Real Estate Conference Highlights 2024

Our fifth annual Canadian Real Estate Conference featured 34 management team representatives from both public REITs/REOCs and select private companies. The conference included 15 panels and fireside chats along with a presentation from a leading Canadian commercial real estate services firm. We also hosted a property tour in the Brampton area consisting of guided tours and drive-bys of 15 properties.

"After turning over the leaf on a turbulent past year for the sector we are all looking forward to 2024 with well-founded optimism," said Armen Farian, Managing Director and Head of Canadian Real Estate Investment Banking. "This year's conference reconfirmed to many of us in attendance the strengths of fundamentals in most of the sectors in the industry, some of which are experiencing record setting leasing momentum. It also highlighted those who are taking prudent steps to weather headwinds (including high interest rates), demonstrating inherent value in their portfolios stemming from resilient cash flows."

Highlights by Sector:

Overall, management teams expressed optimism about the near-term outlook.

Residential and Retail:

The outlook was especially positive where management continues to see very strong leasing fundamentals. Apartments and retail fundamentals in some markets remain strong supported by sustained demand, population growth, and constrained supply with no visible near-term catalysts that might meaningfully slow rent growth. Interest in growth by existing and U.S. based tenants may drive strong demand for in the Canadian retail market.

Industrial:

Demand remains robust, particularly so for small-bay properties where supply is limited compared to larger-sized properties. Panellists discussed how market rent growth in H2/23 slowed from the arguably unsustainable levels in recent years with the potential of a reacceleration slated for 2025 as the pace of new supply deliveries slows.

Seniors Housing:

In our view, the Seniors Housing sector is primed for a more pronounced NOI (net operating income) recovery in 2024. Management teams point to a reduction in agency staffing costs, lower staff turnover, and strong demand in most of their markets. New risk-based rules in the event of an outbreak could result in less severe occupancy dips maintaining healthy occupancy levels.

Office:

Management teams noted continued challenges with elevated Tis (tenant improvement)/leasing costs but in our view were overall more positive about 2024 than 2023 and highlighted a recent uptick in touring activity along with a positive outlook for office utilization rates over the near to medium term. While office utilization remains below pre-pandemic levels, tenants may still require same amount of office space should their hybrid proposition call for three or more days in the office per week. Average terms on new leasing activity have begun to increase signalling that tenant behaviour has started to stabilize with more permanent return to office policies.