5. JLL | Montréal | Capital Markets Investment Insights | 2014 Review | Page 5
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$2,200
$2,400
Industrial Office Retail Multi-Residential Land
2013 vs 2014 Sales Volume ($ Million)
2013 2014
The Greater Montréal Area’s (GMA) real estate investment market saw a considerable increase for the second consecutive quarter, sales volume for
Q4 2014 was approximately $1.5 billion, a 10 percent increase over the previous quarter. The surge in investment activity in the second half of 2014
was a key factor in pushing sales volumes past 2013 levels. While the number of transactions in 2014 stayed relatively stable year over year, total sales
volumes increased by nearly 30 percent, mainly attributable to several larger and significant investment transactions in the office and retail markets
in the second half of 2014. However, we have seen a drop in the inventory of institutional quality real estate coming to market which has resulted in a
significant increase in investments by private investors. Excluding land transactions, there were approximately 600 transactions over the course of the
year representing close to $4.2 billion in sales.
The Canadian economy has experienced relatively positive results for 2014 with total GDP growth of 2.4 percent, up from 2.0 percent in 2013. Increase
in net exports was one of the main drivers of this growth along with a weakening Canadian dollar. The province of Québec saw close to an 8.0 percent
increase in its top commodity exports year to date.
From a political standpoint, the Québec election results were conclusive and a majority Liberal Party government took office in April. This provided the
market with a substantial positive uplift, evidenced by the increase in investment activity post-election. Investors returned to the market with a renewed
sense of optimism and confidence; consequently, Québec’s investment activity increased by close to 40 percent in the second half of 2014 and we
anticipate that this momentum will continue into 2015.
Overview
2013 Versus 2014 Sales Volume ($ million)
H2 2013 Versus H2 2014 Sales Volume ($ million)
Sales Volume by Asset Type - 2014
Sales Volume by Asset Type - H2 2014
$-
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$600
$800
$1,000
$1,200
$1,400
$1,600
Industrial Office Retail Multi-Residential Land
H2 2013 vs. H2 2014 Sales Volume ($ Million)
H2-2013 H2-2014
10%
26%
37%
15%
12%
Sales Volume by asset type - 2014
Industrial
Office
Retail
Multi-Residential
Land
10%
24%
41%
16%
9%
Sales Volume by asset type - H2 2014
Industrial
Office
Retail
Multi-Residential
Land
Source: Collette Plante, JLR, RCA
6. JLL | Montréal | Capital Markets Investment Insights | 2014 Review | Page 6
REIT Outlook
Canadian REIT’s finished 2014 on a positive note and although they
experienced several ups and downs, the sector experienced double digit
returns with +10.4 percent for the year and an average weighted yield of
5.11 percent . A drop in long term interest rates helped stimulate REIT
investment activity while 10 year Government of Canada (GoC) bond
yields ended the year at 1.79 percent. This low interest rate environment
helped stimulate the market for both lenders and borrowers, giving
investors easier access to raise equity for their real estate investments
as well as increased debt capital for development projects. It is expected
that government bond yields will continue declining going into 2015 which
should result in a widening of the REIT yield spread. Furthermore, cap
rates remained low and continue to hover near historic lows which played
an important role in driving REIT unit prices higher in 2014. Research
suggests a number of key factors that should result in a positive outlook
for Canadian REITs going into next year. The recent plunge in oil prices
will have an adverse impact on the Canadian economy as a whole, which
should likely affect interest rates and keep them relatively low. As a result,
this should increase investor appetite, and as demand for top quality
assets remains strong, we expect to see continued compression on cap
rates into 2015.
