By Erika Siegert, Senior Analyst, National Research Insights | September 9, 2020

National investment activity drops 20% in the first half of the year

With pandemic effects mounting in the second quarter, Canadian commercial real estate has seen a drop in overall transaction activity as investors continue to consider the risks of changing market dynamics. Although physical distancing measures and mandated business closures beginning in March have resulted in a market pause, the second quarter began to see re-openings as the market adjusted to these changes.

While the retail sector initially struggled, the office sector now faces the brunt of pandemic challenges as work-from-home practices persist and the majority of offices are likely to remain closed until at least 2021. These factors have driven an increase in the sublease trend, particularly within the Toronto and Vancouver markets, but similar effects could be seen in other markets going forward. The industrial sector has fared well throughout the changes and remains stable as there has been immense demand and consumer reliance on the distribution and delivery of goods. This presents investor opportunities for further industrial development as demand continues to rise.

Although some commercial retail and entertainment tenants are open and operating again, others still struggle financially, leaving some commercial landlords facing losses in the second quarter as they continue to mitigate challenges and try to retain tenants. Government assistance programs have been extended since their outset, but many are anticipating economic fallout as the CERB reaches its scheduled end in the third quarter. With the rise of cap rates across asset classes, investors remain diligent yet cautiously optimistic as the first half of 2020 closes out.

The first half of the year saw national investment activity drop by 20% compared to the same period last year, with 3,356 transactions totalling $19.7 billion in volume. Industrial transactions made up nearly a quarter of investment volume in the first half of 2020 at $4.8 billion, marking a 24% increase from H1 2019. Compared to Q2 2019, industrial also saw a jump of 26% this quarter. Although down slightly from last year, ICI land was the top performing asset class in terms of deal counts with a total of 684 transactions in the first half of 2020. Recording only 100 transactions in the second quarter, the office sector experienced the largest dip in volume compared to other asset classes, dropping 73% from Q2 2019, and 52% from the first half of 2019. While all major markets saw a decrease in volume this quarter, Edmonton performed well in the first half of 2020 with a 26% increase in investment volume from the first half of 2019. The Vancouver, Montreal, Toronto and Other Greater Golden Horseshoe markets all saw growth in the industrial sector during the first half of this year, and Calgary experienced a notable uptick in residential land investments.

National overall capitaliztion rate trends Q2 2020

According to Altus Group’s Investment Trends Survey results for Q2 2020, the national capitalization rate reached 5.15%, up from 5.02% in Q2 2019 and 4.94% in the previous quarter. Cap rates have increased across all markets except for Halifax, reflecting a change in buyer and seller expectations and a rise in bid-ask gaps that may contribute to a continued slowdown in transaction flow. With the surge in remote work and as tenants re-consider their use of office spaces, Downtown Class “AA” Office cap rates rose slightly to 5.53% up from 5.36% in the same quarter last year, and 5.30% in Q1 2020. At the same time, the industrial sector remains stable as single and multi-tenant industrial remain the top-two preferred asset classes, both gaining momentum this quarter. Similar to the previous quarter, the location barometer indicates that Toronto and Vancouver remain the top preferred markets in Q2, although both have seen negative momentum. While Calgary was the only market to slightly gain momentum this quarter, it remains low in investor preference alongside Edmonton.


National property transactions by asset class H1 2019 vs H1 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 Q2 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.

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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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