Q4 2021

Canada
Cap Rate
Report

Accelerating success.
National Investment Trends
Q4 2021
As the year ended, the optimism for a return to normal
was put on hold as the spread of the Omicron variant
across the country increased COVID-19 case counts to
record levels across many major markets across Canada.
While this poses setbacks for some asset classes such
as office, retail, and hospitality, assets within the industrial
and multifamily sectors continue to thrive.
The return to office plans for many tenants across
the country were put on hold late in 2021 as the spread
of the Omicron variant increased. Despite this, there were
some positive signs within the sector as the percentage
of subleases declined, and the overall vacancy rate has
also plateaued or started to trend downwards in some
major markets. Furthermore, those markets that still saw
increased vacancy appeared to have smaller increases than
previously seen throughout the year. Possibly indicating
a slowdown in the rise of vacancy levels. Even with the
softened fundamentals, office assets remained in strong
demand across the country with several larger transactions
occurring in key markets.
Industrial real estate across the country continues
to benefit from global supply chain disruptions as
well as supply and demand imbalances in most markets.
As a result, the national vacancy rate decreased to just
1.3% in Q4 2021, and key markets such as Vancouver,
Toronto, and Montreal all posted vacancy rates below
1.0%. The extremely strong fundamentals are translating
to even stronger sale prices per square foot for industrial
assets from coast to coast.
Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada
Toronto Montréal Vancouver Calgary Edmonton
While the multifamily sector faced some minor headwinds
at the start of 2021, its overall resiliency and stability have
led to increased investor demand and elevated pricing
for most assets. As the country continues to push its way
through the pandemic, immigration, and the eventual return
to normal will only strengthen demand in this sector.
The retail sector continues to be divided among essential
and non-essential tenants as the pandemic carries on.
Those assets with essential anchors like grocers, banks
and pharmacies have remained stable throughout the year
whereas those that are occupied by more non-essential
retailers have suffered more due to closures and capacity
restrictions. In addition, supply chain issues continue
to plague many tenants in the sector as they struggle
to keep stock of goods and products on the shelves.
Compounding this issue is a continued shortage of labour
in most markets together with the adaptation of larger
e-commerce presence.
Although some commercial real estate asset types continue
to experience higher risk due to uncertainties surrounding
the Omicron variant and ongoing pandemic restrictions,
the national all asset average cap rates continued to inch
downward in Q4 2021, now sitting at 5.41%, from 5.45%
in Q3 2021, and down 23 bps from Q4 2019. The Bank
of Canada (BoC) 10-year bond yields dropped from 1.59%
in Q4 2019 to 0.67% in Q4 2020 and rising back up to 1.58%
in Q4 2021. Despite the pandemic, the risk premium for
commercial real estate assets dropped again to 383 bps
from 394 bps in Q3 2021.
2
Ottawa Winnipeg Halifax Victoria Waterloo
 Key Findings Hotels Q4 Cap Rate Report
• Although some real estate asset types continue Hotel investment activity continued to rise through
to experience higher risk due to uncertainties Q4 2021 with preliminary transaction volume surpassing
surrounding the Omicron variant and ongoing $520 million, ranking as the second most active quarter
pandemic restrictions, the national all asset since the onset of the pandemic and pushing the
average cap rate continued to inch downwards year‑end 2021 total to $1.6 billion. Quarterly investment
from 5.45% in Q3 2021 to 5.41% in Q4 2021. volume concentrated in Ontario and British Columbia
with a handful of urban transactions for redevelopment
• The Bank of Canada (BoC) 10-year bond yields
in the Greater Toronto and Vancouver markets; however,
rose again in Q4 2021 to 1.58%, one basis point
acquisitions for hotel use accounted for the lion’s share
below year-end 2019 levels.
of deals at strong pricing.
• BBB corporate bond yields remained steady
Due to a relative lack of operational cashflow and the
in Q4 2021 reaching 3.08%. After experiencing
uncertain outlook for the next quarter with the Omicron
a dramatic dip in 2020, BoC 10-year bond yields
variant, the reporting of normalized cap rates will remain
rose again in Q4, again closing the risk premium
suspended. Colliers Hotels will be releasing its Q4 2021
from 394 bps in Q3 2021 to 383 bps in Q4 2021.
INNvestment Canada Hotel Report in early 2022 with
• Commercial mortgage rates dropped in Q4 2021 to an updated Recovery Report Card and summary of
3.17% from 3.24% in the previous quarter but rising current/ ongoing government subsidy and recovery
bond yields signify a rise in mortgage rates to come. programs, including bill C-2 which received royal assent
in mid‑December 2021.

