;Statistics Canada17EDMONTON|RETAILStrong Sect

170、or Performance Continues Amid Healthy Economic OutlookVacancy to reach a new post-COVID low.Edmontons retail sector fared better than expected in 2023,ending the year with more com-pletions,yet lower vacancy than previously anticipated.A healthy local economy which was supported by elevated oil pric

171、es,a heavy public sector presence and the continued inflow of new residents contributed to robust consumer spending and,in turn,strong retail leasing demand.Net absorption,as a result,exceeded new supply,compressing the vacancy rate to the pre-pandemic level in the fourth quarter of 2023.As Albertas

172、 economy is poised to benefit from increasing oil production,and continued immigration and in-migration in 2024,Edmontons job market is expected to be well cushioned against the impact of elevated interest rates.Retailers will thus feel more confident to expand operations within the metro.The suburb

173、an retail market may continue to outperform,due to consumers preferring to live and shop locally outside the urban core.On the supply side,current under-construction data shows that total completions will likely drop well below 1 million square feet in 2024.This limited supply growth will work in ta

174、ndem with healthy demand to push the vacancy rate to a new post-pandemic low.INVESTMENT TRENDS A few large-sized,single-tenant transactions over$20 million helped offset a notable decrease in multi-tenant sales,which main-tained total investment dollar volume at a healthy level in 2023.Stabilizing i

175、nterest rates and a positive sector outlook should facil-itate a recovery in investment over the coming quarters.2024 Retail TrendsCONSTRUCTION:Construction activity will remain subdued in 2024.New deliveries will account for just 0.8 per cent of total inventory,with a large share of the new space b

176、eing strip and neigh-bourhood centres.VACANCY:Vacancy is set to drop below the pre-pandemic level,as stable leasing demand will meet with tempered supply growth.Suburban areas will likely continue to see lower vacancy rates compared to the urban core.RENT:Annual rent growth is predicted to accelerat

177、e,as limited new supply in-tensifies competition among tenants.The average asking rent is estimated to hover around$24 per square foot in 2024.Average Price per Square FootEmployment Change(000s)Employment vs.Retail Sales TrendsEmployment ChangeAlberta Retail Sales Growth-50-250255023*2221201918-60%

178、-30%0%30%60%Price and Cap Rate TrendsAverage Cap Rate$200$250$300$350$40023*22212019186.0%6.5%7.0%7.5%8.0%Year-Over-Year Retail GrowthAverage Price per Sq.Ft.Average Cap Rate550,000SQUARE FEETwill be completed20BASIS POINTdecrease in vacancy3.4%in asking rentINCREASE*Employment through October,retai

179、l sales through September;*Through 3QSources:Altus Data Solutions;CoStar Group,Inc.;Statistics Canada18EDMONTON|OFFICESuburban Demand a Bright Spot;Incentive Program May Revive City CentreNear-term headwinds to soften leasing momentum.With essen-tially no new supply coming to market during the past

180、four-year pe-riod,Edmontons office vacancy rate has been on a slight downward trajectory since the start of 2023.Almost all of this improvement,however,has come from the peripheral market,which was facilitat-ed by a faster return-to-office pace outside the urban core.The heavy public sector presence

181、 has also helped maintain healthier levels of office occupancy in some parts of the metro.Leasing demand is ex-pected to slow in 2024 as the job market absorbs increasing impacts from a prolonged period of elevated interest rates.The vacancy rate,however,is forecast to remain relatively stable as Al

182、bertas economy is set to outperform the national average.On the supply-side,in order to revitalize downtown and meet the growing housing demand from elevated population growth,the local government is consid-ering an incentive program for office-to-residential conversions.If such a program materializ

183、es,it will complement ongoing redevelop-ment projects and help align office supply and demand.INVESTMENT TRENDS Despite weak transaction activity in 2023,Edmonton saw a hand-ful of deals crossing the$10 million mark.The largest transaction was a$22 million acquisition of a 160,000-square-foot office

184、 build-ing in the Pleasantview area.An incentive program for downtown office-to-residential conver-sions may spur investor interest,as population growth supports increasing housing demand.Possible rate cuts in 2024 could fur-ther facilitate such a recovery in investment activity.Average Price per Sq

185、uare FootCompletions/Absorption(Millions)Supply and DemandVacancy Rate-1.0-0.500.51.024*23*2221201911%13%15%17%19%Completions SFVacancyNet Absorption SFPrice and Cap Rate TrendsAverage Cap Rate$100$140$180$220$2602322212019187%8%9%10%11%Average Price per Sq.Ft.Average Cap Rate2024 Office TrendsCONST

186、RUCTION:Office development has virtually paused in Edmonton since 2020 due to elevated vacancy rates.With very few projects currently under construction,completions in 2024 will remain at a subdued level.VACANCY:As demand is projected to weaken given elevated borrowing costs,the office vacancy rate

187、will reverse course and rise slightly in 2024.The heavy public sector presence will help limit this increase.RENT:Office rents will hold essentially unchanged in 2024,as vacancy rates and leasing activity remain relatively stable.More active leas-ing in the suburbs may also soften this years rent gr

188、owth.20,000SQUARE FEETwill be completed10BASIS POINTincrease in vacancy0.4%in asking rentINCREASE*Estimate;*Forecast;v Through 3QSources:Altus Data Solutions;CoStar Group,Inc.;Statistics Canada19EDMONTON|INDUSTRIALEnergy Tailwinds and Ongoing Population Growth to Drive Industrial PerformanceMetro we

189、ll-positioned to benefit from economic landscape.Industrial space demand is forecast to remain healthy in 2024 as Albertas economy is set to outperform the national average amid elevated oil prices and ongoing record population growth.Edmon-ton will be essential in providing specialized industrial s

190、pace to the natural resources sector,as well as the oil and gas servicing industry,given its proximity to the oil sands.Also,the metro is well-posi-tioned to benefit from ongoing cleantech incentives offered by the federal government,due to the significant pool of professionals with unparalleled ene

