• phone: 514-816-4178
  • fax: 514-933-2299
  • mobile: 514-816-4178

EN FRANÇAIS

asebe@sutton.com

Call 514-816-4178

Blog by alexandre sebe

<< back to article list

Canadian real estate capitalization rates hit record low

Canadian real estate capitalization rates hit record low

Investors continue to hunt for quality investment.
 

Investors continue to hunt for quality investment.

Photograph by: Ted Rhodes , Calgary Herald

CALGARY — Investors are still hungry for income-producing real estate as demonstrated by further cap rate compression across almost all geographies and property types in Canada, says commercial real estate firm CBRE Limited.

The company’s Second Quarter Canadian Cap Rate Survey said the national average cap rate fell to 6.33 per cent in the quarter from 6.46 per cent in the last quarter.

“This is the lowest level on record and trumps the previous low of 6.48 per cent which was reached in the second quarter of 2007,” said the report. “In an era of ultra-low interest rates, investors are prepared to pay up in order to secure a steady income stream, especially where there is the potential to increase rents as leases expire.”

Capitalization rates are calculated by dividing net operating income by asset price.

Cap rates for Calgary in the second quarter were: Downtown office AA, 5.25 to 5.75 per cent; Downtown office A, 5.75 to 6.25 per cent; Downtown office B, 6.75 to 7.25 per cent; Suburban office A, 6.00 to 6.50 per cent; Suburban office B, 6.75 to 7.25 per cent; Industrial A, 5.75 to 6.25 per cent; Industrial B, 6.50 to 7.00 per cent; Retail Regional, 5.00 to 5.50 per cent; Retail Power, 5.50 to 6.00 per cent; Retail Neighbourhood, 5.75 to 6.25 per cent; Retail Strip, 6.25 to 6.75 per cent; Retail Strip (non-anchored), 6.75 to 7.25 per cent; Apartment High Rise A, 4.50 to 5.00 per cent; Apartment High Rise B, 5.00 to 5.50 per cent; Low Rise A, 4.50 to 5.00 per cent; Low Rise B, 5.00 to 5.50 per cent; Hotel Downtown full-service, 6.75 to 7.75 per cent; Hotel Suburban limited-service, 9.00 to 10.00 per cent.

“Our latest survey shows that downward pressure is evident in pretty well all markets and asset classes across the country,” said Ross Moore, Canadian director of research for CBRE. “Cap rates are now generally back to 2007 levels.”

CBRE said competition for quality real estate remains elevated in the country.

“It may be difficult to believe that cap rates could fall much further, but with interest rates set to stay low for the foreseeable future, it is conceivable that cap rates may indeed go even lower,” said CBRE.

mtoneguzzi@calgaryherald.com