Interest Rates vs Cap Rates

Spread between bonds & cap rates is now 7 bps below the 15-yr avg. of 401 bps!
Forecast
8%

7%

6%

435
5% 465
Interest Rate (%)

487 383

4%

3%
3.17%

2%

1%

0%
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

2022 F

2023 F

Avg. Cap Rate 10YR Comm. Mtg. Rate BBB Bond Yields GoC 10YR Bond Yield

Source: Colliers Cap Rate Report, Q4 2021, Bank of Canada and Big 6 Banks, December 20212021.

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 3

Toronto Montréal Vancouver Calgary Edmonton Ottawa Winnipeg Halifax Victoria Waterloo
 Interest Rates vs Cap Rates
Vancouver spread at 251 bps, 43 bps below 15-yr avg. Toronto spread at 297 bps, 67 bps below 15-yr avg.
Calgary spread at 420 bps, 17 bps above 15-yr avg. Montreal spread at 356 bps, 91 bps below 15-yr avg.

Forecast
9%

8%

7%

6%
Interest Rate (%)

5%

4%

3%

2%

1%

0%
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

2022 F

2023 F
National Avg. Vancouver Calgary Toronto
Montreal 10YR Comm. Mtg. Rate BBB Bond Yields GoC 10YR Bond Yield

Source: Colliers Cap Rate Report, Q4 2021, Bank of Canada and Big 6 Banks, December 2021

Average National Cap Rate by Asset Type Average National Cap Rate by Market

9% 9%

8% 8%

7% 7%

6% 6%
Interest Rate (%)

Interest Rate (%)

5% 5%

4% 4%

3% 3%

2% 2%

1% 1%

0% 0%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Q1 2021
Q2 2021
Q3 2021

Q4 2021

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Q1 2021
Q2 2021
Q3 2021

Q4 2021

National Avg. DT Office Sub Office Industrial National Avg. Vancouver Edmonton Calgary
Retail Multifamily GoC 10YR Bond Yield Toronto Ottawa Montreal GoC 10YR Bond Yield

Colliers Cap Rate Report, Q4 2021, Bank of Canada, December 2021

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 4

Toronto Montréal Vancouver Calgary Edmonton Ottawa Winnipeg Halifax Victoria Waterloo
Toronto
Q4 2021 Downtown Office

Class A Class B Q1 Prediction

What’s Trending?
Low High Low High A B

• Industrial assets outshined other major commercial 3.75% 4.75% 4.50% 5.50%
sectors in 2021 as sales volumes and valuations both
saw tremendous increases over the course of the year.
The gains are attributable to the increases in rental rates Suburban Office
seen across all GTA markets and in all asset classes.
This is a direct result of increased demand seen in Class A Class B Q1 Prediction
the sector and record low supply.
Low High Low High A B
• Suburban office investment continued to display strong
activity to close out the year as numerous larger scale 5.75% 6.75% 6.25% 7.25%
transactions closed in Markham and Mississauga.
Some of the more notable sales included the purchase
of both Allstate Corporate Centre and 175 Commerce Industrial
Valley Drive West in separate deals by Groupe Mach
out of Montreal for a combined price of approximately Class A Class B Q1 Prediction
$213 million.
Low High Low High A B
• Multifamily activity remained hot in Q4 2021 as the
3.50% 4.25% 4.00% 4.50%
average price per unit for apartments continues to
climb upwards. This trend should continue into 2022
with the removal of rental freezes in Ontario which
will push up base rental revenues and help increase Retail
net operating incomes.
Regional/ Grocery/ Neighbourhood/
Q1 Prediction
Power Community Strip
• Retail assets have performed much better during 2021
than initially anticipated as cap rates have remained Low High Low High Low High R G N
stable for quality assets. While there are still likely
some more changes ahead as the landscape of bricks 4.50% 5.50% 5.00% 6.25% 4.75% 6.00%
and mortar retail evolves, the integration of larger
e-commerce platforms has not had a negative impact
on stores and vacancies that was originally predicted. Multi-Family Apartment

High-Rise Low-Rise Q1 Prediction

Low High Low High H L

3.00% 3.75% 2.75% 3.75%

Tim Loch
Executive Director, Greater Toronto
tim.loch@colliers.com
+1 416 816 7413

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 5

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Montréal
Q4 2021 Downtown Office

