Despite headwinds facing the real estate market over the last few months, not all asset classes are faring equally. Standing above the rest are the multiresidential buildings. As investors look to diversify their portfolio away from riskier assets in a rising debt environment, multiresidential continues to be a pledge of safety by offering superior returns to investors.

While elevated inflation and high-interest rates create challenges for the retail sector, especially for shopping malls. The latest change in fundamentals work trends also continue to pose headaches for office assets. However, all those same economic and social indicators are reasons favouring a reallocation of investment funds toward the multiresidential sector.  

As cap rates keep compressing, diminishing the apparent real return on investment of those assets, rental revenue continues to climb higher buffering the impact of higher borrowing and funding costs. 

REITs and institutional investors from inside and outside the province are staying active across the province, especially for large multiresidential assets (100 units or more) as many of them revise their asset allocation strategy and plan ahead for long-term detention in the face of an uncertain economic environment. 

Notably, a strong rental market across the province and the economic fallout brought about by major construction projects such as the REM are positive factors influencing the upward trend in rents and favouring the province as a destination for investment capital. 

Large pools of funds are also diversifying away from the island of Montreal and going into secondary markets around the island where the level of competition is less elevated. One notable actor in this field, Interrent said during the Quebec Apartment Investment Conference: 

“Noting that InterRent’s multiresidential acquisitions dropped from 2,000 units a few years ago to 300 last year, Hanif said there is quite a bit of uncertainty and volatility and “we’ve been taking a cautious approach to new investments, but remains bullish on multiresidential properties. He noted that at the end of the day, everyone needs housing.”

For investors, the commercial real estate market, especially the province of Quebec is still a sure way to invest liquidity and diversify away from uncertain and volatile asset classes. And within commercial real estate, the multiresidential sector, backed by strong and growing fundamentals, continues to prove its worth and find its place amongst a well-balanced portfolio.