Investors across Canada rushed to complete commercial real estate deals before the federal capital gains tax increase took effect in late June, according to industry insiders.

More light is being shed on the level of activity between May and June prior to the June 25 deadline for completing deals at the previous tax threshold.

Adam Jacobs, national head of research for Colliers, told the Financial Post that his firm closed a monthly record 156 deals on behalf of clients between June 1 to June 30. Colliers recorded its highest June completion total in a decade, the Financial Post reported.

“It was a big surprise for us, of course, because the commercial market was down,” Jacobs told the FP. “Everyone had an opportunity to do a deal at the old capital gains tax so I think that was what we saw people do: ‘I think I’ll just cash out now and do the deal before I have to deal with more taxes in the future.’ It’s already a difficult market, and it’s getting more difficult.”

Ray Wong, an Altus Group vice-president, told Connect that the CRE market intelligence firm has gathered data showing completions increased across Canada prior to the June 25 deadline. As Connect reported previously, Altus data showed that Greater Toronto Area non-arm’s length commercial real estate sale completions spiked in the weeks before the tax increase kicked in.

From May 1 to June 30, GTA non-arm’s length deals approximately tripled year-over-year to 47 from 16. The increase bucked a trend whereby all completed GTA transaction types (not just arm’s length deals) for May 1 to June 30 dropped 17.8% to $3.7 billion from $4.5 billion during the same period in 2023.

But the additional Altus data shows that both “in-the-market” deals, namely those involving independent parties, and non-arm’s length deals increased in other parts of Canada.

Mark Goodman, principal of Vancouver-based brokerage firm Goodman Commercial, previously told Connect that his company also saw a rush of deals before the June 25 deadline, when two-thirds of a property-sale profit exceeding $250,000 became taxable. Previously, half of a $250,000-plus gain was taxable.

Summer months are traditionally a slow time in Canadian real estate in real estate. Wong said Altus will watch the market during rest of the year to determine whether the tax increase has prompted a continuous rise in investment activity.

“That’s a true measurement of whether or not the capital gains tax may make a difference,” said Wong. “We know that we have seen an increase in May-June, and we have to wait and see if that continues for the rest of the third quarter.”

Jacobs of Colliers does not expect the capital gains tax increase to hurt downtown markets.

“I don’t think it will have a huge effect on downtowns,” he told the FP. “For years, the downtown buildings have been owned by the likes of OMERS, Sun Life, or Canada Pension Plan — the kind of owners who have a very long-term view. They have very big assets under management, so they’re not going to sell simply because they don’t like this market.”

Accordingly, Jacobs does expect the tax increase to have a long-term negative impact on investment.

“We talk about it like the capital gains tax was zero before,” he told the FP. “There was already a capital gains tax, and now there’s a little bit more.

“But I’ve definitely heard some arguments that say, when you do the math on your rate of return over five, seven, 10 years, this [capital gains tax] doesn’t really make a huge difference.”