Class A Class B Q1 Prediction

What’s Trending?
Low High Low High A B

• The industrial market continues to see growth both 4.50% 5.50% 5.25% 6.00%
on the rental rate and value side. Overall rents have
increased throughout 2021 in all asset classes and
submarkets. The lack of inventory has caused prices Suburban Office
to increase for both investment properties as well
as owner-occupier inventory. Class A Class B Q1 Prediction

• The office market has seen limited sales activity. Low High Low High A B
However, this is anticipated to change, a consortium
of buyers has locked up Cominar’s office and retail 6.00% 7.00% 6.75% 7.50%
portfolio which will become the bellwether sale for
year‑end 2021 closing in Q1 2022. There has been
significant negative absorption in the office market Industrial
and a large amount of sublease activity has slowed
new leasing opportunities. Class A Class B Q1 Prediction

• The retail sector has seen an increase of sales activity Low High Low High A B
throughout 2021 with smaller well positioned retail
3.25% 4.50% 4.00% 4.75%
properties seeing much more interest. Although the
pandemic has affected the retail sector over the past
20 months, in general the Quebec government has
tried to support the retail sector by keeping businesses Retail
open but enforcing strict health measures. The biggest
Regional/ Grocery/ Neighbourhood/
challenge in the retail sector has been finding enough Power Community Strip
Q1 Prediction
employees to fill previously vacated positions.
Low High Low High Low High R G N
• The multifamily market has remained consistent with
low-rise multifamily being traded at unprecedented 5.25% 6.50% 6.00% 7.00% 6.50% 7.50%
rates. High-rise multifamily transactions have been
limited due to a lack of available products. In addition,
there has been an increase in interest in redevelopment Multi-Family Apartment
plays to accommodate a higher demand for housing.
High-Rise Low-Rise Q1 Prediction

Low High Low High H L

3.00% 4.25% 4.00% 5.00%

James Gang
Executive Director, Montréal
james.gang@colliers.com
+1 514 764 8166

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 6

Toronto Montréal Vancouver Calgary Edmonton Ottawa Winnipeg Halifax Victoria Waterloo
Vancouver
Q4 2021 Downtown Office

Class A Class B Q1 Prediction

What’s Trending?
Low High Low High A B

• Retail continued to be active in Q4 2021, with The 3.00% 4.25% 3.00% 4.25%
Junction in Mission selling for over $96.0 million and
a low 5% cap rate, and Haney Place Mall in Maple
Ridge selling for $67.5 million, at a low 4% cap rate Suburban Office
reflecting future densification plans. Smaller deals
include a Toys R Us/Bed Bath Beyond tenanted centre Class A Class B Q1 Prediction
in Coquitlam for $24.9 million and 7592 Vedder Road
in Chilliwack for $16.4≈million. Low High Low High A B

• Industrial investment activity was active in Abbotsford 4.75% 6.00% 5.50% 6.50%
with CanFirst Capital Management acquiring three
industrial properties for $46.0 million and a private
investor acquiring a property in West Abbotsford Industrial
for $21.0 million. Several other properties also
traded throughout the Lower Mainland in the Class A Class B Q1 Prediction
$10‑$15 million range.
Low High Low High A B
• Office investment activity included Allied REIT’s
3.25% 4.25% 3.50% 4.50%
acquisition of the Dominion Building near Gastown
for $65.0 million, Dayhu Investments purchase
of the Cossette near Yaletown. Suburban office
was also active with the Berezan Group acquiring Retail
three Class A buildings in South Surrey and the sale
Regional/ Grocery/ Neighbourhood/
of Commerce Court International Phase III and IV Power Community Strip
Q1 Prediction
in Richmond for $55.0 million.
Low High Low High Low High R G N
• The $52.0 million acquisition of The Link in East
Vancouver by Crestpoint and InterRent REIT was 4.00% 6.00% 4.00% 5.50% 3.25% 5.25%
the largest single-property sale, with 104 rental units.
Several transactions in the sub-$20.0 million range
indicate continued activity in this sector, with cap rates Multi-Family Apartment
in low 2% to mid 3% range.
High-Rise Low-Rise Q1 Prediction

Low High Low High H L

2.25% 3.50% 2.50% 4.00%

James Glen
Vice President, Vancouver
james.glen@colliers.com
+1 604 681 4111

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 7

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Calgary
Q4 2021 Downtown Office

Class A Class B Q1 Prediction

What’s Trending?
Low High Low High A B

• 2021 finished strong with positive sentiment towards 6.00% 7.00% 7.00% 9.00%
the strength of the Calgary economy and strength in
the Oil and Gas market. This perspective was mirrored
in the real estate sector in the last half of the year. Suburban Office

