Canadian commercial real estate delivered another strong performance in 2012, as measured by the REALpac / IPD Canada Annual Property Index.
The annual total return of 14.1 per cent continued Canada’s strong performance. Real estate outperformed public equities (7.5 per cent), bonds (3.0 per cent) and inflation (0.8 per cent). (Equities are based on the MSCI Canada Index. Bonds are based on the JP Morgan 7-10 Year Government Bond Index. Inflation is based on data from Statistics Canada).
Looking at the 13 year history of the REALpac / IPD Canada Annual Property Index, 2012 was the fifth highest annual total return ever.
Total annual returns for the three years, five years, and 10 years ending December, 2012 remain robust at 13.6 per cent, 8.7 per cent and 11.7 per cent respectively.
Examining the four major property sectors, residential registered the only increase in total return in 2012 (16.2 per cent, up from 11.9 per cent in 2011). Total returns for office properties, which spiked between 2010 and 2011, pulled back only slightly in 2012 to 15.9 per cent while industrial and retail produced lower total returns in 2012 (11.8 per cent and 13.5 per cent respectively) compared to 2011.
Overall, the six largest commercial property markets generated healthy total returns in 2012. Of the six largest markets, Edmonton was the only metro that saw accelerating growth in value. Calgary, Toronto, Montreal, Vancouver and Ottawa all produced healthy but lower returns in 2012 when compared to 2011.