191、rgy,extraction and engineering skills.Edmonton is the closest industrial hub for many of the natural gas,biomass,solar and hydrogen projects underway,making industrial-related space demand well-supported.On top of these evolving energy tailwinds,population growth should continue at a rapid clip,driv

192、ing the need for distribution space that services the immediate and surrounding areas.With rental rates relatively more affordable compared to neighbouring Vancouver,coupled with lower land values allowing for quicker development,those looking for best-in-class space find Edmonton to be a more cost-

193、effective market.INVESTMENT TRENDS Investment activity in 2023 was mainly fueled by the Dream/GIC portfolio acquisition,which featured roughly 20 properties in Ed-monton and equated to$585 million.After peeling away the portfolio transaction,owner-user sales ac-counted for the next largest share of

194、investment activity,reaching roughly 20 per cent of total dollar volume.2024 Industrial TrendsCONSTRUCTION:New supply growth is set to slow compared to the elevated levels seen in recent years.However,deliver-ies will remain above the metros long-term average as lower-cost land entices development a

195、ctivity.VACANCY:Elevated oil prices and the ongoing population expansion should sup-port healthy economic growth this year.As a result,vacancy will remain relatively stable,ending the year hovering just above 3.5 per cent.RENT:Given Edmontons affordable nature,combined with the flight-to-quality tre

196、nd playing out across the market,rent growth is forecast to remain above the regions long-term aver-age.Year-end rent will sit just below$11.00 per square foot.Average Price per Square FootCompletions/Absorption(Millions)Supply and DemandVacancy Rate-2024624*23*222120190%2%4%6%8%Completions SFVacanc

197、yNet Absorption SFPrice and Cap Rate TrendsAverage Cap Rate$90$115$140$165$19184%5%6%7%8%Average Price per Sq.Ft.Average Cap Rate1.6 MILLIONSQUARE FEETwill be completed20BASIS POINTincrease in vacancy3.3%in asking rentINCREASE*Estimate;*Forecast;v Through 3Q Sources:Altus Data Solutions;C

198、oStar Group,Inc.;Statistics Canada20EDMONTON|HOSPITALITYTourism Sector Receives Policy Support;Stable Inventory Aids Occupancy GainsUpside potential continues in 2024.Following four years of recovery,Edmontons annual average occupancy rate rose above 55 per cent in 2023.The metro welcomed an influx

199、of visitors,with the number of foreign travelers increasing at the fastest pace,accord-ing to air passenger statistics.Besides transient leisure travel that led the recovery,corporate demand was also well-supported by the public sector.This increasing occupancy will likely continue in 2024.Late last

200、 year,Edmonton introduced its Indigenous Tourism Strategy,aiming to draw visitors to the metros distinctive Indige-nous cultures.The federal government has also invested$3.7 million to enhance several key attractions,including Fort Edmonton Park,the Edmonton Valley Zoo and the Muttart Conservatory.T

201、hese efforts are strengthening the metros tourism resources,which will help attract more inbound travelers and improve revenue metrics in the hospitality sector.After several years of inventory expansion,construction activity will be muted in 2024.This lack of supply-side pressure will be another po

202、sitive factor aiding a further recovery in Edmontons hospitality sector.INVESTMENT TRENDS Transaction activity slowed last year,as higher financing costs were the main barrier for investors.Still-soft fundamentals,com-pared to the national average,also weighed on investor sentiment.Despite an increa

203、se in hotel values,Edmonton remained Canadas least costly market for investors.The metros average sale price hovered roughly 40 per cent below the national average in 2023.Total Dollar Volume(Millions)Transaction TrendsOccupancy RateOccupancy and Revenue Metrics0%20%40%60%80%24*22208$0$40

204、$80$120$160ADR/RevPAROccupancy RateADRRevPAR$0$30$60$90$12023*222 Hospitality TrendsOCCUPANCY:Edmontons occupancy rate is fore-cast to rise above 60 per cent this year for the first time since 2016.The suburbs surrounding Edmon-ton are projected to see the greatest increase of 450 basis p

205、oints.ADR:ADR will remain on an upward tra-jectory amid increasing occupancy in 2024.Most gains are expected in the summer months,as lower rates were recorded within the same period last year due to wildfires.RevPAR:Strong occupancy and ADR gains will push RevPAR higher in 2024.Suburban submarkets w

206、ill likely see larger revenue increases as leisure demand leads the recovery.400BASIS POINTchange in occupancy6.5%INCREASEin ADR14.0%in RevPARINCREASE*Forecast;*Trailing 12 months through 3QSources:Altus Data Solutions;Statistics Canada;STR,a CoStar Group Company21MONTREAL|MULTIFAMILYDiversified Eco

207、nomy Aids Multifamily Fundamentals,yet Some Risks EmergingWide array of job opportunities support apartment demand.As Canadas second-largest economy,Montreal has a highly-educated and diversified workforce.Combined with the metros relatively lower cost-of-living and a high quality of life,the city t

208、ends to attract a wide range of talent.The metro is also home to six major universi-ties,which has drawn a broad scope of employers searching for qual-ity labour.Montreal is establishing itself in the artificial intelligence sector,is a leader in the life sciences industry,and has the third-larg-est

209、 aerospace cluster in the world.Boosted by historic immigration,annual population growth hit near-record highs in the third quarter of 2023,expanding by just over 2.0 per cent.While historic immigra-tion targets set by the federal government will continue to support multifamily demand throughout the

210、 year,some risks are forming.Population growth in 2023 trailed the national average and was the lowest among Canadas major metros.The recent adoption of Bill 96 adds various requirements for business and educational establish-ments to operate in French.Its adoption could weigh on immigra-tion and jo