Five (5) Year 10-Year Long Term
Dec-14 1.34% 1.79% 2.33%
Dec-13 1.90% 2.72% 3.20%
Dec-12 1.37% 1.82% 2.37%
A Deal B Deal C Deal
Three (3) year 3.05% 3.50% 4.00%
Five (5) year 3.25% 3.75% 5.00%
Ten (10) year 4.00% 4.30% N/A
Dec. 8, 2014
CAN/USD Exchange Rate 0.0872
Business Prime Rate 3.00%
30 Day BA 1.23%
Government Bond Yields
Commercial Mortgage Rates
Key Rates
0
2
4
6
8
10
12
14
16
2006-Q1
2006-Q2
2006-Q3
2006-Q4
2007-Q1
2007-Q2
2001-Q3
2007-Q4
2008-Q1
2008-Q2
2008-Q3
2008-Q4
2009-Q1
2009-Q2
2009-Q3
2009-Q4
2010-Q1
2010-Q2
2010-Q3
2010-Q4
2011-Q1
2011-Q2
2011-Q3
2011-Q4
2012-Q1
2012-Q2
2012-Q3
2012-Q4
2013-Q1
2013-Q2
2013-Q3
2013-Q4
2014-Q1
2014-Q2
2014-Q3
2014-Q4
10-year GOC Bond Yields S&P/TSX REIT Yield (Weighted)
Bond Versus REIT Yields
Source: Bank of Canada
Source: Bank of Canada
8. JLL | Montréal | Capital Markets Investment Insights | 2014 Review | Page 8
Cap Rates
Despite some uncertainty in 2014, demand for real estate remains high in the Greater Montréal Area which should support cap rates remaining low in the
foreseeable future. Furthermore, returns on real estate are becoming more attractive following a recent drop in long-term interest rates earlier this year.
The average national capitalization rate across all asset classes sat at 6.11 percent, bringing the spread between Canadian cap rates and the 10 year
GoC bond yield to 396 basis points (bps).
Class A office buildings in the Montréal downtown core are trading between 5.25 and 5.75 percent while cap rates for Class A suburban offices are
averaging between 6.50 and 7.25 percent . Retail assets range considerably depending on their use and location: regional shopping malls traded
between 5.50 and 6.00 percent versus anchored strip centres which averaged between 6.25 and 7.00 percent. Although overall returns remain lower in
the multi-residential sector, cap rates for apartment assets are the lowest among all asset classes Class A concrete structures traded between 4.75 and
5.50 percent while cap rates for brick and wood apartments averaged between 5.75 and 6.50 percent. Industrial assets remained the highest yielding
amongst all property types this year. Cap rates for Class A buildings averaged between 6.50 and 7.00 percent while Class B industrial assets traded
between 7.5 and 8.25 percent.
Cap Rates
Q4 - 2010 Q4 - 2011 Q4 - 2012 Q4 - 2013 Q1 - 2014 Q2 - 2014 Q3 - 2014 Trend
Office
Downtown
Downtown Class A 6.50% 6.00% 5.75% 5.75% 5.75% 5.75% 5.75%
Downtown Class B 7.25% 6.75% 6.50% 6.50% 6.50% 6.50% 6.50%
Midtown
Class A 7.50% 7.00% 6.75% 6.75% 6.75% 6.75% 6.75%
Class B 8.00% 7.50% 7.25% 7.25% 7.25% 7.25% 7.25%
Suburbs
Class A 7.50% 7.00% 6.75% 6.75% 6.75% 6.75% 6.75%
Class B 8.25% 7.75% 7.50% 7.50% 7.50% 7.50% 7.50%
Retail
Regional Shopping Centres 6.00% 5.25% 5.00% 5.00% 5.00% 5.00% 5.00%
Sub-regional Shopping Centres 7.75% 6.75% 6.50% 6.50% 6.50% 6.50% 6.50%
Power Centres
Dominant Power Centres 6.50% 5.75% 5.50% 5.50% 5.50% 5.50% 5.50%
Other Power Centres 8.50% 7.50% 7.25% 7.25% 7.25% 7.25% 7.25%
Community Shopping
Centres 9.50% 8.25% 8.00% 8.00% 8.00% 8.00% 8.00%
Neighbourhood Centres 8.75% 8.00% 7.75% 7.75% 7.75% 7.75% 7.75%
Apartments
Top Quality Apartment 6.00% 5.25% 5.00% 4.50% 4.50% 4.50% 4.50%
Other Apartment 7.00% 6.25% 6.00% 5.50% 5.50% 5.50% 5.50%
Senior Homes
Apartments 7.25% 6.75% 6.75% 6.75% 6.75% 6.75% 6.75%
Room and Board 9.00% 8.25% 8.25% 8.25% 8.25% 8.25% 8.25%
Industrial
Multi-Tenant 8.25% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Single-Tenant 7.75% 7.50% 7.25% 7.00% 7.00% 7.00% 7.00%
Source: Desjarlais Prévost
9. JLL | Montréal | Capital Markets Investment Insights | 2014 Review | Page 9
3.00%
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
8.50%
9.00%
Q4 - 2010 Q4 - 2011 Q4 - 2012 Q4 - 2013 Q1 - 2014 Q2 - 2014 Q3 - 2014
Office - Downtown A Office - Downtown B Regional Shopping Centre Power Centres
Apartment - Class A Apartment - Class B Industrial - Class A Industrial - Class B
Cap Rate Trends
Demand for real estate
remains high in the Greater
Montréal Area which should
support cap rates remaining
low going into 2015.
