aging residential towers

Low supply curbs Toronto apartment deals

Wednesday, July 27, 2016

Multifamily transactions accounted for the smallest share of commercial real estate investment activity in Toronto during the second quarter of 2016, but sales values still rose significantly above the level registered in the first three months of the year. Avison Young reports $455 million in Toronto apartment deals this spring, representing 12 per cent of total commercial investment.

Multifamily is the only sector that has not yet surpassed the $1 billion threshold for 2016 sales values, with a total of $753 million in the first half of the year. Sales volume thus far is 30 per cent lower than at midyear 2015. Meanwhile, 2016 office sales hit $1.8 billion following $1.3 billion in transactions in the second quarter.

Investors also actively acquired retail and industrial properties and land for future development. Collectively, $3.7 billion worth of trades in the five sectors during the second quarter drove the 2016 investment tally to just under $6 billion as of June 30.

“Sales increased in every sector,” Avison Young’s 2nd quarter investment review states. “With investor capital still plentiful, demand continues to outstrip supply, keeping yields at historic lows.”

That’s certainly the case for multifamily stock, which recorded the lowest cap rates among Toronto property types. Colliers International pegs them at 3.5 to 4.75 per cent for both high-rise and low-rise buildings, while projecting they’ll decline further for scarce high-rise product.

“Entry into the sector is  discouraged by limited new product and increasing valuations for existing stock,” the Avison Young report concurs.

BayBridge Seniors Housing’s $46.2-million acquisition of 1440-1442 Lawrence Avenue West was the highest valued transaction this spring. Hollyburn Properties $41-million acquisition of the Bellanada Holdings portfolio translated into the highest value per suite, at $310,600.

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