Keeping You Informed - Q2 2026

To our Investors and Partners,

We report our Q2 results against a backdrop that reinforces the thesis of former Bank of Canada Governor Stephen Poloz’s The Next Age of Uncertainty:  this uncertainty is structural, not a passing patch of turbulence.  Trade policy is unresolved, oil is higher on Persian Gulf conflict, and rate relief has yet to materialize.  This underscores the case for real assets and for the value-add  thesis: a falling cost of capital cannot improve an asset — only income growth can, and that growth rests on fundamentals we observe on the ground rather than market sentiment. In such an environment, we build value lease by lease and asset by asset.  Year to date, fund NOI increased 5% on a same asset basis, and we completed 414,781 sq. ft., 53% of budgeted leasing, with 92% of leases renewed or replaced at or above in-place rents.

Market Backdrop

The Bank of Canada has yet to cut rates in 2026, balancing weak growth against inflation risk.  Capital availability continues to improve, with lenders competing to grow originations.  

The office investment market is moving past price discovery: several offerings came to market in H1, with closings expected early in Q3. Those trades should set pricing  bookends across varying levels of asset stability.  We expect more deal flow and price discovery through H2.  

Downtown Toronto office vacancy fell another 30 bps in Q2 to 14.1%, according to CBRE data.  With vacancy in trophy assets now at 2.6%, tenant demand has shifted to the next tier of assets, resulting in a steep decline in downtown Class A vacancy  by 600 bps over the last 12 months. With sublease inventory shrinking and no significant deliveries beyond 2027, tenants have limited options. Pricing power is returning to landlords.  In Crown’s portfolio, inducements decreased and rents increased (see highlights, below).  

Crown Highlights of the Quarter

• We leased 204,254 sq. ft. across 35 completed transactions, mostly renewals.  
• This quarter, 95% of leases renewed or replaced were at or above in-place rents.
• At 400 University, we completed a 10-year lease for a full-floor tenant (~17,000 sq. ft.), at 22% higher rents.
• At Pearson Corporate Centre, we renewed and expanded a tenant across two floors (~36,000 sq. ft.), at 11% higher rents.
• At the Milverton Complex, we renewed a ~12,000 sq. ft. tenant well ahead of expiry, at 35% higher rents.
• We entered into contracts to sell four Fund IV assets.
• Fund V is executing to plan, with a new property acquisition under review.

Looking Ahead

At our Annual General Meeting in June, we launched our sixth value-add fund, CR VI LP, targeting $250 million of equity with a first closing before year end. Fund VI enters a market of tightening vacancy, restricted supply, and returning landlord  pricing power, while uncertainty remains structural.  That uncertainty leaves good assets mispriced, creating the opportunity for Crown to identify and buy those with  fixable problems.

Our priorities for 2026 have not changed and we are achieving them.  No one can offer certainty on the macro; what Crown can offer is conviction earned through cycles, an operating platform that is a real advantage, and the discipline to deploy when the opportunity is right.  That is the basis for Fund VI.

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