• Despite the woes of the Calgary office market Class A Class B Q1 Prediction
(with overall vacancy nearing 30%) Oak Street Real Estate
Capital acquired Western Canadian Place (a 1.06 million Low High Low High A B
square feet downtown office building) for $475 million
in December. 6.25% 7.00% 7.00% 8.50%

• The industrial market saw the largest gains as the

leasing market tightened, and available products for sale Industrial
declined. Overall, capitalization rates compressed in the
back half of 2021 as both rising construction costs and Class A Class B Q1 Prediction
rising rental rates put upward pressure on value.
Low High Low High A B
• The multifamily market remained steady in Q4 2021,
4.50% 5.50% 5.25% 6.75%
and overall rental rates saw modest growth. Harris
Street Capital acquired a newly constructed 286-unit
apartment building in the University District and Hines
moved forward with listing the Park Central project Retail
which is a newly constructed purpose-built high-rise
in the Beltline. Regional/ Grocery/ Neighbourhood/
Q1 Prediction
Power Community Strip
• The general expectation for Calgary is continued
Low High Low High Low High R G N
optimism into 2022 as the economy strengthens and
investor appetite increases. 5.25% 6.00% 5.25% 6.00% 5.50% 6.50%

Multi-Family Apartment

High-Rise Low-Rise Q1 Prediction

Low High Low High H L

4.25% 4.75% 4.50% 5.25%

Mark Berestiansky
Managing Director, Calgary
mark.berentiansky@colliers.com
+1 403 298 0419

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 8

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Edmonton
Q4 2021 Downtown Office

Class A Class B Q1 Prediction

What’s Trending?
Low High Low High A B

• The office market in Edmonton remained weak in 6.75% 8.00% 7.25% 9.00%
Q4 2021 although the sector has stabilized. Negative
absorption was evident in most sectors, although the
rate of decline has flattened. Investment was muted Suburban Office
during the year with only two sales over $10 million.
Both transactions exhibited elevated levels of vendor Class A Class B Q1 Prediction
motivation.
Low High Low High A B
• The strongest sector in Edmonton in 2021 was industrial.
Over 1.5 million square feet of positive net absorption 6.75% 7.75% 7.00% 8.50%
was seen with vacancy rate dropping below 5.5% in
Q4 2021. Capitalization rates remained low as investment
demand by both local and national companies was Industrial
substantial. By the end of 2021, the level of new
industrial construction was nearing 4.2 million square Class A Class B Q1 Prediction
feet.
Low High Low High A B
• The retail market was projected to be the sector with the
5.75% 6.75% 6.25% 7.25%
most negative downside during the COVID-19 pandemic.
These grim forecasts never materialized. Although there
were some notable failures, vacancy levels increased by
less than two percentage points and the market appears Retail
to be improving at the end of 2021. Capitalization rates
Regional/ Grocery/ Neighbourhood/
are in a mild declining trend. Power Community Strip
Q1 Prediction

• The difficulties experienced by the multifamily market Low High Low High Low High R G N
in 2020 reversed in part during 2021. Energy prices
moved to high levels during the year and employment 5.50% 6.50% 5.50% 6.50% 6.50% 7.00%
/ migration in the metropolitan area reflected this
renewed optimism. Vacancy levels declined and are
expected to fall even more in 2022. Capitalization rates Multi-Family Apartment
are stable despite the spectre of rising interest rates.
High-Rise Low-Rise Q1 Prediction

Low High Low High H L

4.00% 5.00% 4.25% 5.50%

Perry Gereluk
Vice President, Edmonton
perry.gereluk@colliers.com
+1 780 969 2979

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 9

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Ottawa
Q4 2021 Downtown Office

Class A Class B Q1 Prediction

What’s Trending?
Low High Low High A B

• The Ottawa market continued to see strong transaction 5.25% 6.50% 6.50% 7.25%
activity in Q4 2021. Demand for development lands,
industrial, multifamily, and well tenanted retail assets
remains strong. Suburban Office

