The latest results from Altus Group’s Q3 Investment Trends Survey (ITS) for the four benchmark asset classes show that the Overall Capitalization Rate (OCR) was little changed at 5.14 per cent, but grew from 5.01 per cent in the same quarter in 2019.
While multi-res assets still appeal to investors, demand continues to be influenced by pandemic effects, such as enduring international travel restrictions, continued threats of rent arrears, and the projected end of CERB and mortgage deferrals as we move into the final quarter of 2020. Suburban apartment cap rates fell to 4.39 per cent this quarter, down from 4.43 per cent in the previous quarter, but remaining stable compared to the same quarter last year.
Vancouver and Montreal were the lone markets with an increase in cap rates, while Edmonton experienced the largest drop from the previous quarter. The greatest increase year-over-year was recorded in the Vancouver market.
Market conditions
While the impact of COVID-19 on market conditions persists, investors are cautiously optimistic as the end of the year approaches. Strong industrial demand due to the pandemic has allowed that sector to remain resilient, while the office sector continues to face unprecedented challenges.
Despite businesses slowly re-opening over recent summer months, the retail and entertainment sector anticipates additional challenges moving forward as the weather gets colder, leaving less room for outdoor physical distancing. Although there has been a decrease in total transaction volume—down by 20 per cent for the first half of 2020 compared to 2019—overall commercial real estate remains stable as deals continue to close.
With a second wave now declared in some areas, as well as the end of some government assistance programs, the delay in real estate decisions may continue.
Employment trends
As predicted by the Bank of Canada earlier this year, economic growth has resumed, but at a slow rate. Unemployment levels have steadied after reaching a record high in May, but the Conference Board of Canada forecasts that some jobs will not return, requiring the creation of additional jobs in new segments.
The board reports notable employment gains within the accommodation and food services sector as businesses made adjustments to meet new avenues of demand—such as take-out and outdoor dining, as well as in the manufacturing sector which is well in alignment with increasing demand for industrial space across the country. Still, the Canadian unemployment rate sits at 10.2 per cent at the end of August, according to Statistics Canada.
Interest rates
Interest rates continue to remain low and are forecasted by the Conference Board of Canada to stay that way long-term as the Canadian economy is unlikely to fully recover until 2022 or 2023. Food anchored Retail Strip and Single-Tenant Industrial are the top preferred products this quarter.
The location barometer for all available products indicates positive momentum within the Calgary, Montreal and Halifax markets, while momentum has slowed in Vancouver, Toronto, Ottawa and Quebec City, and remains stable in Edmonton. Toronto and Vancouver remained among the top preferred markets, now accompanied by Montreal. With the ongoing struggles in the Alberta economy, Edmonton is the least preferred market by investors.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
