Industrial assets remained the most popular commercial real estate investment-grade acquisition targets in the first quarter of 2024, says a new Morguard report.

Industrial properties led investment sales although capital flow into the asset class slowed. (Investment-grade assets are properties priced at $10 million or more.)

Owner-users accounted for a significant share of industrial property purchases, seeking to capitalize on the financial advantages and control associated with ownership. And, private capital groups took advantage of reduced competition levels.

Industrial leasing fundamentals remained relatively strong and healthy as new inventory and subleasing opportunities boosted availability.

Meanwhile, multi-family remained the second most coveted asset class, said Morguard.

“Notably, smaller-scale properties sold to private groups have accounted for a large share of investment sales activity while institutions and pensions funds have increasingly sought acquisitions outside of Canada,” said Morguard.

But few large multi-suite transactions have occurred in the past year due to an availability shortfall. Only about $568 million of investment-grade transactions were completed in Greater Vancouver, Calgary, Toronto, Ottawa, and Montreal markets combined. (In good years, the total would be in the billions.)

Despite the modest transaction dollar volume, investors remain confident in the in Canada’s multi-suite residential rental property sector, said Morguard.

“The Canadian commercial real estate sector in the first quarter has shown positive signs of market resilience,” said Angela Sahi, Morguard’s president and chief operating officer.

Morguard’s report did not discuss investment-grade office building sales, of which there have been few. But the company said office leasing was bolstered by the preleasing of new supply amid a slight increase in the national vacancy rate and downward pressure on rents.

Both Vancouver and Winnipeg recorded positive office absorption for the first time since the third quarter of 2022.

Morguard’s report also did not discuss retail investment-grade transactions, which have been limited. But the firm said retail leasing fundamentals remained stable as vacancy was generally flat.

“The ongoing high interest rates continue to impact the real estate market, leading to increased costs of debt and widening of the gap between seller and buyer price expectations,” said Keith Reading, Morguard’s senior research director.

But, he added, the market is poised for growth as inflation remains stable, the Bank of Canada contemplates interest-rate cuts and investors stay confident in various property sectors.