• Though the Ottawa office market remains soft, there Class A Class B Q1 Prediction
were several substantial office transactions in Q4 2021.
Crown Realty purchased the IBM Campus at 3755 Low High Low High A B
Riverside Drive for $183 per square foot and partnered
with Crestpoint to acquire the Place de Ville office 6.50% 7.25% 7.00% 7.75%
complex in Downtown Ottawa. Office transaction activity
remains well off the historical average, but with that,
some owners remain bullish on the Ottawa office market Industrial
despite the decreased demand from tenants.
Class A Class B Q1 Prediction
• The multifamily market was quieter than typical in
the last quarter of 2021 with only a handful of trades, Low High Low High A B
all comprised of assets under 20 units in size. It is
5.00% 6.00% 5.50% 6.25%
anticipated that there will be an increase in large-scale
multifamily transaction activity in 2022 as an increasing
number of newly built apartment buildings come online.
Retail
• Industrial sale prices and capitalization rates continue
to improve throughout Ottawa. Several transactions Regional/ Grocery/ Neighbourhood/
Q1 Prediction
Power Community Strip
occurred in 2021 which demonstrated record-high prices
per square foot for their respective districts. An increasing Low High Low High Low High R G N
number of assets are trading at more than $200 per
square foot with capitalization rates in the low 5.0% range. 5.75% 6.75% 6.00% 6.75% 6.00% 7.00%

• As we move through 2022 investor remain concerned

with the potential for interest rate increases as well as
Multi-Family Apartment
ongoing uncertainty around the rise in COVID-19 cases
and further potential lockdowns. High-Rise Low-Rise Q1 Prediction

Low High Low High H L

4.00% 4.75% 3.75% 4.75%

Oliver Tighe
Executive Director, Ottawa
oliver.tighe@colliers.com
+1 613 683 2225

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 10

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Winnipeg
Q4 2021 Downtown Office

Class A Class B Q1 Prediction

What’s Trending?
Low High Low High A B

• Demand for good quality industrial property remains 5.50% 6.25% 6.00% 6.75%
strong and has led to a decrease in cap rates
throughout 2021.
Suburban Office
• Transaction volume for industrial and multifamily has
returned to pre-pandemic levels, with office sales being Class A Class B Q1 Prediction
on the slower side. Retail volume began to increase
in Q4 2021. Low High Low High A B

• Office and retail transaction volume remain low with − − 6.00% 6.75%
few significant transactions occurring throughout 2021.
Vacancy for these property types will be what drives cap
rates on a case-by-case basis. Industrial

• Multifamily transactions have been steady with owners Class A Class B Q1 Prediction
taking a buy / renovate approach to increase rental rates.
New construction has also been active throughout Low High Low High A B
the year.
5.75% 6.50% 6.00% 6.75%

Retail

Regional/ Grocery/ Neighbourhood/

Q1 Prediction
Power Community Strip

Low High Low High Low High R G N

6.00% 6.50% 6.00% 6.75% 6.00% 6.75%

Multi-Family Apartment

High-Rise Low-Rise Q1 Prediction

Low High Low High H L

5.00% 6.00% 5.00% 6.00%

Rob Preteau
Senior Associate, Winnipeg
rob.preteau@colliers.com
+1 204 926 3827

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 11

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Halifax
Q4 2021 Downtown Office

Class A Class B Q1 Prediction

What’s Trending?
Low High Low High A B

• The shortage of people for a broad variety of business 6.50% 7.25% 7.25% 8.25%
and vocations persists, impacting many services resulting
in longer wait times / delays.
Suburban Office
• Supply for preferred asset classes such as multifamily,
necessity retail and industrial are limited. Availability Class A Class B Q1 Prediction
of land for new development is scarce in many areas,
particularly approved land at city-edge locations and Low High Low High A B
industrial parks. This lack of supply is causing a chain
reaction as there are more buyers pursuing alternative 6.50% 7.25% 7.25% 8.25%
development sites, along with a continuation of
development interest from outside of the region.
The cost of land has increased, along with the higher Industrial
cost of construction has resulted in increased overall
costs that has compressed overall cap rates. In many Class A Class B Q1 Prediction
instances, along with compressed cap rates, the market
Low High Low High A B
rents are also moving to where they need to be to
support continued development. 5.50% 6.25% 6.00% 7.00%

• Resale and new housing supply is at a record low with

high demand resulting in price increases never seen
in Halifax. Retail

• There is a sense that looming interest rate hikes are Regional/ Grocery/ Neighbourhood/
Q1 Prediction
Power Community Strip
prompting owners to renew mortgages now and complete
any pending acquisitions and secure financing before Low High Low High Low High R G N
interest rates move up, as is widely anticipated. In some
instances, the potential for higher cost of capital is resulting 5.50% 6.25% 6.25% 7.50% 6.00% 7.25%
in cap rate compression as investors are more anxious
to complete deals to take advantage of current rates.
Multi-Family Apartment
• There remains an increasing feeling that the city is
destined to reach a new level in its’ growth continuum. High-Rise Low-Rise Q1 Prediction