211、b creation as it may have a negative impact on the citys growing startup ecosystem.INVESTMENT TRENDS Total dollar volume over the past year ending in September 2023 was down 40 per cent as rising interest rates curbed buyer appe-tite.The average sale price fell 5.0 per cent,pushing cap rates up.With

212、 capital markets uncertainty persisting last year,institutional players remained sidelined.Private buyers,as a result,accounted for roughly 85 per cent of the total dollar volume purchased.2024 Multifamily TrendsCONSTRUCTION:Completions will remain well above the metros long-term average,but will fa

213、ll from the elevated levels seen in recent years.Construction starts dropped 30 per cent annually in 2022 amid rising costs.VACANCY:While demand is expected to remain healthy in 2024,the vacancy rate is likely to inch up slightly due to the meaningful levels of new supply that have entered the marke

214、t over the past five years.Year-end vacancy will hover around 2.0 per cent.RENT:Rent growth is forecast to remain above the metros long-term average,given still-healthy demand and the high-quality supply coming to market in recent years.The rate of increase in 2024,however,will likely cool compared

215、to last year.Average Price per Unit(000s)Vacancy RateVacancy TrendPrice and Cap Rate TrendsAverage Cap RateAverage Price per UnitAverage Cap Rate$80$110$140$170$20023*22212019183.5%4.0%4.5%5.0%5.5%1%2%3%4%5%24*222018161411,800UNITSwill be completed20BASIS POINTincrease in vacancy4.2%in effective ren

216、tINCREASE*Forecast;*Through 3Q Sources:Altus Data Solutions;CMHC;CoStar Group,Inc.;Statistics Canada22MONTREAL|RETAILRoyalmounts Opening Well on Track to Enrich Experiential Retail OfferingsSupply surge to open up more possibilities for tenants.In 2023,retail sales in Montreal outperformed the natio

217、nal average and recorded one of the highest annual growth rates in Canada.Com-bined with government support for restaurants and small busi-nesses,the metros vacancy rate declined compared to the height of the pandemic.Construction activity between 2021 and 2023 was relatively muted,which also aided

218、the sectors fundamentals.Royalmount is slated to be delivered in spring 2024,almost 10 years after the project was announced.This brand-new shopping cen-tre will be a mixed-use property,offering retail,hotels,offices and other commercial establishments.It will become a new landmark for Montreal,lift

219、ing total completions to a multi-year high.On the demand-side,the metros large student population,elevated levels of immigration and a robust tourism industry will maintain a growing consumer base to help combat near-term economic headwinds.However,falling business investment in recent quarters may

220、slow employment growth over the short-term,causing consumers to pull back on spending.This is likely to put upward pressure on vacancy over the coming year.INVESTMENT TRENDS Despite investment activity falling,single-tenant sales held up relatively well in 2023 as these properties tend to be occupie

221、d by large,nationally-known businesses and are lower risk.Investors may seek out assets near phase 2 of Rseau Express Mt-ropolitain,as foot traffic will increase once this project is complet-ed in late 2024.Average Price per Square FootEmployment Change(000s)Employment vs.Retail Sales TrendsEmployme

222、nt ChangeRetail Sales Growth-23*2221201918-120%-60%0%60%120%Price and Cap Rate TrendsAverage Cap Rate$140$180$220$260$30023*22212019185%6%7%8%9%Year-Over-Year Retail GrowthAverage Price per Sq.Ft.Average Cap Rate2024 Retail TrendsCONSTRUCTION:The completion of the 1.4-million-square-fo

223、ot Royalmount project will contribute to most of this years increase.Other additions will mostly be small-to medium-sized mixed-use properties.VACANCY:New supply,as well as a slowing economy,will lead to an increase in vacancy.However,healthy migra-tion patterns and a large university presence will

224、keep Montreals retail vacancy relatively tight.RENT:While leasing demand may slow,a large pullback is not expected.Annual rent growth will also be well supported,due to a large influx of Class A properties.2.1 MILLIONSQUARE FEETwill be completed20BASIS POINTincrease in vacancy2.9%in asking rentINCRE

225、ASE*Employment through October,retail sales through September;*Through 3QSources:Altus Data Solutions;CoStar Group,Inc.;Statistics Canada23MONTREAL|OFFICEHigh-Quality Space Capturing Demand,Lower-Tier Fundamentals WeakeningOffice performance bifurcated by property class.The pace of vacancy increase

226、in Montreals office sector accelerated in 2023.By the end of the fourth quarter,the share of unoccupied spaces rose by roughly 200 basis points year-over-year,following a 50-basis-point increase seen in 2022.The impact was not uniform across the prop-erty class spectrum,however,as many businesses re

227、located to high-er-grade buildings for a better in-office experience.This resulted in a considerable number of Class B and C properties being vacated,whereas demand for Class A spaces remained at a healthier level.As business expansion and hiring activity are expected to slow due to elevated borrowi

228、ng costs in 2024,vacancy rates are estimated to rise further in lower-quality assets.Last years flight-to-quality trend may continue once again,especially in the life sciences and tech sec-tors,which could help stabilize vacancy rates for Class A properties.Backfilling older spaces will thus be more

229、 challenging.However,in-ventory expansion is projected to slow,and more office-to-residen-tial conversion projects are expected,a trend that is gaining traction among policymakers and investors.These supply-side factors could help stabilize vacancy over the long-term.INVESTMENT TRENDS Property owner

230、s have been heavily investing in under-performing office assets in a bid to revamp performance and alleviate rising va-cancy by providing flexible turnkey spaces.Investment in the life sciences sector increased notably over the past few years.This growth potential may be a future demand driv-er for

231、Montreals office sector,specifically in the Laval area.2024 Office TrendsCONSTRUCTION:Following last years completion of the National Bank building,new construction is projected to decline.A major addition in 2024 includes Devmonts Westbury Tower.VACANCY:Near-term economic headwinds will take a toll

