The sector’s $17.7 billion collected in H1 2018 was down a modest 7% from the same period last year
Rising interest rates, a mature investment cycle, and scarce products relative to demand have not been enough to dampen investors’ enthusiasm for Canada’s commercial property market, according to commercial real-estate services firm Avison Young.
“Against a backdrop of geopolitical tensions and financial volatility, Canada is still viewed globally as a safe haven given the country’s stable economic and political climate and sound property market fundamentals,” the firm said in its Fall 2018 North America and Europe Commercial Real Estate Investment Review.
The total investment volume for the first half of 2018 across Canada’s six major markets was $17.7 billion, with roughly three-quarters going to Toronto ($8.2 billion) and Vancouver ($5.1 billion). In comparison, investors poured a record $36.2 billion into Canadian commercial real-estate assets last year, $19 billion of which was contributed in H1 2017.
Office property was the most desired asset class, collecting $4.5 billion worth of capital as an influx of technology and co-working firms adds to demand from traditional sectors. However, overall sales for the segment declined 16% year-over-year; Toronto, which soaked up $2.7 billion, was the sole market to post year-on-year sales growth (35%).
“Coming off a record $9.1-billion performance in 2017, retail posted $3.9 billion (22% share) in first-half 2018 sales – a decrease of 25% year-over-year,” the report said. It added that investors in the segment favoured Vancouver ($1.7 billion) and Toronto ($1.3 billion).
Industrial acquisitions, meanwhile, crept up 1% year-on-year in to reach a value of $3.3 billion, while cap rates compressed in nearly market. Toronto, one of North America’s biggest and tightest industrial markets, accounted for nearly half of the overall investment in the sector; Ottawa, Montreal, and Edmonton saw more capital inflows compared to a year earlier.
“[R]ising population density and the strong links between the industrial and retail sectors – resulting from the growth of e-commerce and last-mile logistics – mean that both asset types are garnering investors’ attention,” the firm said.
ICI land saw high demand, with $3.8 billion worth of land parcels changing hands in the first half of 2018. The sector was also the only one to post notable year-on-year sales growth (82%), with Toronto and Vancouver nearly doubling their annual sales to $1.8 billion and $1 billion, respectively.
Multi-family property sales, which reached $3.2 billion in the first half of 2017, sank 28% year-on-year to $2.3 billion. Toronto was a bright spot in the segment, advancing 46% year-on-year to a total of $848 million thanks to the entry of Blackstone into the Canadian multi-family sector business (as part of a joint venture with Starlight Investments).
“Multi-family assets commanded the lowest capitalization (cap) rates – closely followed by retail,” the firm reported. “The overall average cap rate across the six markets and five asset types was 5.1% at mid-year 2018, down 20 bps year-over-year.”
Follow WP on Facebook, LinkedIn and Twitter
