Q1 Canadian Investment Market

The investment volume during first quarter of 2015 in Canada’s commercial real estate market came in at $5.5 billion (1,204 transactions vs 1,074 transactions Q1 2014), which is just shy of the 5-year quarterly average of $5.8 billion. The overall drop in investment was most pronounced in the office sector, which is traditionally the most sought after class. This was due in part to the lack of quality assets available for sale, but also because investors and vendors became more cautious. Hotel investments, on the other hand, reached a two-year quarterly high of $660.1 million, driven largely by two significant transactions which include dispositions by Ivanhoe Cambridge of two Fairmont hotels – Fairmont Royal York and Fairmont Hotel Vancouver. The national overall average cap rate fell 12 bps from a year ago to close at just under 6.1%.

Commercial real estate investments in Canada are being driven primarily through acquisitions by private investors, accounting for an unusually high portion of 52.5% of overall investment volumes of $2.375 billion during Q1, 2015. In 2014, private investors represented only 27% of total investments. Institutional buyers also increased their proportion approximately 5% to 15.2% overall. Nonetheless, with the first quarter drop behind us, activity is forecasted to pick up steam for the remainder of 2015 on the account of higher appetite for risk, the increase of products on the market and ample liquidity.

To read more on the Canadian investment market in commercial real estate, please see the attached document.

Corbin Staniloff
Analyst
(416) 362-2122 ext. 221
cstaniloff@largocapital.com