By Kruti Desai, National Research Insights Manager | June 10, 2020

Market pause from COVID-19 will likely result in a drop-off in Canadian investment activity for the remainder of the year, although it’s still too early to tell.

The Canadian commercial real estate sector remained relatively steady, similar to the same quarter last year, as previously negotiated transactions – those that were not yet subject to the distresses of COVID-19 – closed in the first quarter of 2020.  Social distancing, stay-at-home measures, business closures and a rise in unemployment rates in the first quarter translated into a temporary pause at the beginning of the second quarter.  Early indicators show that deals are still closing, but not at the same pace as 2019.

Many commercial landlords are facing pressures on vacancies and revenue as rent collections have declined due to tenants facing cash flow problems, mostly in the retail sector. Government assistance programs have been set up to provide some rent relief, but it is still too early to actualize the results.  Many tenants and owners are also working out rent deferrals or reduction options as temporary relief, in lieu of rental abatement. The industrial sector has been relatively spared from the pandemic – more so for the larger, newer assets – with many households relying heavily on the delivery of goods. The Canadian commercial real estate sector will continue to work through the challenges associated with the global pandemic as the economy gradually enters the next phase of reopening.

Looking ahead, there may be a slight change in investor confidence, a sense of cautiousness and continued pause in specific sectors. Some companies may lean towards a more risk-averse strategy, while others take a more flexible approach to seize opportunities at the right time. It is expected that the full impact and economic implications of the pandemic will not be truly felt until the second half of the year as we emerge from the pandemic. 

National property transactions Q1 2020

Total Canadian investment activity in the first quarter saw a 9% uptick in both volume and deal counts compared to the same quarter last year, reaching $11.3 billion and 1,879 transactions. The most active investments in terms of deal counts were the industrial, ICI land and retail sectors, at over 350 transactions each. In terms of volume, industrial, apartment and residential land sectors each recorded over $2 billion for a combined total of $6.7 billion, which accounted for almost 60% of the overall total volume. The residential land sector in the GTA was the only asset class across all major markets and sectors to exceed $1 billion in total investments. The Edmonton and Montreal markets saw some significant positive gains in total investment volume compared to the same quarter last year.  Investment volume was up by by 60% and 59%, respectively; the apartment sector represented a significant proportion of total investment in both markets, and the office sector represented a large portion in the Montreal market. All other markets took a slight dip in volume.

National overall capitaliztion rate trends Q1 2020

According to the first quarter results of Altus Group’s Investment Trends Survey, Edmonton and Montreal pushed up slightly in momentum on the location-type barometer. Vancouver and Toronto remained the most in-demand markets, but dropped in momentum from the previous quarter.  Overall cap rates for the first quarter marginally compressed from the previous quarter to 4.94% from 4.98%. Suburban multi-unit residential was the only sector that showed a decline in cap rates across all markets, a recurring trend among this in-demand asset class, particularly for older stock with potential for redevelopment and rental increases. It also remained one of the top contenders for investment on the property-type barometer. The industrial sector asset class for single and multi-tenant and industrial land retaining their positions at the top three spots for positive investment momentum. Overall cap rates are expected to stabilize as investors may consider pulling back their investments while they reevaluate their risk exposure and take extra measures to protect their investments.

National property transactions by asset class Q1 2019 vs Q1 2020

The momentum seen in the first quarter has already begun to slow down in the second quarter as investors pause and move towards a more cautious outlook, and as property owners and tenants work through the challenges they have had to face from the pandemic. Additionally, the inability to inspect properties due to protectionist measures as well as difficulties negotiating deals in a remote working environment has ultimately translated to delays or stoppages in deal closures, causing a temporary pause on market activity. Nonetheless, any deals negotiated in previous months will continue to push the Canadian investment market forward, but it is expected that the ramifications of the pandemic won’t show its full hand until the second half of the year. Even once the economy shows signs of improvement, fluctuations in demand could cause valuations to plummet for older properties.

Click the links below to view notable Q1 2020 transactions in each of the major markets:





Data Solutions connects the Canadian real estate industry through the delivery of data with unparalleled breadth, integrity and relevance.  We cover new homes, investment transactions and commercial market inventory in key markets, and also provide intelligence on the national housing market and consumer home buying and borrowing patterns.

Our solutions are used by real estate industry stakeholders to gain market intelligence, identify and validate opportunities, benchmark, strategically plan, manage risk and more.

Data Solutions is part of Altus Analytics, the software and data solutions business of Altus Group, where our focus is to empower real estate clients and partners to work collaboratively to enhance decision making, drive performance and optimize transactional efficiency. Our solutions enable firms to better organize and manage data and connect with the right information and analytics to help them gain a complete picture of real estate assets, portfolios and transactions.

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Altus Group Limited is a leading provider of independent advisory services, software and data solutions to the global commercial real estate industry. Our businesses, Altus Analytics and Altus Expert Services, reflect decades of experience, a range of expertise, and technology-enabled capabilities. Our solutions empower clients to analyze, gain insight and recognize value on their real estate investments. Headquartered in Canada, we have approximately 2,500 employees around the world, with operations in North America, Europe and Asia Pacific. Our clients include some of the world’s largest real estate industry participants across a variety of sectors.  Altus Group pays a quarterly dividend of $0.15 per share and our shares are traded on the TSX under the symbol AIF.

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Elizabeth Lambe
Manager, Communications
Altus Group
(416) 641 – 9787


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