Canadian CRE investment has dropped in 2020 says Altus Group

The market has dropped overall in the past year but there are some bright spots

Canadian CRE investment has dropped in 2020 says Altus Group
Steve Randall

While Canada’s residential real estate market continues to be among the best investments, what about the commercial sector?

Overall, commercial real estate (CRE) investment activity in Canada dropped 22% year-over-year in the first three quarters of 2020 according to a new report from the Altus Group. There were 5,106 transactions totalling $22.8 billion in volume.

However, transactions have been solid in some key asset classes within the wider market.

Perhaps unsurprising, in a year where ecommerce surged, industrials remained strong with 994 transactions totalling $6.5 billion, down just 1% year-to-date compared to the same period of 2019.

Multifamily also remained relatively resilient with a 6% decline year-over-year and making up 19% of overall transactions.

Residential land transactions fell 19% but there were a significant 820 transactions totalling $5.5 billion.

That leaves the office asset class, which in a year of work-from-home was always going to struggle; and the retail sector which has been decimated by lockdowns. These two asset classes saw transaction volume fall 53% and 22% respectively.

While landlords of office and retail real estate are considering how space may require reconfiguration amid changing tenant demands, challenges will likely remain for some time.

Cap rates
Altus Group’s Investment Trends Survey Q3 2020 shows that cap rates have increased across all Canadian markets compared to last year.

The location barometer highlights Calgary, Montreal and Halifax gaining momentum this quarter, with Toronto and Montreal still remaining the top-preferred markets by investors.