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Canadian commercial real estate investment returns start to ease

Returns on Canadian commercial real estate fell slightly over the past quarter with a total return of 9.5% for the year ending 30 June, according to the REALpac/IPD Canada Quarterly Property Index.

Over the past year, real estate under performed public equities at 23.7% (MSCI Canada Index), but outperformed bonds at 5.1% (J.P. Morgan Government Bond Index 7-10 years) and inflation at 2.4% (Statistics Canada). 

Simon Fairchild, Executive Director at IPD, says: “While the annual rate of return at 9.5% remains robust – and still indicates that capital values are rising across all four real estate sectors – the rate of growth over the past two quarters has eased.”

The retail sector continues to outperform other property types with an annual return to June of 11.8%. The spread of returns across the other sectors was very narrow, from 7.7% on offices to 8.1% on residential and 8.6 on industrial property. Calgary and Edmonton continued to outperform the market overall, but have seen a marked slowdown over the past six months.

The REALpac/IPD Canada Quarterly Property Index measures over 2,343 institutional grade properties across Canada valued at 121.3bn CAD, as of June 30, 2014.

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