Outlook 2021: Toronto

December 23, 2020 3 Minute Read

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As an unforgettable 2020 draws to a close, most of us will be happy to move forward to better days. With that in mind, we’re speaking with CBRE’s market leaders to find out what commercial real estate trends they’ll be watching for in their cities in 2021.

Jon Ramscar, CBRE Toronto Managing Director, sees the opportunity in the office sector, creative development concepts in the industrial market and a wide-open lens for the alternative asset classes.


2021 is going to be a year of discovery around workplace, with a lot of occupiers and landlords still figuring out what the return to the office will look like. The “wait and see” approach should come to an end and with the office space that has come available in the wake of COVID-19, we see a healthier balance in the markets for occupiers and landlords as people start returning back to the office.

The investment community continues to remain focused on the income profile of office buildings. Going into next year and the year after, amid all the short-term noise, owners remain less concerned about long-term value. There is a strong argument out there that cap rates could actually compress once we come out the other side of the pandemic because of an all-time low, risk-free rate. The risk premium now is wider than it’s ever been in this asset class and there’s a lot of investment capital waiting on the sidelines. However, certainty around the income profile will be at the top of the underwriting agenda.


Industrial is the bride of the commercial real estate industry. It’s not just industrial, it’s the new retail and industrial. We can’t build industrial fast enough for the demand we’re witnessing accelerate. We were already at a pinch point before COVID-19 and it’s only become more acute. So we expect next year we could see more creative opportunities from the development community looking to new concepts in industrial. Like in Vancouver, where land constraints led to more strata development coming to the market.


There’s retail and there’s retail. A big chunk of the retail market is dealing with the pain, certainly the tertiary and secondary markets. Grocery-anchored retail with long-term leases and strong demographic continue to hold up well, while everything else is challenged. But we are seeing activity in core markets, particularly in downtown Toronto, where there has been some momentum in leasing activity, with larger groups looking to position themselves for when we come out the other side of COVID-19. Unfortunately next year we expect to see a continued widening of the gap between the haves and have-nots.


The chief bridesmaid, with industrial being the bride. We’re seeing a huge amount of appetite for multifamily, especially for the core urban, well-located assets. Cap rates continue to compress and we don’t have enough product in multifamily; we never did pre-COVID and I think it’s only gotten more acute, like with industrial. So I think the focus next year will be on "how low can you go" with cap rates. However, many will be watching income profiles and government policy closely.

See this related article MORE OUTLOOK 2021:   Calgary  |  Edmonton  |  Halifax  |  Toronto  |  Waterloo   |  Vancouver

Hidden opportunities

The hotel sector has been hardest hit through COVID-19. But as a company right now what we’re hearing from the market and seeing elsewhere in the world is the rise in the synergies in the alternative classes, with operating real estate offering an attractive business case. The ability to have an operating entity as well as the underlying real estate. We’re seeing some of those cap rates and yields sitting very high at the moment, whether it’s in senior living, self storage or student accommodation — yields are significantly higher than the traditional asset classes. So there’s a huge premium there. With current financing rates, the ability to get underlying quality real estate while driving the EBITDA of an operating business will be an attractive play in the marketplace. We think that spread will offer opportunities to new investors, particularly international investors with experience in these sectors.

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