2015 Returns are in: Commercial Real Estate +8% vs Stocks and Bonds -10%!

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Figure 1

Canada’s Property Index recorded an 8.0% total return in 2015, which is an improvement from the 7.4% result in 2014 (Figure 1 above). By comparison equities and bonds yielded -10.0%. in 2015. Globally, Canada ranks in the middle compared to the other countries tracked, and while Canada’s 8% return may seem low compared to the 25% posted by Ireland, but remain -47.7% lower than their peak in 2007. similarly,  other countries such as Thailand, Malaysia, and Spain offered slightly higher returns than Canada but given the additional economic and political risks in those regions the slight premium might not enough for some investors.

The REALpac/IPD Canada Quarterly Property Index, with results dating back to 1999, is an annual rolling index measuring unlevered total returns to directly held standing property investments from one open market valuation to the next. The index tracks performance of 2,343 property investments, with a total capital value of CAD $121.3 billion as at June 2014. For more information on the Canada Property Index visit the REALPac website or the MSCI website.

Similar to the wider economy, there was a mix of results across all the provinces. Performance and capital growth were strongest in Toronto, with a total return of 12.8% and Vancouver, at 12.5% (Figure 2 below).  Calgary, Edmonton and Halifax were on the other end of the spectrum, due to the declining economic factors such as the price of oil, which resulted in a lower than average and negative annualized return on both residential (multifamily/apartments) and commercial properties.

In terms of asset classes, retail was the strongest performer in 2015 with an average total annual return of 8.8%.

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Figure 2

In 2015, investment in retail commercial real estate assets amounted to a total of $2,083 Million. This amount is to 37% of all real estate traded for 2015 and was more than both the residential (multifamily/apartments) and office net investment combined! Toronto continues to be the hottest market with a dollar value traded of 1,710MM, which represents 31% of all real estate assets traded in Canada.

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Figure 3

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