07:22 AM EST, 01/24/2025 (MT Newswires) -- Cap rates continue to drift up across various sectors of

Canadian commercial real estate, with

multifamily/apartments a notable mover, said Bank of Montreal (BMO).

Across Canada's major cities, class B apartment cap rates

now sit anywhere from 3% to 6%, with most clustered in

the 4%-to-5% range (according to CBRE's survey), noted the bank.

Toronto's rate, which had of course been a very active investor market, is now up to 4.5% versus the low-3% range at the height of the boom, stated BMO.

The last time Toronto saw cap rates at this level was around 2015/16. At that time, 10-year risk-free Government of Canada bonds were yielding about 1.5% versus 3.3% today, pointed out the bank. Typical

residential mortgage borrowing costs were around 2.5%-

to-3% versus 4%-to-4.5% of today.

In other words, while cap rates have risen, the relationship between the returns that investors are getting in Toronto real estate, associated borrowing costs and risk-free alternatives still doesn't 'pencil', added BMO.

In the meantime, the bank looks for cap rates to keep pushing higher unless interest rates suddenly fall "significantly."