232、 on office demand,which will push the vacancy rate to a new high in 2024.Class B and C proper-ties are likely to hold higher vacancy rates due to the flight-to-quality.RENT:The average asking rent is forecast to register a mild decline in 2024 due to diminishing office demand.An increase in unoccupi

233、ed Class B and C buildings will also put downward pressure on rents.Average Price per Square FootCompletions/Absorption(Millions)Supply and DemandVacancy Rate-3.6-1.801.83.624*23*222120196%9%12%15%18%Completions SFVacancyNet Absorption SFPrice and Cap Rate TrendsAverage Cap Rate$190$210$230$250$2702

234、322212019184%5%6%7%8%Average Price per Sq.Ft.Average Cap Rate100,000SQUARE FEETwill be completed120BASIS POINTincrease in vacancy1.7%in asking rentDECREASE*Estimate;*Forecast;v Through 3Q Sources:Altus Data Solutions;CoStar Group,Inc.;Statistics Canada24MONTREAL|INDUSTRIALMarket Inches Toward Equili

235、brium After Record Performance in Recent YearsSector reaching a more balanced state.The Montreal industrial market has seen record-setting performance since the onset of 2021,as on average,the asking rent grew 25 per cent year-over-year.While market fundamentals are expected to remain at healthy lev

236、els in 2024 due to record population growth,a diverse economy and a disciplined under-construction pipeline Montreals industrial sector is set to stabilize.With rising interest rates already caus-ing three quarters of negative net absorption last year,this muted leasing activity should continue thro

237、ugh 2024 as businesses and consumers further pull back on spending.Shipping volumes at the Port of Montreal were down 15 per cent year-over-year as of the third quarter of 2023.Consequently,third-party logistics and multi-national companies are set to slow expansion efforts until they have reduced e

238、xisting inventory levels.Vacancy will inch up the most in older spaces with lower clear heights,as well as big-box space,given elevated construction activity within this segment.This is expected to provide some balance to the market as tenants will have more options and leverage to negotiate inducem

239、ent packages.INVESTMENT TRENDS Rising interest rates curbed sales activity,with total dollar volume down 15 per cent annually as of the third quarter of 2023.The av-erage sale price,however,has fared relatively well,up 4.5 per cent.With price growth beginning to stagnate amid rising interest rates,c

240、oupled with annual rent growth hitting 16 per cent in the third quarter of 2023,cap rates have increased to just over 6.0 per cent.Completions/Absorption(Millions)Supply and DemandVacancy Rate-2.202.24.46.624*23*222120190%1%2%3%4%Completions SFVacancyNet Absorption SFAverage Price per Square FootPri

241、ce and Cap Rate TrendsAverage Cap Rate$50$100$150$200$2502322212019183%4%5%6%7%Average Price per Sq.Ft.Average Cap Rate2024 Industrial TrendsCONSTRUCTION:With pre-leasing and overall de-mand slowing,speculative devel-opment began to ease in the latter parts of 2023.New supply is set to fall compared

242、 to last year,but re-main above the long-term average.VACANCY:The vacancy rate will edge up and end the year sitting around 3.5 per cent as sublet space and big-box availabilities rise.Vacancy,howev-er,will still sit below the pre-pan-demic average of 4.5 per cent.RENT:As leasing demand slows,annual

243、 rent growth will also ease from the historic levels seen in recent years.Given relatively tight vacancy,how-ever,the rate of change will remain above the pace of inflation.2.3 MILLIONSQUARE FEETwill be completed80BASIS POINTincrease in vacancy3.6%in asking rentINCREASE*Estimate;*Forecast;v Through

244、3QSources:Altus Data Solutions;CoStar Group,Inc.;Statistics Canada25MONTREAL|HOSPITALITYTourism Sector Cushions Demand Amid Ebbing Corporate Travel and Rising SupplyMild decrease in occupancy expected this year.As demand from the tourism sector returned to the pre-pandemic level,hoteliers enjoyed a

245、double-digit percentage revenue increase in 2023.Unlike other major metros in Canada,transborder and overseas air pas-senger traffic exceeded the 2019 level,which reflects strong foreign demand in the metros tourism sector.Corporate and group travel,however,was still not fully normalized due to slow

246、ing business expansion and remote work arrangements.This kept the metros 2023 average occupancy rate below the pre-pandemic level.As elevated interest rates work their way through the economy in 2024,corporate and group demand are expected to continue lagging.In addition,the metros total room invent

247、ory will expand by 1.4 per cent,which is forecast to outpace the national average.This supply increase is likely to be another source of downward pressure for occupancy.Nevertheless,the well-performing tourism sector is expected to help maintain relatively steady travel demand,providing a backstop t

248、o the softening occupancy rate.INVESTMENT TRENDS As hotel revenues increased,investment activity improved in 2023.Total dollar volume rose markedly,which was boosted by several large transactions,including the sales of InterContinental Hotel Montreal and SpringHill Suites Old Montreal.The increase i

249、n sales last year shows great buyer demand despite higher interest rates.Any future opportunities will likely be met with strong enthusiasm,as financing costs are expected to ease amid still-robust operating fundamentals in the near term.2024 Hospitality TrendsOCCUPANCY:The annual occupancy rate has

250、 likely peaked and is projected to soften slightly in 2024.Lagging corporate and group demand,as well as an inventory expansion,will put down-ward pressure on occupancy.ADR:Hotel operators will be able to raise daily rates amid still-healthy tran-sient leisure travel demand.The rate of increase,howe

251、ver,will moderate,falling to the single-digit percentage territory in 2024.RevPAR:Despite a slight decrease in the occu-pancy rate,the positive ADR growth will keep RevPAR on an upward trajectory.The peak summer season is expected to see the greatest gains in hotel revenues.Total Dollar Volume(Milli