11. Despite a significant increase
in new condo development,
vacancy rates on the
secondary rental market
remained stable
at 3.4 percent.
12. JLL | Montréal | Capital Markets Investment Insights | 2014 Review | Page 12
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Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
Multi Residential - Sales Volume ($ Millon)
Following several major transactions in Q3 2014, the multi-residential
market saw a decrease in sales volume quarter over quarter but remained
healthy going into 2015. Volume for Q4 2014 was approximately $235
million with an average unit price of $103,800. With the help of a strong
Q3, multi-residential sales for H2 totaled $580 million, representing a 45
percent increase from the first half of 2014 and up 22 percent compared
to the same period in 2013. The vacancy rate on the primary rental
market in the GMA increased slightly to reach 3.4 percent in 2014, while
the estimated increase in average apartment rents was 2.2 percent.
Despite a significant increase in new condo development, vacancy rates
on the secondary rental market remained stable at 3.4 percent. Based on
market transactions, the average price per door in the Greater Montréal
Area in 2014 was $99,020. Cap rates for Montréal apartment buildings
remained stable year over year: top quality Class A assets were trading
between 4.75 and 5.25 percent while Class B apartment buildings sold
between 5.75 and 6.50 percent.
The most notable transaction of 2014 was the sale of 84 units in the
iconic Westmount Square tower, which ELAD Group sold to the Leclerc
family, a private investor who paid approximately $70 million for the
portfolio. In the two months following the sale, the Leclerc family sold off
48 of the units either individually or through bulk sales to a number of high
net worth investors. Another major transaction saw Cogir Management
Corporation acquiring a three-property portfolio from the ELAD Group,
totaling 950 units for approximately $68 million, or $72,000 per unit.
Akelius Real Estate Management, Sweden’s largest privately owned
multi-residential company, made its mark in Canada this year. With the
intention of acquiring 1,000 apartments across the country in 2014,
Akelius was involved in a number of Montréal transactions. Their most
notable purchase was the acquisition of Mountain Place Apartments for
approximately $41 million. The 180 unit apartment complex is located in
downtown Montréal on Drummond Street.
Cap Rate
Class A - High Rise 4.75% - 5.50%
Class A - Low Rise 5.75% - 6.50%
Sales Volume
2013: $703 million | 2014: $892 million
Number of Transactions
2013: 215 | 2014: 206
Sale Price Per Door (GMA)
2013: $99,020 | 2014: $92,309
Multi-residential
Notable Transactions
1 Westmount Square, Montréal
Vendor: ELAD Group
Purchaser: Leclerc Family
Sale Price: $70,000,000
Number of Doors: 84
Price per Door: $833,333
Portfolio Sale, Montréal
Vendor: ELAD Group
Purchaser: Cogir
Sale Price: $68,200,000
Number of Doors: 950
Price per Door: $72,000
3468 Drummond Street, Montréal
Vendor: Gestion Montreville Inc.
Purchaser: Akelius Group
Sale Price: $40,941,000
Number of Doors: 180
Price per Doors: $227,450
Multi-Residential - Sales Volume ($)
Source: Collette Plante
14. JLL | Montréal | Capital Markets Investment Insights | 2014 Review | Page 14
Office
Much like last year, the 2014 office investment market experienced a
substantial increase in the second half of the year, mainly attributable
to several larger transactions, including those of the Bell campus and
the Liberty Sites portfolio. Approximately 6.1 million square feet of
office space traded in 2014, representing a total sales volume of $1.48
billion for the year. These numbers represent a 24 percent increase
from 2013, which includes the trade of Montréal’s iconic Place-Ville-
Marie office tower. However, 42 percent of the office investment
volume in 2014 was attributable to the Liberty Sites and Bell Campus
transactions, which were amongst two of the largest office transactions
in Canada. Bell’s 840,000 square foot campus style headquarters was
sold by German investor KanAm Grund to a consortium of Korean
investors for approximately $340 million. Additionally, the 1.7 million
square foot Liberty Sites transaction of 26 office buildings and one
industrial building located in the Saint-Laurent Technoparc was sold
to the joint venture partnership between HOOPP, Forgestone Capital
and Canderel for approximately $285 million. The average weighted
price per square foot stayed relatively stable quarter over quarter and
currently sits at $178.81 in the GMA (including user and vacant sales).
On the leasing front, we anticipate tenant favorable conditions in
Montréal to remain at least until the beginning of 2016. Currently,
total vacancy in the downtown core stands at 8.1 percent, expect
to increase to almost 11 percent over the next 24 months, as new
office developments come to market. This increased competition put
significant pressure on landlords during the second half of 2014, and
asking net effective rents in the downtown market have decreased by
5 percent over the last six months. With new supply coming to market,
total vacancy in most GMA submarkets will continue to rise in 2015,
expect to reach 12.5 percent in coming months.
From a development standpoint, Montréal experienced one of the
largest office construction booms in over a decade with approximately
2 million square feet coming to the market in 2014. Some of the more
notable completions include the 240,000 square foot Aimia tower
located in the heart of downtown Montréal, the 320,000 square foot
office at 7250 Mile End and its 115,000 square foot adjacent neighbor
at 7250 Marconi, both located in one of Montréal’s fastest growing
neighborhoods. Looking forward, another 1.5 million square feet
of office space is set to be delivered in the GMA during 2015. This
includes, most notably, Cadillac Fairview’s 495,000 Platinum LEED
certified Deloitte tower.
Notable Transactions
Liberty Sites Portfolio (27 properties), Saint-
Laurent
Vendor: Liberty Sites Limited
Purchaser: Joint venture (HOOPP, Canderel,
Foregestone Capital)
Sale Price: $285,000,000
Bell Canada Campus, Montréal
Vendor: KanAm Grund
Purchaser: Joint venture (IGIS, Hanwha Life,
Kyobo Life)
Sale Price: $343,693,090
Portfolio Sale (7 properties) GMA
Vendor: Redbourne Group
Purchaser: Cominar
Sale Price: $92,500,000
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Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
Office - Sales Volume ($ Million)
Office - Sales Volume ($)
Source: Collette Plante
* includes PVM transaction
Cap Rate
Class A - Downtown 6.00% - 6.75%
Class A - Suburban 6.50% - 7.25%
Sales Volume
2013: $1.1 billion | 2014: $1.48 billion
Number of Transactions
2013: 48 | 2014: 64
15. Montréal experienced
one of the largest office
construction booms in over
a decade with approximately
2 million square feet of new
construction being added to
the market in 2014.
17. Cominar acquired a
14-property mixed retail
portfolio from Ivanhoe
Cambridge, which included
11 retail centres, for a total
purchase price of $1.53
billion.
18. JLL | Montréal | Capital Markets Investment Insights | 2014 Review | Page 18
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Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
Retail - Sales Volume ($ Million)
Retail
The retail investment market continued experiencing substantial growth
going into the fourth quarter of 2014. Approximately 2.6 million square
feet of retail space was traded, representing just over $630 million
in sales volume for Q4 alone. This growth was mainly attributable to
several large transactions, including Cominar’s acquisition of the Ivanhoe
Cambridge mixed retail portfolio as well as Brossard’s Quartier Dix 30,
which traded hands twice in this year alone. There was roughly 42 million
square feet of retail space sold in the second half of 2014 which brought
total sales volume to an impressive $1.5 billion. Cap rates for regional
shopping centers remained stable quarter over quarter and sat between
5.25 and 6.00 percent while grocery anchored strips ranged between
6.25 and 7.00 percent.
This year’s largest retail transaction saw Cominar acquire a 14 property
mixed retail portfolio from Ivanhoe Cambridge which featured 11 retail
centers, including the Rockland Centre in Montréal and Carrefour
Centropolis in Laval. In addition Brossard’s Quartier Dix 30, Québec’s
largest mixed-use commercial centre located on the South Shore of
Montréal, traded hands twice in 2014. At the beginning of the year,
RioCan sold its 50 percent share to its partner, Devimco, for a total sale
price of $193 million, representing 5.4 percent cap rate. More recently,
Oxford Properties Group, OMERS’ real estate arm, acquired a 50 percent
share of the retail complex from its original developer, Carbonleo, for
$225 million. Another major transaction was the 236,000 square foot
acquisition of newly developed mixed-use, retail and office assets in the
heart of Montréal’s Griffintown neighborhood. This prestigious Devimco
project was sold to First Capital Realty for $102.2 million or $433.00 per
square foot. The District-sur-Peel retail portion will be grocery-anchored
(Metro Supermarket) and include AAA-covenant tenants, such as
Winners and the SAQ.
Notable Transactions
Peel and Wellington Streets, Montréal
Vendor: Devimco
Purchaser: First Capital Realty
Sale Price: $102,200,000
Mixed Retail Portfolio Sale (11 retail
properties and 3 office properties), GMA
Vendor: Ivanhoe Cambridge
Purchaser: Cominar
Sale Price: $1.53 billion
6000 Rome Boulevard (Quartier Dix-30),
Brossard
Vendor: RioCan
Purchaser: Devimco
Sale Price: $193,000,000
Retail - Sales Volume ($)
Source: Collette Plante
* includes the Quartier Dix
30 and the Ivanhoe portfolio
Cap Rate
Regional Shopping Centre 5.25% - 6.00%
Strip Centre (anchored) 6.25% - 7.00%
Sales Volume
2013: $729 million | 2014: $2.16 billion
Number of Transactions
2013: 171 | 2014: 202
20. JLL | Montréal | Capital Markets Investment Insights | 2014 Review | Page 20
Industrial
The industrial investment market experienced a significant increase
in sales volume for the second half of 2014, due to several large
transaction towards year end. Volume for the second half of 2014 was
approximately $346 million (including user and vacant sales), a 12.5
percent increase compared to Q4 2013, but still a slight decrease of 4.5
percent year over year. The weighted average price per square foot for
industrial properties in H2 2014 increased to $65.69 (including user and
vacant sales); this represents an 8.5 percent improvement compared
to the same period last year. With the decline of the Canadian dollar,
and a recovering U.S. economy, the industrial market should see a
significant increase in commodity exports going into 2015.
From a leasing perspective, an increase in industrial demand in the
last quarter of 2014 caused rental rates to increase across the GMA to
an average of $5.71 psf net and $8.92 psf gross, represent an almost
2.0 percent increase from the previous quarter. We continue to see
the highest average lease rental rates in the Midtown North and Laval
submarkets.
On a development front, there are currently eight industrial buildings
under construction in the Greater Montréal Area for a total of 1,957,330
square feet. The majority of these buildings are set to be delivered by
year end 2015.
The most notable industrial transaction this year took place in the first
quarter of 2014, with the 372,000 square foot sale-leaseback of the
Exel DHL Canada building in Saint-Jean-sur-Richelieu, which sold
to Fiera Properties for $34,650,000 or $93.00 per square foot. The
single tenant building was 100 percent occupied with a signed lease
until 2025. Another significant transaction was the 106,263 square foot
FedEx Ground building (with additional land) in Dorval, which traded as
part of an 11 property portfolio to Pure Industrial REIT. The building has
a net lease to FedEx expiring in 2024 and sold for approximately $20.4
million, or $192.00 per square foot and a 7.2% cap rate (allocated).
Notable Transactions
760 Grand-Bernier Boulevard, Saint-Jean-
sur-Richelieu
Vendor: Excel Canada Ltd.
Purchaser: Fiera Properties
Sale Price: $34,650,000
2000 Saint-Francois Road, Saint-Laurent
Vendor: Scannell Properties
Purchaser: Pure Industrial REIT
Sale Price: $20,444,735
6650-6666 Saint-Urbain Street, Montréal
Vendor: Gestion TMSA Inc.
Purchaser: Helenio Investments Inc.
Sale Price: $17,000,000
Cap Rate
Class A 6.50% - 7.00%
Class B 7.25% - 8.25%
Sales Volume
2013: $585 million | 2014: $561 million
Number of Transactions
2013: 149 | 2014: 128
$-
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Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
Industrial - Sales Volume ($ Million)
Industrial - Sales Volume ($)
Source: Collette Plante
21. With the decline of the
Canadian dollar, and a
recovering U.S. economy,
the industrial market should
continue seeing a significant
increase in commodity
exports going into 2015.
23. Golf course sales continue to
be a growing trend
for developers across Québec
with several courses being
sold in the past 24 months
for residential.
24. JLL | Montréal | Capital Markets Investment Insights | 2014 Review | Page 24
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Land - Sales Volume ($ Million)
Land
Land transactions remained stable throughout the year and
experienced a slight increase of 4 percent in total sales volume for the
second half of 2014. Approximately 62 million square feet of land was
traded in 2014, down slightly from the 65 million square feet in 2013.
The largest transaction was the $97 million sale to the Metropolitan
Transportation Agency of Québec, which counted over one hundred
vacant lots across 11 million square feet of land located in the Laval
area.
Another notable transaction towards the end of 2014 saw the sale
of La Prairie golf course in the South Shore to a local residential
developer. The 6.8 million square foot course was sold for $27.8
million and will be a future site for condo development.
Golf course sales continue to be a growing trend for developers across
Québec with several courses being sold in the past 24 months and
others being considered for sale including Golf Candiac, UFO in Laval
and Les Legendres in Saint-Jean-sur-Richelieu.
Notable Transactions
500 du Golf, La Prairie
Vendor: Espace Rive-Sud Inc.
Purchaser: 9306‑3220 Québec Inc.
Sale Price: $27,800,000
René-Lévesque Boulevard West, Montréal
Vendor: Smart 92384 Canada Limited
Purchaser: Global Investment Funds Inc.
Sale Price: $25,000,000
131 Vacant Lots, Laval,
Vendor: CN Canada
Purchaser: AMT
Sale Price: $97,000,000
Land - Sales Volume ($)
Source: Collette Plante
* includes AMT transactions
Sales Volume
2013: $482 million | 2014: $690 million
Number of Transactions
2013: 121 | 2014: 128
26. JLL | Montréal | Capital Markets Investment Insights | 2014 Review | Page 26
Forward-Looking Trends
Québec’s economy has seen steady improvement throughout 2014. Economists forecast provincial GDP growth to accelerate from 1.6 percent to
2.0 percent in 2015 and 1.7 percent in 2016. The ongoing decline of the Canadian dollar proved to be beneficial for Québec exports, which saw the
province’s real merchandise exports up 7.7 percent year to date. The majority of these export gains came from Québec’s top export commodities,
including aluminum, aircrafts and parts, pharmaceuticals and softwood lumber. RBC Economics anticipates that growing exports will provide a
steady boost to Québec’s labor market and will be a key driver of the province’s economic growth in 2015.
The Greater Montréal Area finds itself in a phase of significant transformation: the combination of abundant real estate developments along with
major capital allocations for local infrastructure will dramatically change Montréal’s landscape in the coming years. The Champlain bridge project,
estimated at approximately $5.0 billion, will see the construction of a brand new three point four kilometer bridge across the Saint-Lawrence River.
The bridge is expected to have a 125-year life expectancy and will be operational by the end of 2018. Québec’s Ministry of Transport has awarded
the contract for the new Turcot Interchange, representing an additional $3.7 billion investment into Montréal’s infrastructure. Furthermore, the
Québec government has extended the Caisse de Dépôt’s mandate, allowing it to control and oversee the execution and development of major
infrastructure projects in the province. Two priority projects have been identified by the Caisse, including a light-rail corridor along the new Champlain
Bridge and a public-transit system linking downtown Montréal to the P.-E.-Trudeau International Airport and the West Island. The combined cost of
these projects is estimated at $5.0 billion.
In an unexpected post-quarter move, the Bank of Canada lowered the overnight rate by one quarter of a percentage point down to 0.75 percent. This
decision was in response to decreasing oil prices which will impact economic growth and Canada’s underlying inflation. Subsequently, the 10 year
GoC bond yield dropped to one point thirty-five as of January 28th
, 2015; an 85.19 percent decrease compared to the same time last year.
2015 will likely prove to be challenging for several large retailers across Canada, none bigger than for U.S. discount retailer Target, which recently
announced the closing of all of its 133 Canadian locations. The announcement will put 17,600 people out of work and leave approximately 215
million square feet of vacant retail space across the country. Other retailers shutting or significantly curtailing their operations include Sony, Jacob,
Smart Set and Mexx.
On the political front, investor sentiment took a turn for the better following a decisive Liberal majority in Québec’s provincial elections earlier this
year. Québec’s real estate investment market saw a significant increase in investment activity in the second half of the year, which is expected to
carry into 2015 and beyond. Indeed, the latter half of 2014 proved to be one of the best for Québec in recent history, seeing some of the largest
real estate transactions across the country. The province is also beginning to see a significant boost in foreign investment, with many of these large
transactions funded by overseas capital from Sweden, South Korea, and China. According to IPD Limited the 10-year annualized total return for
Canadian commercial real estate is 11.7 percent, second only to South Africa. In a market historically dominated by local pension funds, insurers and
REITs, expect to see an increase in foreign inbound investment into the Canadian market.
