Investors Bullish About Canadian CRE, by CBRE

File Type: Free Content, Article
Release Date: May 2014
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Investment volume in Canadian commercial real estate reached a new first quarter record this year, largely due to pension fund activity, according to CBRE’s “Canada Investment MarketView.” Investors purchased $6.8 billion of Canadian CRE in 1,072 transactions in the first quarter of 2014, up 12.2 percent from $6.1 billion and 1,138 transactions in the first quarter of 2013. Pension funds accounted for 33.7 percent of total investment activity, challenging private investors (35.2 percent) for the top spot. (In Canada, private investors typically account for more than 45 percent of CRE purchases.) REITs were the third most active group, accounting for 11.4 percent of investment volume.

“With the rise in interest rates in mid-2013 effectively pushing REITs to the sidelines, pension funds have filled the void with further room to grow their respective real estate portfolios,” the report states. Much of the investment activity comes from demand for office buildings, land and retail properties, especially in Eastern Canada. First-quarter investment volumes in Toronto and Montreal topped $3.6 billion and $1.1 billion, respectively. “Pricing showed little change as demonstrated by the national average capitalization rate, which remained stable at 6.19% in Q1 2014, despite the downward movement in mortgage rates and long term interest rates.”

“Looking forward,” the report concludes, “total volume in 2014 is expected to reach approximately $24.0 billion, with pension funds and private investors remaining the most active buyers.”