Perspective: Q1 2018 Commercial Real Estate Cap Rates in Major Canadian Markets
With the Bank of Canada’s overnight lending rate up 75 basis points since last summer, rising to 1.25%, and further bumps expected through 2018, subtle changes are occurring in specific markets and asset classes. These glimpses offer the first evidence that cap rate compression may be reaching a tipping point as we head into the ninth year of a record-long growth cycle.
Make no mistake though; despite rising interest rates and other dampening factors, the vast majority of individual markets and asset classes saw cap rate stability and in some cases, further compression. Overall demand for commercial real estate in Canada remains ferocious, fueled by sound real estate fundamentals, transformative change, and an abundance of capital seeking long-term investment opportunities.