Canada Market Update: September 23, 2024

Written by Elliot Higgins, Analyst

CPPIB Major Office Lease

The Canadian Pension Plan Investment Board (CPPIB) has agreed to relocate its investment arm to CIBC Square, signing a 10-year lease valued between $300 million and $430 million. CPPIB will lease 330,000 square feet at 141 Bay Street, marking one of the largest office leases since the pandemic. CIBC Square, a development project led by Ivanhoe Cambridge and Hines, will include office towers that offer prominent visibility on Toronto’s skyline upon completion.

This move reflects the growing “flight-to-quality” trend in the office sector. Premium amenities and prime locations are now critical factors in tenants’ decisions. Lower-rated offices are seeing vacancies rise as employers prioritize high-quality spaces to encourage a return to the office.

Canadian Apartment Investment Conference

Largo attended the Canadian Apartment Investment Conference, where speakers and investors shared insights on trends heading into 2025. Key concerns include affordability, increasing housing supply, and innovation. To address these, the sector needs reduced development costs, expanded CMHC programs, and low-cost financing. Shelter inflation has remained sticky and continues to be a closely monitored parameter for the Bank of Canada, which has reduced the policy interest rate by 75 basis points since June 2024.

Discussions also highlighted the importance of diverse capital sources. Conventional bank lenders have de-risked, limiting their ability to offer competitive terms. Largo, as a correspondent to 25 active commercial real estate lenders, offers competitive rates and fewer restrictions than national banks.

New Canadian Mortgage Rules

The federal government announced reforms to address the housing shortage. The insured mortgage cap will rise from $1M to $1.5M, meaning Canadians can purchase homes priced up to $1.5M without a 20% down payment. First-time homebuyers and those purchasing new builds, including condos, will now be eligible for 30-year mortgage amortizations. The new rules will take effect on December 15, 2024.

These reforms aim to stimulate new construction and help Canadians enter the housing market with lower mortgage payments. First-time homebuyers will have better access to high-cost markets, while developers are expected to benefit from increased demand due to lower borrowing costs for buyers.

Quebec: Mortgage Agency Brokerage License #3001949759 • Ontario: Mortgage Broker License #10454 | Mortgage Administrator License #11669