252、ons)Transaction TrendsOccupancy RateOccupancy and Revenue Metrics0%20%40%60%80%24*22208$0$60$120$180$240ADR/RevPAR$0$50$100$150$20023*2221201918Occupancy RateADRRevPAR110BASIS POINTchange in occupancy5.7%INCREASEin ADR4.0%in RevPARINCREASE*Forecast;*Trailing 12 months through 3Q Sources:A

253、ltus Data Solutions;Statistics Canada;STR,a CoStar Group Company26OTTAWA|MULTIFAMILYHealthy Demographic Profile and Diverse Job Prospects Aid Multifamily PerformancePublic sector insulates Ottawa from softening economy.As Can-adas capital city,nearly one-third of the economy is directly linked to th

254、e public sector.Therefore,Ottawas labour market tends to be more stable in times of uncertainty,which may soften the impact of rising interest rates over the past two years.The metro typically sees healthy intra-provincial migration amid its relatively lower cost-of-living,and is benefiting from the

255、 nations historic immigration as newcomers seek stable employment with the federal government.In September 2023,Ottawas annual population growth reached new highs,expanding 3.2 per cent.Surging international university enrollment has also benefited the metro,as the city is home to sev-eral important

256、 post-secondary institutions.This strong university presence has also aided Ottawas labour market as roughly 40 per cent of the working-age population is university-educated.Interna-tional tech firms,such as IBM and Kinaxis,have taken notice of this large talent pool and hold major office footprints

257、 in the metro.With Ottawa offering both stable and high-income potential jobs,popula-tion growth is expected to remain elevated this year.Combined with limited supply,apartment performance will remain robust in 2024.INVESTMENT TRENDS The 2022 adoption of a new urban plan,plus developments like the Z

258、ibi master-planned community,Lansdowne 2.0,and the redevel-opment of LeBreton Flats,should spur multifamily investment.Historically,investors have been reluctant to sell,given tight va-cancy and robust rent growth.As a result,the average sale price has held relatively steady compared to other major

259、Ontario markets.Average Price per Unit(000s)Vacancy RateVacancy TrendPrice and Cap Rate TrendsAverage Cap RateAverage Price per UnitAverage Cap Rate$110$140$170$200$23023*22212019183.5%4.0%4.5%5.0%5.5%1%2%3%4%5%24*22201816142024 Multifamily TrendsCONSTRUCTION:New supply is set to cool in 2024 as ris

260、ing interest rates over the past two years curbed development.This comes after four consecutive years of elevated deliveries,with 2022 and 2023 reaching new highs.VACANCY:Heightened population growth,a shortage of apartment inventory,and a lack of affordable homes are key factors driving down vacanc

261、y.By the end of the year,the rate will hover around 2.0 per cent.RENT:Given rent control policies,coupled with a slowdown in unit turnover,rent growth is likely to ease from last years highs.However,with still strong demand and limited supply,growth is expected to remain above the regions long-term

262、average.2,200UNITSwill be completed20BASIS POINTdecrease in vacancy4.8%in effective rentINCREASE*Forecast;*Through 3Q Sources:Altus Data Solutions;CMHC;CoStar Group,Inc.;Statistics Canada27OTTAWA|RETAILVacancy Rate Getting Slashed As Demand Outstrips SupplyMarket resilience continues to build.As Ott

263、awas economy fully re-opened,the metros retail vacancy rate fell to the lowest level on record in 2023.Net absorption well surpassed completions,inten-sifying tenant competition and putting upward pressure on rents.Several retailers,including Altea,Uniqlo and T&T Supermarket,all occupied large space

264、s in this tight market.In 2024,the metro is expected to see its retail sector fundamentals improve further amid steady demand growth and a muted level of construction.Ongoing domestic and international in-migration continues to expand Otta-was consumer base.Spending may also be supported by the metr

265、os large government presence.About one-third of Ottawas employ-ment is in the public sector,which is considered to offer greater income stability during periods of economic distress.After falling to a multi-year low in 2023,total completions are projected to increase slightly this year,but sit below

266、 the regions long-term average.This subdued supply growth,coupled with stable consumer demand,will push the vacancy rate to a new low,helping the average asking rent increase for another year in 2024.INVESTMENT TRENDS Sales activity slowed in 2023 as higher lending rates prompted an increasing numbe

267、r of investors to stand on the sidelines.This year may see a recovery as interest rates have likely peaked.As LeBreton Flats is redeveloped over the coming years,investors may seek out retail assets in surrounding regions to benefit from increasing foot traffic.2024 Retail TrendsCONSTRUCTION:Buildin

268、g activity will remain below the long-term average,despite a slight increase in new supply expect-ed this year.A large share of the new projects will be delivered in Kanata.VACANCY:Stable consumer demand and muted construction will put downward pressure on vacancy.The share of vacant space will hove

269、r around 1.5 per cent,making Ottawa one of the tightest retail markets in 2024.RENT:The squeeze in the vacancy rate will keep rents on an upward trajectory.By the end of 2024,the average retail asking rent is estimated to sit around$25 per square foot.Average Price per Square FootEmployment Change(0

270、00s)Employment vs.Retail Sales TrendsEmployment ChangeOntario Retail Sales Growth-40-200204023*2221201918-70%-35%0%35%70%Price and Cap Rate TrendsAverage Cap Rate$220$260$300$340$38023*22212019185.5%6.0%6.5%7.0%7.5%Year-Over-Year Retail GrowthAverage Price per Sq.Ft.Average Cap Rate200,000SQUARE FEE

271、Twill be completed10BASIS POINTdecrease in vacancy4.2%in asking rentINCREASE*Employment through October,retail sales through September;*Through 3QSources:Altus Data Solutions;CoStar Group,Inc.;Statistics Canada28OTTAWA|OFFICEOffice Divestment to Weaken Performance,While Conversions Provide Optimism

272、Subdued demand to push vacancy higher.Following the public sectors labour disputes in the early parts of 2023,which resulted in more remote work flexibility,the federal government announced that it aimed to cut approximately 50 per cent of its office usage.This includes offloading some office holdin

