The Q4 Cap Rate Update compiled by CBRE suggests that change was the operative word for Canada’s major real estate markets as 2016 drew to a close.
Toronto and Vancouver continue to dominate
As we’ve grown accustomed to over the past year or two, real estate demand and prices continue to show growth in both Toronto and Vancouver. CBRE’s Canada Cap Rate Report Fourth Quarter 2016 summarizes these trends and reports that Toronto saw several large transactions reflective of sub 5% capitalization rates in several major asset classes.
Vancouver was a similar story. Office assets are trading at or below 4% cap rates. The real surprising story was that there were several apartment trades in the previously untouched 1.9% to 2.3% range. It’s hard not to think that this market will need to take a pause and catch it’s breath.
Edmonton and Calgary continue to struggle
Real Estate activity in the two major Alberta markets at year end, was reflective of the increased and ongoing sense of economic uncertainty. Cap rates ended the year either stable or increasing in these two markets. Office markets were particular hard hit as leasing uncertainty/risk continues.
Increased interest in Hotel assets
Flying under the radar perhaps, are indications of increased investor interest in hotel properties. Cap rates for both limited and full service hotels are stable or declining in all major markets. Undoubtedly our low dollar is an attraction for foreign visitors.