Low High Low High H L

4.00% 4.50% 4.25% 4.50%

Mitch Wile
Managing Director, Halifax
mitch.wile@colliers.com
+1 902 442 8701

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 12

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Victoria
Q4 2021 Downtown Office

Class A Class B Q1 Prediction

What’s Trending?
Low High Low High A B

• The close of 2021 indicated continued strength in the 5.00% 5.75% 5.25% 6.00%
Greater Victoria investment market, with office and
industrial rental rates edging upwards, and a downward
trend on vacancy rates for these asset classes. Suburban Office

• The multifamily market is sought after by REIT’s Class A Class B Q1 Prediction

aggressive acquisition of older assets that benefit from
low vacancy, upward pressure on monthly rental rates, Low High Low High A B
and future income upside from necessary renovation
of these ageing buildings. 5.25% 6.00% 5.50% 6.25%

• Retail continues to be an unknown variable, depending

upon the tenancy type, with the most risk associated Industrial
with the service-based sector. Investor confidence
is supported by the sale of Wilkinson Plaza, an Class A Class B Q1 Prediction
18,111 square feet fully leased neighbourhood strip
plaza, which was recorded at the close of 2021 Low High Low High A B
at a sub‑5% stabilized cap rate.
4.25% 5.25% 4.50% 5.50%
• Within the industrial market, the $23.9 million
sale of 765 Vanalman Avenue was recorded
at a market‑leading capitalization rate. Retail

• The sale of Class A buildings at Upper Harbour Place Regional/ Grocery/ Neighbourhood/
Q1 Prediction
from Sun Life Assurance Company of Canada to Reliance Power Community Strip
Properties this quarter highlighted the continued
Low High Low High Low High R G N
strength of the office market and a flight-to-quality
within this sector. 5.00% 5.75% 5.25% 6.00% 5.25% 6.00%

• For the final quarter of 2021, indications of overall

confidence in the Greater Victoria investment market
remains positive for 2022. Multi-Family Apartment

High-Rise Low-Rise Q1 Prediction

Low High Low High H L

3.50% 4.25% 3.75% 4.50%

Andrew Buhr
Associate, Victoria
andrew.buhr@colliers.com
+1 250 414 8371

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 13

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Waterloo
Q4 2021 Downtown Office

Class A Class B Q1 Prediction

What’s Trending?
Low High Low High A B

• The market continues to be characterized by short 5.75% 6.50% 6.25% 7.00%

supply and high demand. There continue to be many
more buyers than sellers in our region. That in turn
is putting upward pressure on prices as well as buyers Suburban Office
look past issues that may have given reason for
a discount in the past. Class A Class B Q1 Prediction

• Even though the return to office has been further Low High Low High A B
delayed, enthusiasm for office properties amongst
investors persists. They see this as an opportunity 5.75% 6.50% 6.00% 6.75%
to buy well-located and tenanted properties or use
their skill set to add value to challenged office assets.
Industrial
• Waterloo Region is seeing significant industrial
spillover effect from both GTA tenants and investors. Class A Class B Q1 Prediction
This is causing sharp increases in industrial land and
building values, driving industrial cap rates to hit new Low High Low High A B
record lows.
4.00% 4.50% 4.50% 5.00%
• Retail investment is active as buyers carefully pick
opportunities that they expect will thrive post COVID-19,
or ones that have a redevelopment component to them. Retail

• Multifamily is a perennial favourite and is in high Regional/ Grocery/ Neighbourhood/

Q1 Prediction
demand. Rents continue to rise as vacancy rates drop. Power Community Strip
Portfolios that have never been brought to the market
Low High Low High Low High R G N
have kept the sales volume high. Large institutional
buyers are winning bidding wars and seem to have 5.50% 6.25% 5.25% 6.00% 6.25% 7.50%
limitless capital to invest in multifamily assets in the
Waterloo region.
Multi-Family Apartment

High-Rise Low-Rise Q1 Prediction

Low High Low High H L

3.50% 4.25% 3.75% 4.50%

Karl Innanen
Managing Director, Kitchener
karl.innanen@colliers.com
+1 519 904 7005

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 14

Toronto Montréal Vancouver Calgary Edmonton Ottawa Winnipeg Halifax Victoria Waterloo
Canada Cap Rates
Q4 2021

