Toronto Topples Vancouver as Most Desirable Market for Lenders

Report shows majority of lenders want to increase their allocation to Canadian CRE, but reveals shifting preferences for specific cities and asset classes in 2017

Toronto – November 29, 2016 – The GTA has emerged as the most desirable market for lenders in 2017, with 84% of surveyed lenders reporting a ‘strong’ appetite to lend towards Toronto commercial real estate (‘CRE’) assets in 2017.  According to CBRE Limited’s 2016 Canadian Real Estate Lenders’ Report, which assesses Lenders’ activity during the year and intentions for 2017, Vancouver remains a highly desirable location for lenders. 68% of lenders reporting a strong desire to lend in Vancouver but the GTA, with its larger size and broader based economy, currently offers more attractive relative risk for lenders.  Of all the asset classes, industrial appears to be the most in demand for 2017, with lenders tempering their appetites for increasing their exposure to the high-rise condo sector.

“We have had an unprecedented level of interest of both debt and equity capital to invest in Canadian commercial real estate assets and 2016 is expected to break the investment volume record of $32.1 billion set back in 2007.  The financing climate has been highly supportive of this record-breaking environment and, with 58% of lenders looking to expand their asset allocation to commercial real estate in 2017, lenders are poised to support another robust year of investment activity.  However, there has been a shift in preference between geographies and asset classes, with the GTA and industrial markets set to find a robust but more balanced lending environment in 2017,” commented Carmin Di Fiore, Executive Vice President of CBRE’s Debt and Structured Finance Group.

The percentage of lenders with strong appetites to target lending in the GTA increased from 77% in 2015 to 84%, moving Toronto from second to first in the list of most desirable markets.  Although over two-thirds of lenders reported a strong desire to lend in Vancouver, the percentage of surveyed lenders with a strong appetite for lending in Vancouver fell by 15% from 2015.

“With debt capital flow moderating in Vancouver, and Calgary seeing capital becoming more tightly focused at specific high value opportunities, Toronto stands to be the destination of choice for lenders in 2017. The diversity and strength of the GTA economy and sustainability of commercial property values in recent years appeals to lenders’ sensibilities.  Both enthusiasm and capital are spilling over into cities close to Toronto with the desire to lend to both Hamilton and Waterloo Region doubling from 2015,” added Di Fiore.

2016 Lender Target Market
(% of respondents with a strong desire to lend here)
2015 Lender Target Market
(% of respondents with a strong desire to lend here)
2016 Lender Target Property Types
(% of respondents increasing their budget per asset class)
2015 Lender Target Property Types
(% of respondents increasing their budget per asset class)
1. Greater Toronto Area – 84%
1. Vancouver – 80%
1. Industrial – 45%
1. Apartments - 60%
2. Vancouver  - 68%
2. Greater Toronto Area – 77%
2. Retail – 34%
2. Retail - 47%
3. Ottawa-Gatineau – 50%
3. Ottawa-Gatineau – 46%
3. Apartments – 32%
3. Industrial - 43%
4. Montreal – 45%
4. Montreal – 37%
4. Office – 24%
4. Seniors Housing - 40%
5. (Tie) Hamilton, Victoria, Waterloo Region – 21%
5. Victoria – 17%
5. (Tie) Seniors Housing & Single-Family – 13%
5. (Tie) Office CBD & High-rise residential condos - 30%

Industrial was the only property type to record a year-over-year increase in overall budget intentions for 2017. With the lowest industrial vacancy rates in North America and rising rents, industrial properties are quickly becoming the preferred asset class for both investors and lenders. Despite the stability of apartment buildings, lending appetite has moderated as lenders have built up sizeable loan books in this sector over recent years. 
Almost a third of lenders reported they exceeded their 2015 budget plans for lending to apartment buildings, demonstrating the robust appetite for this asset class in recent years.

As property fundamentals and macroeconomic factors shift, certain property types have seen moderation by lenders, particularly high-rise condos. There are signs that lenders are responding to high values and potential concerns about the Canadian housing market. Only 16% of lenders reached their planned high-rise condo budgets in 2016 and only 5% are looking to expand this book of business in 2017.

“Rising and record commercial real estate values also naturally bring about rising scrutiny. So we’re seeing lenders pay much more focus to those asset classes and markets which are underpinned by the strongest underlying fundamentals. This is in addition to a laser-like focus on the quality of the asset being underwritten, as well as the borrower’s current levels of leverage,” explained Di Fiore.

92% of lenders reported that asset quality was a primary microeconomic factor that shaped their lending decisions up from 70% in the prior year. Borrowers’ leverage levels are also increasingly being scrutinized with 63% of respondents stating it as a primary influence in their decision making, up from 43% in 2015.

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 (based on 2015 revenue).  The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide.  CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.  Please visit our website at

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