273、gs and relinquishing leased space.Ottawas office sector will likely be the hardest-hit in the upcoming years,with over half of the governments office spaces in the national capital region.In addition to this long-term impact,the metro has already witnessed early signs of weakening office demand.Betw

274、een the third quarter of 2022 and the third quarter of 2023,more than 1.2 million square feet of office space was vacated.Office demand is projected to remain weak amid a slowing economy in 2024.The federal government will continue to pull back on its office needs,and the tech sectors demand will li

275、kely remain muted due to elevated interest rates.However,with five office-to-residential conversions now approved,and more likely to occur,vacancy rates may show early signs of stabilizing by year-end.INVESTMENT TRENDS Overall transaction activity slowed last year as a result of rising financing cos

276、ts.The number of large-sized deals over$20 million decreased the most.Ottawa has now approved five office-to-residential conversions,with some being fully-vacated government properties.Future of-fice sales activity could follow suit as demand wanes and residen-tial space needs continue to grow.Avera

277、ge Price per Square FootCompletions/Absorption(Millions)Supply and DemandVacancy Rate-1.0-0.500.51.024*23*222120194%6%8%10%12%Completions SFVacancyNet Absorption SFPrice and Cap Rate TrendsAverage Cap Rate$260$285$310$335$3602322212019185%6%7%8%9%Average Price per Sq.Ft.Average Cap Rate2024 Office T

278、rendsCONSTRUCTION:Declining office occupancy,as a result of the federal governments reduction of its office footprint,has discouraged construction activity.New supply will be limited over the upcoming years.VACANCY:With muted new supply,weakening demand will be the main driver for this years vacancy

279、 increase.However,more suburban markets such as Kanata are continuing to see more stable demand.RENT:The diminishing need for office spaces will put downward pressure on rents.The average asking rate is estimated to end 2024 slightly below$17 per square foot.130,000SQUARE FEETwill be completed100BAS

280、IS POINTincrease in vacancy0.5%in asking rentDECREASE*Estimate;*Forecast;v Through 3QSources:Altus Data Solutions;CoStar Group,Inc.;Statistics Canada29OTTAWA|INDUSTRIALOttawas Industrial Market Showing Resilience Amid Economic UncertaintyDisciplined supply pipeline aids outlook.Ottawa has benefited

281、from its strategic location between Toronto and Montreal Can-adas two largest cities and is acting as a more affordable dis-tribution hub for Eastern Ontario and Qubec.Ottawas average asking rent is roughly 25 per cent below that of Toronto,and the metro offers a more business-friendly environment c

282、ompared to that of Montreal.Both of these factors attract large distribution and logistics companies looking to service Canadas most populated areas.Ottawas disciplined construction pipeline has also allowed vacancy to remain more stable compared to other major metros.Due to Ottawas strategic locati

283、on,coupled with still-elevated population growth,distribution and warehousing space needs are expected to remain healthy over the coming year,especially for small-bay space.The meaningful levels of new supply set to enter the market this year should help meet a portion of this ongoing demand.While t

284、hese deliveries will also put upward pressure on vacancy,the metros con-struction pipeline as a per cent of existing inventory sits well below the national average.This will help soften the impact of moderating demand,as a result of elevated interest rates.INVESTMENT TRENDS Despite heightened intere

285、st rates and falling sales activity,the av-erage sale price was up 20 per cent annually as of the third quarter of 2023 the largest increase among major Canadian metros.Interest rate uncertainty kept institutional capital on the sidelines in 2023.User purchases captured the largest share of total do

286、llar volume at 42 per cent,followed by private investors at 37 per cent.2024 Industrial TrendsCONSTRUCTION:In response to healthy fundamentals and still-strong demand for new,top-tier distribution and ware-housing space,developers remain confident.New supply,as a result,is set to increase in 2024.VA

287、CANCY:As demand and pre-leasing ease amid rising interest rates,coupled with elevated levels of new supply entering the market,vacancy will inch up and end the year hovering slightly above 2.5 per cent.RENT:Limited existing space,combined with an influx of new,high-quality supply that is not fully p

288、re-leased,will cause asking rents to grow at a slightly above-average pace.The rate of change,however,will ease from the historic levels seen last year.Completions/Absorption(Millions)Supply and DemandVacancy Rate00.81.62.43.224*23*222120190%1%2%3%4%Completions SFVacancyNet Absorption SFAverage Pric

289、e Per Square FootPrice and Cap Rate TrendsAverage Cap Rate$100$150$200$250$3002322212019184%5%6%7%8%Average Price per Sq.Ft.Average Cap Rate1.5 MILLIONSQUARE FEETwill be completed50BASIS POINTincrease in vacancy3.5%in asking rentINCREASE*Estimate;*Forecast;v Through 3Q Sources:Altus Data Solutions;C

290、oStar Group,Inc.;Statistics Canada30OTTAWA|HOSPITALITYInflux of Tourists Drives Recovery,While Business Travel Falls BehindOccupancy continues to improve.Boosted by a return of leisure travelers,Ottawa saw its hospitality occupancy rate approach the pre-pandemic level in 2023.The metro welcomed an i

291、nflux of visitors coming for its summer events,such as Tamarack Ottawa Race Weekend and the Canadian Tulip Festival.Hotel occupancy on some peak summer weekends was near capacity as a result,which led to double-digit percentage increases in revenue per available room.Further momentum from this pent-

292、up demand is expected in 2024;however,the rate of increase in key revenue metrics is forecast to soften,as some consumers may pare back travel spending amid near-term economic headwinds.In contrast to the recovery in the tourism sector,corporate travel was still shy of the pre-pandemic level.This wa

293、s partly due to the federal governments cut on travel expenses and reduced business travel needs in other sectors,as a result of elevated interest rates.The cuts will continue to weigh on 2024s weekday demand,leading to an annual average occupancy rate that is still slightly below the 2019 level.INV

294、ESTMENT TRENDS Investment activity continued to be scarce throughout 2023.The sale of Ottawa Marriott Hotel by InnVest to Manga Hotels was one of the only major transactions in the first three quarters of 2023.Similar to the national trend,there has been hesitancy to sell as property owners opt to b

295、enefit from increasing hotel revenues.Any future openings will likely be met with greater buyer interest,due to robust post-pandemic operating fundamentals and the expec-tation of declining borrowing costs over the latter parts of 2024.Total Dollar Volume(Millions)Transaction TrendsOccupancy RateOcc

296、upancy and Revenue Metrics0%20%40%60%80%24*22208$0$60$120$180$240ADR/RevPAR$0$25$50$75$10023*2221201918Occupancy RateADRRevPAR2024 Hospitality TrendsOCCUPANCY:A further recovery in the leisure segment is expected to drive this years occupancy rate increase.Corporate travel demand,however,

297、will remain subdued.ADR:As overall inflation is expected to cool in 2024,the increase in ADR is forecast to moderate from the 2023 level.The early spring and summer months will see the greatest gains of the year.RevPAR:Hotel revenues will trend higher as both the occupancy rate and ADR continue to i

298、ncrease.The annual average RevPAR is expected to end 2024 above$140.150BASIS POINTchange in occupancy5.3%INCREASEin ADR7.7%in RevPARINCREASE*Forecast;*Trailing 12 months through 3QSources:Altus Data Solutions;Statistics Canada;STR,a CoStar Group Company31SOUTHWESTERN ONTARIO|MULTIFAMILYPopulation Gr

299、owth,Job Prospects and University Presence Aid PerformanceMultiple factors support multifamily demand.Southwestern On-tario has seen historic population growth in recent years,expanding roughly 2.5 per cent annually as of September 2023.Like most other major metros,the region is benefiting from hist

300、oric immigration,but also from elevated levels of intra-provincial migration due to the lower cost-of-living and evolving labour opportunities.The average rent is roughly 20 per cent below that of Toronto,and the region is among the fastest-growing industrial hubs in North America.On top of growing

301、industrial employment,cities like Kitchener-Water-loo and Hamilton offer ample job prospects in the tech and health science sectors.This lower cost-of-living,combined with widening job opportunities,should support robust rental demand over the coming year especially in Southwestern Ontarios more urb

302、an areas.Additionally,the region is also home to 10 post-secondary educational institutions.As Canada is the worlds third-leading destination for international students,study permits were up 77 per cent annually through the first six months of 2023.Due to this factor,Southwestern Ontario is expected

303、 to welcome an influx of temporary residents this year,further aiding apartment demand.INVESTMENT TRENDS Despite strong fundamentals,dollar volume transacted was down 25 per cent annually over the trailing 12 months ending in Septem-ber 2023,as rising borrowing costs curbed buyer enthusiasm.With pop

304、ulation and job growth holding above average,underlying rental demand remains healthy.Transaction activity,as a result,is likely to gain momentum once interest rate uncertainty abates.2024 Multifamily TrendsCONSTRUCTION:Development activity is set to reach new highs as builders recognize the ongoing

305、 demand for rental hous-ing.Most new supply will be in the form of mixed-use projects and office-to-residential conversions.VACANCY:The vacancy rate is forecast to remain extremely tight,ending 2024 hovering just above 2.0 per cent.However,a record level of new sup-ply set to enter the market will p

306、ut slight upward pressure on the rate.RENT:Annual rent growth is expected to cool from the elevated levels seen over the past two years,yet still increase at a solid rate given the in-flux of new,high-quality supply and above-average demand.Average Price per Unit(000s)Vacancy RateVacancy TrendPrice

307、and Cap Rate TrendsAverage Cap RateAverage Price per UnitAverage Cap Rate$100$135$170$205$24023*22212019183.5%4.0%4.5%5.0%5.5%1.2%1.7%2.2%2.7%3.2%24*22201816144,000UNITSwill be completed30BASIS POINTincrease in vacancy4.0%in effective rentINCREASE*Forecast;*Through 3Q Sources:Altus Data Solutions;CM

308、HC;CoStar Group,Inc.;Statistics Canada32SOUTHWESTERN ONTARIO|RETAILSuburban Retail Composition Aids Sector in Combating Near-Term ChallengesHealthy demand to cap vacancy increase.Southwestern On-tario saw the largest influx of new supply since 2017 in 2023.The 450,000-square-foot Gateway London Shop

309、ping Centre was close to being fully delivered.Other openings varied from small neighbour-hood centres to standalone restaurants and supermarkets,contrib-uting another 650,000 square feet to the total stock.Yet the vacancy rate remained low,signaling the markets resilience against econom-ic headwind

310、s.With a heavy presence of suburban essential retail in the region,leasing demand was shielded from moderating consumer spending in 2023.This suburban nature should continue to benefit retailers amid a slowing economy this year.Inventory expansion will soften slightly in 2024,but will still hover ab

311、ove the historical average.Besides the full completion of the Gateway London Centre,other projects will be delivered in large cities,including Hamilton,Kitchener and Guelph.This elevated supply growth,however,is expected to only lift the vacancy rate slightly as demand for space will likely hold.INV

312、ESTMENT TRENDS It is likely that interest rates have peaked,and could even ease to-ward the second half of 2024.As such,investment activity may im-prove over the coming quarters as financing costs taper.Aided by historic levels of immigration,the areas expanding con-sumer base is expected to benefit

313、 retailers and increase retail in-vestment over the long-term,especially for suburban properties with densification potential.Average Price per Square FootEmployment Change(000s)Employment vs.Retail Sales TrendsEmployment ChangeOntario Retail Sales Growth-70-350357023*2221201918-70%-35%0%35%70%Price

314、 and Cap Rate TrendsAverage Cap Rate$100$175$250$325$40023*22212019185.5%6.0%6.5%7.0%7.5%Year-Over-Year Retail GrowthAverage Price per Sq.Ft.Average Cap Rate2024 Retail TrendsCONSTRUCTION:Construction activity seems to have largely recovered from the pandemic trough.Despite a decline from last years

315、 level,total comple-tions will still stand above the long-term annual average in 2023.VACANCY:Consumer demand for the metros suburban essential retail is ex-pected to remain robust.Elevated supply growth,however,will be the main contributor to this slight increase in the vacancy rate.RENT:Retail ren

316、ts will remain on an upward trajectory.After multiple years of increase,the average ask-ing rent in 2024 will be roughly 25 per cent above the 2019 level.800,000SQUARE FEETwill be completed10BASIS POINTincrease in vacancy3.5%in asking rentINCREASE*Employment through October,retail sales through Sept

317、ember;*Through 3QSources:Altus Data Solutions;CoStar Group,Inc.;Statistics Canada33SOUTHWESTERN ONTARIO|OFFICEHigher Vacancy Linked to Smaller Firms;Office Conversions Helping Cut InventoryVacancy to rise,but signs of stabilization begin to emerge.As businesses consolidated their office footprints a

318、mid the slower pace of hiring and adoption of hybrid work arrangements,office demand in Southwestern Ontario weakened in 2023.Sublet space rose by more than 10 times over the course of last year,which was the biggest driver for the vacancy rate increase.A higher concentration of small-to medium-size

319、d enterprises in the region also weighed on demand,as elevated financing costs took a heavier toll on these businesses compared to large corporations,which typically have a greater resilience against economic headwinds.Meanwhile,the metros smaller city size,shorter commutes and a growing student pop

320、ulation have sparked redevelopment activity to transform old of-fice buildings into residential units.One such project was Europros conversion of a 12-storey office building in downtown Kitchener,which was acquired by Conestoga College after completion.As these projects continue,coupled with a pause

321、 in construction activity this year,supply-side pressure on the vacancy rate should be limited.While still muted demand is also likely to cause further upward pres-sure on vacancy,the rate could show signs of stabilizing by year-end.INVESTMENT TRENDS Total dollar volume fell notably in 2023,largely

322、due to a drop in transaction volume in Waterloo.However,the Kitchener-Water-loo-Cambridge area continued to attract the most investment.The metro is seeing an expansion of the life sciences sector as a number of universities are building medical schools within the re-gion.This may create more invest

323、or traction in the coming years.2024 Office TrendsCONSTRUCTION:Following the completion of The Breithaupt Block Phase 3,construc-tion activity will be muted in 2024.Additions will be spread across Kitchener,London and Hamilton.VACANCY:Vacancy will rise at a slower pace than last years 400-basis-poin

324、t increase.Conversion programs and a minimal inventory expansion will likely help stabilize the vacancy rate over the latter half of the year.RENT:Office rents appeared to have peaked in mid-2023 and have since been on a downward trajectory.This trend is expected to continue this year,as still-soft

325、demand causes vacancy rates to climb higher.Average Price per Square FootCompletions/Absorption(Millions)Supply and DemandVacancy Rate-0.6-0.300.30.624*23*222120197%9%11%13%15%Completions SFVacancyNet Absorption SFPrice and Cap Rate TrendsAverage Cap Rate$180$220$260$300$3402322212019185%6%7%8%9%Ave

326、rage Price per Sq.Ft.Average Cap Rate85,000SQUARE FEETwill be completed30BASIS POINTincrease in vacancy0.7%in asking rentDECREASE*Estimate;*Forecast;v Through 3Q Sources:Altus Data Solutions;CoStar Group,Inc.;Statistics Canada34SOUTHWESTERN ONTARIO|INDUSTRIALManufacturing Sector to Support Industria

327、l Outlook Amid Spillover EffectsNearshoring aids metro outlook.Southwestern Ontario is carving out a key link in the global supply chain of electric vehicles,bene-fiting from the provinces already established automotive network.Both Stellantis and Volkswagen selected the region for their new state-o

328、f-the-art EV battery manufacturing plants,resulting in Cana-da earning the second spot in the global electric battery supply chain rankings.Not only will this directly impact long-term demand for manufacturing space,these emerging industries will have clustering effects,supporting robust employment

329、opportunities and growth.Spillover impacts for distribution and warehousing space are likely to emerge over the coming years as the regions population contin-ues to expand.Southwestern Ontario is also a pivotal contributor to Canadas agriculture industry,which is benefiting from nearshoring as well

330、and is set to support the need for industrial space in the com-ing years.The long-term outlook for the metros industrial sector is positive.However,tenants space needs are likely to moderate in 2024 amid elevated interest rates.Coupled with record supply growth,fundamentals are set to soften compare

331、d to the historic performance seen in recent years.INVESTMENT TRENDS In the third quarter,total dollar volume sold was down 20 per cent annually.Despite still-healthy fundamentals,capital markets un-certainty has pushed many buyers to the sidelines.Due to the expectation of stabilizing interest rate

332、s,investment ac-tivity will likely gain momentum,given the positive sector outlook amid the growing EV presence and expected employment gains.Completions/Absorption(Millions)Supply and DemandVacancy Rate01.12.23.34.424*23*222120190%1%2%3%4%Completions SFVacancyNet Absorption SFAverage Price per Squa

333、re FootPrice and Cap Rate TrendsAverage Cap Rate$0$60$120$180$2402322212019183.0%4.5%6.0%7.5%9.0%Average Price per Sq.Ft.Average Cap Rate2024 Industrial TrendsCONSTRUCTION:New supply growth will hold above average as developers significantly increased building intentions over the past three years.Deliveries,however,will fall slightly compared to last years historic level.VACANCY:Easing demand amid