Press Release

With Commercial Real Estate Transactions Topping $43 Billion in 2017, CBRE Forecasts 2018 could break Investment Record for Third Consecutive Year

28 Feb 2018

CBRE predicts rents to climb in 2018 with vacancy continuing to fall

The Canadian commercial real estate market set back-to-back record years in 2017, recording over $43.1 billion in investments with CBRE forecasting that the amount could potentially be surpassed in 2018. This would make it a remarkable three-year run of consecutive investment records according to CBRE Canada's 2018 Real Estate Market Outlook Report. The report predicts strong tenant demand, coupled with declining vacancy rates which are at, or near, all-time lows in multiple Canadian markets will lead to strong increases in rental rates. So, despite questions about the length of the upswing in Canadian commercial real estate, CBRE projects historically-strong market fundamentals will again improve in 2018.

"Despite the relatively late stage in the cycle, investors are not shying away from Canadian commercial real estate," commented Paul Morassutti, Executive Managing Director for CBRE Canada. "The sheer passing of time shouldn't detract from the solid underlying fundamentals that underpin the Canadian market, which are some of the best in any mature markets across the globe. We have record low vacancy rates, record low unemployment, increasing institutional allocation to real estate and supportive immigration that fuels population growth.

"Every year, we critically assess the threats to the Canadian commercial real estate market, but for each challenge we found, there was an even stronger reason to be optimistic about 2018."

The report revealed that 2017's commercial real estate investment volume of $43.1 billion surpassed 2016's previous record amount of $34.7 billion by almost a quarter. As a result of this surge in investment activity, Canada was one of only four countries around the world to set back-to-back investment records in 2017. The report forecasts that 2018 could see the market set a historic treble of consecutive investment records, with investors continuing to flock to the asset class as a stable, high-yielding investment vehicle.

"In 2018, Canada will once again find itself at the centre of two very powerful investment trends. Firstly, our status as a safe haven with stable rule of law gets more pronounced as geopolitical instability continues to accelerate. Secondly, real estate has arrived as a true ‘fourth asset class' that provides yield in a yield-starved world. As a result, institutional allocations are set to increase by over 20 per cent in the next five years," added Morassutti.

Addressing potential risks for 2018, the report cites rising interest rates and the fate of NAFTA as issues to watch out for in 2018. However, it concluded that the underlying strength in the commercial real estate market outweighs these concerns, minimizing the potential impacts.

"When we considered the effect of expected increases in interest rates in 2018, although it raises the carrying costs of landlords and could potentially put pressure on cap rates, it will be mitigated by the rental growth that our record low vacancies will drive during the year.

"Likewise, when we reviewed the impact of NAFTA on our industrial market, we believe this threat stems from an outdated analysis of the Canadian economy. Today, logistics, distribution and e-commerce account for three-quarters of all tenant demand, with manufacturing, which is more reliant on cross-border trade, a much smaller proportion. This logistics and e-commerce activity is predominantly Canadian-based, and this demand will be present irrespective of the result of NAFTA negotiations. With each additional $1 billion of online sales requiring an additional 1.25 million square feet of industrial space to handle its distribution, industrial assets are the winner of a structural change in the economy." commented Morassutti.

Toronto and Vancouver start 2018 with the lowest downtown office vacancies in North America at 3.7% and 5.0% respectively. Due to growing tenant demand and that meaningful new office supply is not being delivered to both markets until 2020, CBRE forecasts downtown vacancy will fall even lower to 3.3% and 4.9% respectively in 2018. This growth in tenant demand is spreading to other Canadian cities with downtown office vacancy rates also slated to fall in London, Waterloo Region, Ottawa, Montreal and Halifax. After surging for the past two years, vacancy rates will finally stabilize in Calgary as the recovery in Alberta starts to take hold. Collectively, this is anticipated to lead to a decrease in the national average office vacancy rate from 13.0% to 12.7%.

Canada's industrial market is also projected to be a winner in 2018. CBRE anticipates that growing logistics and distribution needs from e-commerce fulfillment will see tenant demand for space outpace by over a third the supply of new industrial buildings delivered in 2018. This will decrease the national average availability rate from 4.1%, the lowest since 2001, to 3.8% in 2018. Availability rates in each of Canada's largest industrial markets, barring Waterloo Region, are all expected to fall in 2018, leading to sustained rental growth during the year.

"Canadian commercial real estate is poised to continue its moment in the spotlight through 2018. It has become a leading destination for capital, businesses and highly-skilled immigrants. Collectively, this is diversifying the economy, bolstering property fundamentals and providing a buffer to the spectre of interest rate hikes. In our view, these solid underlying fundamentals carry far more weight than the discussion around what stage we might happen to be at in the market cycle," concluded Morassutti.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of 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

In Canada, CBRE Limited employs 2,200 people in 22 locations from coast to coast. Please visit our website at