Avison Young released its annual commercial real estate forecast earlier this month and predicts change and opportunity will abound in 2018. According to the report, Canada’s commercial real estate sector continues to possess varying, but largely healthy, property market fundamentals across the country’s regions and asset classes—supported by a stable economy, which is the envy of the G7 countries.
“Despite the favourable market conditions, there is a sense that we are late in the cycle and a slowdown is inevitable,” commented Bill Argeropoulos, Principal, Practice Leader, Research (Canada) for Avison Young. “The commercial real estate sector is having to re-evaluate challenges and opportunities in a technologically transforming world – a world that Canada appears to be making a concerted effort to lead, rather than follow.” Residential tower has started.
Downtown Winnipeg will be seeing major changes this year, as several multifamily and commercial mixed-use projects are set to reach completion in 2018. More than $900 million has been invested in the city’s downtown core during the last decade. Phase 1 of the $400 million True North Square project is already taking shape, and construction on a $165-milion, 40-storey commercial/residential tower has begun.
In Toronto, a vast amount of capital chasing limited product continues to keep prices high and cap rates low. Scarcity of product is pushing some investors toward more challenged assets, and/or locations, to capitalize on redevelopments or future growth, requiring buyers assume some risk.
In Halifax, the multifamily investment sector is more active than ever. Many developers are local, family-owned businesses, strategically building and selling assets to publically traded companies and organized syndicates that are both local and from abroad.
The major markets in western Canada are beginning to show signs of recovery. In Calgary the total investment dollar volume of transactions were up compared with 2016, with a high proportion of investment coming from groups that do not have existing exposure to the local market. An increasing number of transactions in 2018 are expected to drive investment dollar volume to its highest level in three years.
Looking back at Q4 2017
The apartment market in 2017 ended with a flurry of activity, which, according to Morguard’s Keith Reading, will likely result in a new record high for apartment sales volume. Reading also noted that public and private capital sources have been very active, with pricing held at the peak for the cycle resulting in record-low yields for prime assets. As with previous quarters, the supply of assets available for purchase—particularly in cities like Toronto and Vancouver—continues to fall short of capital availability.
Here’s a look at some of the top apartment transactions for Q4 2017: