A growing economy is expected to push strong growth in Vancouver’s commercial property market in 2016, making the city more attractive to investors in that sector, according to a Morguard Corporation (TSX:MRC) report released January 18.
Economic output in the city is forecast to grow by 3.5% in 2016, after increasing at rates higher than 3% over six of the past seven years, the report said. This will continue to drive goods and services production and continue to push rental market demand.
“Owners will be treated to healthy and stable income performance, which will also be an attraction for investors,” Morguard said in a press release.
“As a result, the region’s real estate investment market will continue to post positive results.”
The report also found, however, that property yields in Vancouver will be the lowest in Canada, which is nothing new.
“[The low property yields] will do little to deter investors from acquiring assets in a market that is expected to be an economic growth and commercial property market performance leader in 2016,” Morguard said.
British Columbia as a whole is expected to see strong growth over the year. Alberta, however, will see a slowing economy as a result of the continuing oil price slump. This will lead to shrinking store sizes and store closures, contributing to a decline in the commercial rental market in that province.
Morguard forecasts that over the next three to five years, Vancouver will see a significant amount of new supply entering the market. This will lead to downward pressure on rents as occupancy levels fall.
