Sector was boosted by two large M&A deals
The second quarter of 2018 was a strong one for investment in Canada’s commercial real estate.
CBRE reports that a record total of $16.5 billion was invested in the quarter, up 38% from the previous record high of $11.97 billion in Q1 2017.
But that wasn’t the only record to be smashed as half-year CRE investment in Canada reached a new high of $26.8 billion.
There was also a new quarterly record for investment in CRE in Toronto with $5.7 billion invested, up 20% from the $4.7 billion previous record of Q2 2013. The city accounted for almost a third of all transactions in the quarter.
Vancouver was the second placed city for CRE investment ($3.2%) while Calgary, Montreal and Edmonton rounded out the top five with $2.5 billion, $1.7 billion and $1.5 billion, respectively.
“Interest in Canadian commercial real estate today has a lot to do with Canada’s global market leading fundamentals. Toronto and Vancouver together have maintained the two tightest downtown office vacancies for four consecutive quarters and the two lowest industrial availability rates for six consecutive quarters in North America,” said Peter Senst, President, Canadian Capital Markets at CBRE Canada. “Vancouver recorded the largest price increase in North America for downtown prime office space and the world’s largest rental increase for prime industrial and logistics space in the past year. All of this is leading to aggressively priced tier one assets in Canada’s major markets.”
Industrial led the record-breaking quarter
The industrial sector saw the largest share of Canadian CRE investment in Q2 2018, although this resulted from the closing of two large M&A deals.
Choice Properties’ acquisition of CREIT and Blackstone’s acquisition of PIRET, represented a combined 45% of the quarter’s investment volume.
Without the M&A activity, multifamily tied with industrial at $1.9 billion each.
“Simply put, investors want multi-family exposure because it is a good long-term investment strategy. No matter the economic or political state, people are always going to need places to live, which translates to a consistent flow of income for investors,” said Senst.
Industrial also saw some large single-asset deals in the quarter.
“With two large M&A transactions closing within the second quarter, it’s not surprising that investment volume was the strongest ever in Canadian history. In fact, the average deal size in Q2 was up 67% year-over-year to $9.4 million, which is reflective of the size and significance of the investors in real estate today,” said Senst.
