First National Financial LP

Québec Commercial Property Financing: A First National Mid-Year 2021 Report

  • Michael C. Williams, Regional Vice President, Commercial Financing, Québec and Atlantic Canada

After more than a year of living with the effects of the global pandemic, the worst of the crisis has passed, and it’s now time to consider where the commercial property market in Québec goes from here.

As we look forward, I want to share some observations and insights with you. As we see it:

  • Landlords continue to report favourable rent collection trends and are holding steady on apartment rental rates
  • Universities/colleges have announced a return to in-person classes for September, and border restrictions are loosening, providing two tailwinds for rental-unit demand
  • Permanent work from home and hybrid options are spurring apartment construction well beyond downtown Montréal and Québec City
  • Foreign investment in Montréal reached a new high of $1.9 billion through the first six months of 2021 – according to the city’s investment promotion agency – a great outcome that created 6,300 new jobs and led the Globe & Mail to note that “Montréal now has more people employed than it did before the pandemic started” (July 13th edition)
  • Construction costs are up significantly and may stay at elevated levels for some time, meaning it is vital to have appropriate contingency plans
  • Aggressive cap rates indicate an optimistic tone in the market
  • Unprecedented demand for industrial properties coupled with limited inventory is driving higher property prices

Based on these factors, taking into account the record volume of commercial property financings First National completed in the second quarter of 2021, and the recent growth in loan commitments, First National’s outlook for Québec is decidedly bullish.

Our newest financing option takes flight

In light of unprecedented demand for financing, we recently introduced our first ever Core Conventional term loan. We are excited to offer this product as it gives borrowers a cost-competitive alternative when CMHC financings are not available, not available in a timely fashion or not optimal for the stated property investment strategy.

Since its introduction just a few months ago, we have already financed several major transactions in the Gatineau, Montréal and greater Montréal areas with many more under review.

We are very pleased to add this Core Conventional product to our toolkit. Prior to its creation, many borrowers were limited to insured financings, so this is a breakthrough. Moreover, it is well priced, comes with the First National brand of service and expertise and can be used to term out a construction project, refinance existing debt, for an equity take out or for an acquisition. Available terms are 1 to 20 years with amortizations up to 30 years. Guarantee structures are also advantageous.

CMHC affordable flex remains a stalwart

On the construction side, our partners at CMHC continue to provide major incentives to build affordable rental units. As experts in this area, First National is helping many borrowers qualify, with funds on multiple deals currently being disbursed. The CMHC Flex program offers the ability to finance up to 95% of construction costs, pay dramatically lower insurance premiums and term out the loan without lease-up requirements.  

There are, however, two cautionary notes. One, with construction costs rising, it is becoming more challenging to achieve the full 95% loan to cost. Two, CMHC approval delays remain long and therefore it is important to begin discussions with us very early on in the process.

CMHC’s policy on take-out financing for new builds

CMHC recently announced that as of June 23, 2021, it will apply its policy of limiting take-out financing for all new construction to 100% of the actual construction cost or up to 85% of lending value, whichever amount is less. As a result, it makes sense to consider a CMHC Market Construction loan as a viable option. Please speak to us about this policy and the timelines now necessary to navigate the CMHC approval process.

Bridge loans rising in popularity

In light of the lengthy approval turnaround times on insured loans, many clients are using First National’s conventional bridge-to-stabilization and bridge-to CMHC loans. Bridge loans from First National are cost effective and ensure you have the funds to move ahead at the most advantageous time. A recent highlight is the bridge financing of $200MM+ we completed earlier this year to help our client complete the second largest multi-unit residential purchase transaction in the history of Québec.  This large, complex and time sensitive transaction benefited greatly from our bridge financing solution.

First National’s expanding presence in Québec city

As noted above, Montréal is attracting significant investment dollars and attention. So is Québec City. As part of First National’s expanding market presence, we are proud to announce that we recently completed a financing of $82 million in June in the Québec City area. We continue to pursue our growth strategy in this great market and expand our footprint.

Growing to better serveyou

Over the past three + years, we have doubled the size of our Québec business. As Québecers ourselves, we are proud of this track record and proud to be growing our talented and experienced local team. With greater resources, we are better able to live up to our mandate of providing valuable service and advice as empowered lenders and advisors.

Timely choices

Conditions are right for commercial property financing. Interest rates remain low, liquidity is high, the Bank of Canada has upgraded its economic outlook for 2022 and with our Core Conventional program joining our CMHC offerings, First National now has the market’s best uninsured and insured mortgage options available in the market.

However, the key to success is making timely moves. We urge you to engage with your First National advisor at the earliest stages of your planning process so that we assess your needs, present the most effective strategies and secure the very best financing package – which is one that is available exactly when you need it.

Please contact me or any member of our team if we can help.


Yours sincerely,


Michael C. Williams

Vice President, Commercial Financing