However, some asset classes fare significantly better than others
Despite mounting pandemic pressures, Canada’s commercial assets remained a focus of investor activity over recent months, according to a new study by Altus Group.
“With day-to-day changes in pandemic-related restrictions across regions, industrial assets have remained a key priority for investors, especially in the Ottawa market this quarter,” Altus Group said in its report released earlier this month.
The overall capitalization rate across the major commercial asset classes stood at 5.08% this quarter, down from 5.10% in Q1, but up from 4.94% in Q2 2020.
“With re-openings in the retail sector driving increased sales volume, high industrial demand reflects a continued need for logistics space to meet the needs of enhanced omni-channel capabilities that have grown over the past year,” Altus stated. “While industrial assets have surpassed both food-anchored retail strip and suburban multiple-unit residential assets on the location barometer, both sectors are still of interest to investors.”
Read more: Bank of Canada on the commercial market’s outlook for the coming year
A sense of greater optimism is also feeding the commercial market’s recovery.
“Overall transaction volumes are rising as investors push forward with decision-making and anticipate increased activity later in the year,” Altus said.
Of particular note is the multi-residential segment, which saw “increasing momentum” this quarter, especially in Vancouver, Ottawa, and Halifax.
“Continued low interest rates could push the spring market forward and drive demand moving forward in 2021,” Altus reported.
However, prospects for the office segment remain subdued, despite downtown Class “AA” office cap rates reaching 5.63% this quarter (versus Q1’s 5.6% and Q2 2020’s 5.3%).
“Although some are reassessing their space needs and considering a downsize, others are taking a wait-and-see approach to return to their existing space once it is safe to do so,” Altus said. “Low office transaction volumes and high availability rates contribute to ongoing uncertainties.”
