Perspective: Q2 2017 Commercial Real Estate Cap Rates Across Canadian Markets

Stuart Barron • 8/17/2017
The desire to own trophy office assets, fueled by strengthening fundamentals in growth markets, continued to nudge CBD office cap rates downwards in Toronto, Ottawa and the Waterloo region during the second quarter of 2017.

Modest cap rate compression in downtown Toronto was driven in part by upward pressure on Class A rental rates within a very tight CBD market. Tenants will see little relief until 81 Bay Street and 16 York Street open for business in late 2020.

Canadian interest rates began creeping up in July 2017, though the 25-basis point increase has had little effect on investor interest. Continued rate increases would ultimately dampen the red-hot demand by owner/users and investors for lower-priced commercial real estate. For now, this segment continues to sell near or at record prices.

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