Paul Morassutti Makes the Case for an Optimistic Future for Canada’s Commercial Real Estate Market at CBRE's Vancouver Market Outlook Event

Global Uncertainty is Driving Substantial Capital to Vancouver

Vancouver – November 3, 2016Paul Morassutti, Executive Managing Director of CBRE Canada, today made the case for an optimistic future for Canada’s commercial real estate (‘CRE’) market in his speech to over 700 attendees at CBRE’s Vancouver Market Outlook event. Despite the era of low global economic growth, a prolonged recovery predicted for the Albertan economy and a vulnerability to a slowdown in the Canadian housing market, 2016 is set to be a record year for investment in the Canadian CRE market.

“Let’s consider where we were at the beginning of 2016: The price of oil was $26 per barrel. REITs ended the year with a return of negative 5%. The stock market was roiling with volatility. The consensus of many was that the office market was over-supplied. The retail market was reeling from the mop up of Target space and the continued threat of e-commerce. Expectations for cap rates were that they had no place to go but up and predictions for investment activity in 2016 were muted at best.

“Fast forward to today and Toronto has the lowest downtown office vacancy rate of any major market in North America and Vancouver is heading lower. Oil crept past $50. National cap rates continue to fall to break historic lows, and we broke a record for investment activity in the first half of 2016 with the second half predicted to be just as strong,” Morassutti told attendees.

Morassutti described investment activity in Vancouver as “nothing short of spectacular.” Cap rates have declined across all classes of CRE product in the city during 2016. Class AA and A downtown office product in Vancouver now commands cap rates as low as 3.75%. As a result, Vancouver now rivals Manhattan (3.75%) and Los Angeles (3.50%) in having the lowest cap rates in all of North America.

Addressing the issue of foreign capital setting record pricing for Vancouver commercial real estate assets, Morassutti reminded the attendees that given the diminishing number of markets considered true ‘safe havens’, the sale prices achieved make sense particularly when you consider the low Canadian Dollar. “On a national basis, Canada is about a safe a bet as there is anywhere in the world,” added Morassutti.

In summing up, Morassutti asserted that the case for optimism outweighed the challenges facing the Canadian CRE market. “Global slow growth, a protracted Alberta recovery, the ongoing impact of digital disruption, the ongoing bifurcation of retail assets and an overall vulnerability to a slowdown in the Canadian housing market all present very real issues.” However Morassutti concluded, “I believe the case for optimism is stronger: Slow growth means interest rates aren’t going higher for a while in Canada. Record high spreads over 10 year Canada bond yields support the historic low cap rate environment. Capital is abundant both globally and domestically. And, finally, global uncertainly and a lack of investment alternatives plays firmly in Canada’s favour.”


About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.

In Canada, CBRE Limited employs approximately 1,890 people in 20 locations from coast to coast. Please visit our website at www.cbre.ca​.​


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