British Columbia’s multi-family residential market is starting to slide, says a new report from Avison Young.

According to the British Columbia Multi-Family Investment Report, the lack of quality product of scale, and the retreat of REITs from the B.C. commercial real estate market, have caused a decline in dollar volume generated by the disposition of multi-family assets compared to last year.

The report predicts that multiple competing offers and hyper compressed capitalization rates will become a thing of the past. In terms of total sales and dollar volume, 2013 is expected to finish strong.

There was a slow start to the year, with only four of the 17 multi-family building transactions in the first half of 2013 exceeding $10-million. In comparison, the first and second halves of 2012 recorded the most significant transactional activity and dollar volume since the global economic recession.

Also affecting the market is the arrival of new rental product, particularly in Vancouver. The results of the City of Vancouver’s STIR (Short Term Incentives for Rentals) program and its resulting Rental 100: Secured Market Rental Housing Policy is also starting to manifest in the city’s skyline.

Low vacancy rates in Metro Vancouver is driving the need for more rental units. Developers are finding that rental developments can be a suitable alternative investment that may provide more liquidity than condominiums as concerns regarding a potential condo overbuild situation linger.