Investing in Canadian Real Estate in 2023: Opportunities and Emerging Markets (2024)

The real estate market in Canada has been performing well in recent years, with the industrial and multifamily sectors seeing particularly strong investor demand. According to a report by Altus Group, industrial real estate investment in Canada reached $11.8 billion in 2022, representing a 60% increase from the previous year. The rise of e-commerce has driven increased demand for warehouse and fulfillment space, particularly in urban areas where retailers seek to provide customers with faster delivery times. The pandemic has also accelerated online shopping growth, further boosting demand for industrial real estate assets.

Logistics and distribution centers have been particularly attractive to investors, as the pandemic has underscored the importance of supply chain resilience and efficiency. As a result, investors have been increasingly focused on well-located industrial properties that can provide quick and reliable access to transportation networks. In addition, there has been a growing interest in specialized properties, such as cold storage facilities, which are used to store perishable goods like food and pharmaceuticals.

Canada’s multifamily real estate sector has been experiencing strong investor demand, driven by a combination of demographic trends and shifts in consumer behaviour. According to JLL Report, multifamily properties will have a strong demand in the long run. As the population ages, there is increasing demand for rental housing options that cater to seniors, such as retirement communities and assisted living facilities.

At the same time, younger generations are also driving demand for rental housing, as many are unable to afford homeownership due to high housing costs. This is particularly true in major urban centers like Toronto and Vancouver, where housing affordability remains a significant challenge. The pandemic has also accelerated the shift towards rental housing, as people have sought more space and flexibility in their living arrangements.

Investors have been drawn to the stability and steady income streams that multifamily properties can provide. In addition, there is growing interest in properties that can provide affordable housing options, as affordability remains a key concern in many Canadian cities. As a result, there has been strong investor demand for purpose-built rental apartment buildings and older buildings that can be renovated and modernized to meet current market demand.

Looking ahead, the industrial and multifamily real estate sectors are expected to continue to see strong investor demand in the coming years. According to a report by PwC, Emerging Trends in Real Estate, investors are expected to focus on properties that can provide secure income streams and value-add opportunities. In the industrial sector, there is expected to be a continued emphasis on well-located logistics and distribution centers, as well as specialized properties like cold storage facilities. In the multifamily sector, investors are expected to continue to focus on affordable housing options and properties that can provide flexible living arrangements.

Investor interest in Canadian real estate is expected to remain strong in the coming years, with a particular focus on major cities like Toronto and Vancouver. According to PwC, both cities have seen significant population growth in recent years, which has fueled demand for residential and commercial real estate assets. In addition, both cities have strong economies and are home to many of Canada’s leading businesses, further boosting demand for commercial real estate properties.

However, other cities across Canada are also emerging as attractive investment destinations due to their growing populations and strong economic fundamentals. For example, the city of Montreal has seen significant growth in the technology and innovation sectors, which has driven demand for commercial real estate assets. Montreal is also home to a large student population and has a thriving cultural scene, contributing to the need for residential real estate assets.

The city of Ottawa is another emerging investment destination, with a growing population and strong demand for commercial real estate assets due to its status as the capital city of Canada. Ottawa is home to many government institutions and has a thriving technology sector, which has fueled demand for office and industrial real estate assets.

Halifax is also an emerging investment destination, with a growing population and a strong economy driven by the education, healthcare, and technology sectors. The city has a thriving arts and cultural scene and offers a high quality of life, contributing to the demand for residential real estate assets.

While major cities like Toronto and Vancouver are expected to remain the primary focus for real estate investors in Canada, other emerging investment destinations have strong economic fundamentals and growing populations. Investors should conduct thorough research and seek professional advice to make informed investment decisions that align with their goals and risk tolerance.

Canada's industrial and multifamily real estate sectors have been performing well in recent years, with solid investor demand driven by long-term trends and changes in consumer behaviour. While the market is subject to fluctuations, there is expected to be continued interest in well-located and specialized properties that can provide secure income streams and value-add opportunities. Investors should conduct thorough due diligence and work with qualified professionals to assess any investment opportunity's risks and potential returns.

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References

• Altus Group — Canadian Real Estate Market — https://www.altusgroup.com/insights/canadian-commercial-real-estate-market-update/
• JLL — Canadian Real Estate Outlook — https://www.jll.ca/en/trends-and-insights/research/canadian-realestate-outlook
• Canada Mortgage and Housing Corporation — Rental Market Report — National Overview — https://www.cmhc-schl.gc.ca/en/professionals/housing-markets-data-and-research/market-reports/rental-market-reports-major-centres
• Colliers International — Global Investor Outlook— https://www.collierscanada.com/en-ca/research/2023-global-investor-outlook
• PwC Canada — Emerging Trends in Real Estate — Canada 2023 — https://www.pwc.com/ca/en/industries/real-estate/emerging-trends-in-real-estate.html