Downtown Office

Market Class A Class B Q1 2022 Prediction

City Low High Low High Class A Class B

Toronto 3.75% 4.75% 4.50% 5.50%

Montréal 4.50% 5.50% 5.25% 6.00%

Vancouver 3.00% 4.25% 3.00% 4.25%

Calgary 6.00% 7.00% 7.00% 9.00%

Edmonton 6.75% 8.00% 7.25% 9.00%

Ottawa 5.25% 6.50% 6.50% 7.25%

Winnipeg 5.50% 6.25% 6.00% 6.75%

Halifax 6.50% 7.25% 7.25% 8.25%

Victoria 5.00% 5.75% 5.25% 6.00%

Waterloo 5.75% 6.50% 6.25% 7.00%

Suburban Office

Market Class A Class B Q1 2022 Prediction

City Low High Low High Class A Class B

Toronto 5.75% 6.75% 6.25% 7.25%

Montréal 6.00% 7.00% 6.75% 7.50%

Vancouver 4.75% 6.00% 5.50% 6.50%

Calgary 6.25% 7.00% 7.00% 8.50%

Edmonton 6.75% 7.75% 7.00% 8.50%

Ottawa 6.50% 7.25% 7.00% 7.75%

Winnipeg – – 6.00% 6.75%

Halifax 6.50% 7.25% 7.25% 8.25%

Victoria 5.25% 6.00% 5.50% 6.25%

Waterloo 5.75% 6.50% 6.00% 6.75%

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 15

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Canada Cap Rates
Q4 2021

Industrial

Market Class A Class B Q1 2022 Prediction

City Low High Low High Class A Class B

Toronto 3.50% 4.25% 4.00% 4.50%

Montréal 3.25% 4.50% 4.00% 4.75%

Vancouver 3.25% 4.25% 3.50% 4.50%

Calgary 4.50% 5.50% 5.25% 6.75%

Edmonton 5.75% 6.75% 6.25% 7.25%

Ottawa 5.00% 6.00% 5.50% 6.25%

Winnipeg 5.75% 6.50% 6.00% 6.75%

Halifax 5.50% 6.25% 6.00% 7.00%

Victoria 4.25% 5.25% 4.50% 5.50%

Waterloo 4.00% 4.50% 4.50% 5.00%

Retail

Market Regional/Power Grocery/Community Neighbourhood/Strip Q1 2022 Prediction

City Low High Low High Low High R G N

Toronto 4.50% 5.50% 5.00% 6.25% 4.75% 6.00%

Montréal 5.25% 6.50% 6.00% 7.00% 6.50% 7.50%

Vancouver 4.00% 6.00% 4.00% 5.50% 3.25% 5.25%

Calgary 5.25% 6.00% 5.25% 6.00% 5.50% 6.50%

Edmonton 5.50% 6.50% 5.50% 6.50% 5.75% 7.00%

Ottawa 5.75% 6.75% 6.00% 6.75% 6.00% 7.00%

Winnipeg 6.00% 6.50% 6.00% 6.75% 6.00% 6.75%

Halifax 5.50% 6.25% 6.25% 7.50% 6.00% 7.25%

Victoria 5.00% 5.75% 5.25% 6.00% 5.25% 6.00%

Waterloo 5.50% 6.25% 5.25% 6.00% 6.25% 7.50%

Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada 16

Toronto Montréal Vancouver Calgary Edmonton Ottawa Winnipeg Halifax Victoria Waterloo
Canada Cap Rates
Q4 2021

