Commercial real estate investment hits record high in Q2

By Staff | September 10, 2018 | Last updated on September 10, 2018
2 min read
Toronto, Canada - November 16, 2016: Old and new buildings in Toronto downtown
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Canadian commercial real estate (CRE) investment reached a record high in the second quarter, driven by two mergers-and-acquisitions transactions and large single-asset sales.

CBRE Canada reports in a release that $16.5 billion in transactions was recorded in Q2, up 38% from the previous record of about $12 billion in the first quarter of last year—and 105% above the five-year quarterly average.

Investment volume for the first half of the year was almost $27 million, an all-time high for a half-year period. Two major M&A transactions in the quarter—Choice Properties’ acquisition of Canadian Real Estate Investment Trust and Blackstone’s acquisition of Pure Industrial Real Estate Trust—represented 45% of the quarter’s investment volume, says CBRE Canada.

Significant single-asset sales in the quarter included Hines and Oaktree Capital Management’s $107-million purchase of Calgary’s First Tower office building, and Tigra Vista Inc.’s $256-million acquisition of Toronto’s Parkway Place.

Peter Senst, president of Canadian Capital Markets at CBRE Canada, says in the release that the quarter’s record-breaking investment volume isn’t surprising, given that 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.”

Assets of quality and income duration draw robust demand, he adds.

“If there is a downturn, investors want assets they can believe in, where the income profile is predictable in the longer term,” he says in the release.

Toronto and Vancouver remain the primary locations for CRE investment, with the former accounting for more than one-third of all transactions in Q2 with $5.7 billion—a quarterly record in amount and volume—and Vancouver accounting for more than $3.2 billion in transactions.

“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,” says Senst in the release.

Calgary, Montreal and Edmonton were next with $2.5 billion, $1.7 billion and $1.5 billion in transactions, respectively.

By property type, industrial sales volumes outperformed all asset classes in Q2, due in large part to Blackstone’s acquisition of PIRET. Industrial investment also had a record quarter in Q2.

For investments without M&A activity, multi-family transaction totals were comparable to industrial transactions totals.

“Investors want multi-family exposure because it is a good long-term investment strategy,” says Senst in the release. “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.”

To compare real estate investment by volume, city and property type since 2015, see CBRE Canada’s website. staff


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