Commercial property transactions up 57% over last year…

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Nov 11, 2010

Just as the Canadian Real Estate Association predicts residential property prices will fall next year, the value of commercial property deals in Canada is on target to hit $16 billion this year.

Sales have already trounced 2009 numbers; by the end of September more than $12 billion in commercial real estate had changed hands, thats an impressive 57 per cent increase over the same nine-month period a year ago.

“This is a significant improvement over the $11 billion worth of investment sale transactions completed in 2009, but is still shy of the $21 billion recorded in 2008 and the $30 billion in properties that changed hands at the peak of the market in 2007,” Avison Young’s director of research, Bill Argeropoulos, said in a release.

Investors favoured Toronto over any other market as Canada’s largest city recorded $4.7 billion in commercial real estate sales, up 92% over the same nine-month period in 2009 – accounting for 39% of the total sales volume. Vancouver, at $2.4 billion (+34%) was second, capturing 20% of the total investment volume. Montreal ($1.8 billion / +56% / 15% share), Calgary ($1.6 billion / +31% / 13% share) and Edmonton ($1.0 billion / +56% / 8% share) followed, while Ottawa lagged behind. The nation’s capital was the only market not to crack the $1 billion mark, finishing with $436 million (+22%) and a 4% market share.

Overall, cap rates range from an average low of 5.97% for multi-residential properties to a high of 7.47% for multi-tenant industrial buildings. While multi-residential properties are viewed as the most expensive asset among investors, Vancouver is the highest-priced market in Canada with an overall average cap rate of 6.12%, which is poised to fall further.

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