Cap Rate


The good news for investors is that the demand for well-positioned properties with strong fundamentals will continue to keep cap rates stable, while on the flip side, a lack of supply of those same types of properties will be hard to find, as development attempts to catch up.

Despite concerns about the national economy and upcoming election, capitalization rates across Canada remain in relatively good health, according to the Colliers International Q3 2015 Canadian Commercial Real Estate Capitalization Rate Report.

Each quarter, Colliers surveys its top investors from across Canada regarding current market conditions, with the capitalization rate as a leading indicator of market health. The capitalization rate measures the rate of income return on any real estate investment, applied as a percentage.

“Despite weak energy markets and a slowing Canadian economy, demand for good-quality, well-tenanted assets remains strong, particularly in Toronto, Montreal and Vancouver,” said Chris Marlyn, senior vice president of Colliers’ Valuation and Advisory Services team.

According to the report, Alberta has seen a shift taking place in the economy due to the current commodity environment that has caused companies to undergo significant changes in order to operate. Investment in Calgary’s commercial real estate market is trending well behind the previous year’s third quarter levels. However, Alberta is still very active with new projects under construction, from office towers and hotels, to condominiums and extensive development at both international airports.

Smaller markets such as Ottawa, Winnipeg, Halifax and Victoria are slow with few assets trading, noted the report, adding that ongoing limited supply of good-quality assets and ample availability of low-cost financing have contributed to reduced activity in those markets.

1 in 5 Renters Are Affected

Piggy Bank and canadian dollars close up shot


It’s certainly not news to landlords spoiled for choice in terms of tenants that Canadians are struggling to find affordable housing, but it’s especially bad in the in suburbs.

According to a new study by a coalition of affordable housing groups in six provinces and the Vancouver City Savings Credit Union, one in five Canadian renters are spending more than half their income on shelter costs.

While rents tend to be highest in cities such as Toronto, Vancouver and Calgary, the communities facing the greatest affordability crisis tended to be the suburbs, where home prices have been soaring and developers have built little in the way of rental apartments or social housing.

In the Toronto area, average rents are higher in suburban communities such as Milton and Vaughan than in the City of Toronto. Mississauga ranked among the worst cities in the country when it comes to a shortage of affordable rental housing, according to the study. It used data on income and rents from Statistics Canada’s Survey of Household Spending for more than 1,000 municipalities and regions.

In Whitchurch-Stouffville, a suburb north of the city, 30% of renters spend more than half their income on shelter costs, the highest in the province and well above the 22% of renters in Toronto.

Affordable-housing advocates say soaring rents in the suburbs are a symptom of a lack of low-cost rental supply in the major cities, where the bulk of the new rental stock has come from high-priced, investor-owned condos.