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Canada Cap Rate Report Q1 2019

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research article

Many of the issues putting pressure on the commercial real estate industry in 2019 are not all that different from previous years, but this year may demonstrate that the rate and breadth of change are picking up as the segment navigates uncertainty across differing markets. As fast-paced technological and social change transforms the way people live, work, and play, Canada’s commercial real estate industry faces rising pressure to respond with new innovations. For industry players, the challenge will be to re-balance their portfolios by considering different property types, redeveloping their assets, and exploring new partnerships and regions. Those that reinvent how they do business by integrating analytics and new technologies may see themselves take the lead in 2019.

  • Vancouver: The continued compression of cap rates due to redevelopment potential on almost any property appears to have halted. Instead, a different set of fundamentals have once again moved to the forefront: high tenant demand, under market rents, and strong lease covenants. 
  • Edmonton: Edmonton remains a consistent market with strong, well-placed assets garnering investor attention and is expected to have one of the better performing economies in 2019.
  • Calgary:  Office leasing fundamentals continue to stabilize, and we expect this trend to continue into Q2-Q3 of 2019.
  • Winnipeg: Demand for good quality investment continues to be strong; however, if cap rates do increase due to rising interest rates, expect the multi-family market to be impacted first due to the low spread currently being experienced in the market.
  • Toronto: The spread between Bank of Canada bond yields and capitalization rates widened in the first quarter of 2019; the gap between these two rates is likely to keep cap rates stable for the short term among most asset classes as reduced interest rates preserve investor returns. 
  • Ottawa: The Ottawa market continues to perform well in most asset classes, though in recent months has seen a significant uptick in underway and planned construction activity.
  • Montreal: Montreal’s commercial real estate market is marked by considerable optimism as the first quarter of 2019 comes to a close. Cap Rates continue to be decrease and Montreal is one of Price Waterhouse Cooper’s top Canadian markets to watch in 2019.

Canada Cap Rate Report Q1 2019

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