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Special Report

Invasion of Ukraine Implications for Canadian CRE

April 2022

Canadian Economy and Real Estate Secure in Stature;
Effects of the Ukraine Invasion Ripple Throughout Globe

Soaring energy costs add to inflationary concerns. Following Russia’s invasion of Ukraine, the government administered broad economic sanctions, including a ban on importing and purchasing petroleum products from the country. As Russia is one of the largest producers in the world, this has pushed up energy costs at a time when inflationary concerns are already heightened. The average price of gasoline surged nearly 40 per cent year-over-year in March and jumped 12 per cent from the previous month. In addition to the direct impact at the pump, there are down-stream ripples to a wide range of goods and services. The core consumer price index, which excludes food and energy, rose 6.7 per cent in March 2022 — the most rapid jump since January 1991. In an attempt to rein in inflation, the Bank of Canada lifted the benchmark interest rate by 50 basis points to 1.0 per cent in April, the biggest one-time increase since 2000 and second hike in as many months. Additional rises are expected in the coming quarters, which will elevate borrowing costs and could place upward pressure on commercial real estate cap rates.

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