Multi-Family Apartment

Market High-Rise Low-Rise Q1 2022 Prediction

City Low High Low High Class A Class B

Toronto 3.00% 3.75% 2.75% 3.75%

Montréal 3.00% 4.25% 4.00% 5.00%

Vancouver 2.25% 3.50% 2.50% 4.00%

Calgary 4.25% 4.75% 4.50% 5.25%

Edmonton 4.00% 5.00% 4.25% 5.50%

Ottawa 4.00% 4.75% 3.75% 4.75%

Winnipeg 5.00% 6.00% 5.00% 6.00%

Halifax 4.00% 4.50% 4.25% 4.50%

Victoria 3.50% 4.25% 3.75% 4.50%

Waterloo 3.50% 4.25% 3.75% 4.50%

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Toronto Montréal Vancouver Calgary Edmonton Ottawa Winnipeg Halifax Victoria Waterloo
Glossary
Cap Rate
A capitalization rate is a property’s net operating income for the 12 months following the date of sale divided by the purchase price.
Cap rate range estimates in this report are provided by appraisers in their respective markets and take into consideration recent
transactions, as well as investor sentiment.
Office
Downtown Class A
Office buildings, predominantly high-rise,
situated within the Central Business District
(CBD), that offer high-quality construction
and amenities; large floor plates; modern,
efficient systems; and superior accessibility.
These buildings typically compete for larger,
top-tier tenants and command among the
highest rental rates.
Downtown Class B
Office buildings, commonly high-rise, in
the CBD, that offer average to good-quality
construction and amenities, but tend to be
more dated, with fewer features and less
prominent locations. These buildings tend
to compete for smaller to mid-size tenants
seeking average to good-quality space at
more economical rent rates.
Suburban Class A
Office buildings located outside of the
CBD offering high-quality construction and
amenities that appeal to mid-size to larger,
upper-tier tenants seeking non-central
locations
Suburban Class B
Office buildings outside of the CBD offering
average to good-quality construction and
amenities appealing to smaller to mid-size
tenants seeking peripheral locations and
discounted rent rates
Industrial
Class A
Newer, fully-featured industrial buildings of
high-quality steel and concrete construction,
with modern, efficient mechanical and
electrical systems; high ceilings; good
loading capability; air-conditioned
offices; and extensive yard storage/truck
marshalling areas
Class B
Average to good-quality industrial buildings,
typically of somewhat dated construction,
providing good- quality functional space,
but with less extensive features. These
buildings are usually characterized by lower
clear heights and fewer shipping doors.
Q4 2021 Cap Rate Report | Valuation & Advisory Services | Colliers Canada
Toronto Montréal Vancouver
Retail
Regional Shopping Centre
Larger enclosed malls characterized
by multiple anchors (typically including
department stores and/or larger discount
stores/mini-anchors) complemented by
numerous smaller retailers (CRUs). The
CRUs are generally oriented inwardly with
stores connected by internal walkways
(malls) and with numerous common
entrances. They tend to reflect a high
proportion of national tenants, with a broad
mix of categories.
Power Centre
Larger “open air” centres, typically in arterial
locations, comprising a cluster of mostly
freestanding, large-format “big box” stores,
with ample surface parking adjacent to
the stores and throughout the centre.
Tenant mixes tend to reflect anchors such
as discount department stores, furniture/
home furnishings, home improvement/
hardware, electronics, office supplies,
cinemas, fashion outlets, etc., with few
smaller CRUs.
Grocery or Community Centre
Mid-size to larger enclosed or unenclosed
centres with a community-oriented
focus, offering products and services for
daily needs, but with an expanded soft
goods and services component. Anchors
often include supermarkets, drugstores,
discount department stores and similar
outlets, but can also include “big box”
outlets in categories such as apparel, home
improvements, electronics and others.
Neighbourhood or Strip Centre
Smaller to mid-size unenclosed centres,
intended for convenience shopping
for the residents of the surrounding
neighbourhood. These centres are often
anchored by smaller supermarkets,
drugstores, discount stores, etc., with a mix
of smaller, attached retailers.
Calgary Edmonton Ottawa Winnipeg
Multi-Family
High-Rise
Multifamily residential buildings with
comparatively high densities, typically
exceeding four stories in height and
including elevators. These commonly
offer concrete construction and can have
amenities such as underground parking,
fitness rooms, indoor or outdoor pools,
tennis courts, social rooms, etc.
Low-Rise
Lower-density multifamily residential
buildings, typically comprising four stories
or fewer, with or without elevators.
These can offer concrete or wood frame
construction and generally have surface
parking with few building amenities.
Hotels
Urban Full Service
Fully-featured branded hotels offering an
extensive suite of services and amenities,
such as food and beverage services,
conference centres/meeting rooms, fitness/
activity centres, and valet and concierge
services
Select Service
Hotels that offer mid-range
accommodations with a selection of added
services and amenities, but to a notably
lower extent compared to full service
facilities
Limited Service
Hotels that offer affordable accommodation
with comparatively limited additional
features and amenities, typically excluding
food and beverage services
18
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Regional Authors
Tim Loch | Executive Director, Toronto
James Gang | Executive Director, Montréal
James Glen | Vice President, Vancouver
Mark Berenstiansky | Managing Director, Calgary
Perry Gereluk | Vice President, Edmonton
Oliver Tighe | Executive Director, Ottawa
Rob Preteau | Senior Associate, Winnipeg
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Andrew Buhr | Associate, Victoria
Karl Innanen | Managing Director, Waterloo
Leo Lee | Director, National Research Operations | Canada

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