Real estate sales over $5 million hit a new dollar volume high in 2017, led by institutional buyer demand
B.C.’s commercial investment value set a new record-high of $7.5 billion in 2017 – up nearly 83 per cent over 2016’s $4.1-billion value.
A new year-end investment review from Avison Young Commercial Real Estate notes commercial real estate deals and dollar volumes have continued to rise astronomically since 2015. Avison Young cites a number of reasons behind this acceleration – primarily a divergence of market opinion between vendors and purchasers that has led to more assets for sale by owners and more demand for purchase among investors.
The report tracks B.C. office, industrial, retail and multi-family property transactions greater than $5 million. Two hundred and thirty property sales were recording in 2017, versus 147 in 2016.
2017 property sales continued to be led by redevelopment potential, regardless of asset class.
"Ongoing price appreciation in all asset classes is being driven almost exclusively by land value and redevelopment potential," says Bob Levine, principal for Avison Young. "The acquisition of retail assets has morphed in many cases into land deals with lesser consideration or interest for the income in place or the retail asset itself.”
Private investors accounted for 87 per cent of transactions in 2017 but only 46 per cent of dollar volume. Institutional buyers accounted for the other 47 per cent of dollar volume recorded in 2017. Institutional buyers were involved in most high-profile transactions of the year, including Cadillac Fairview’s downtown Vancouver office portfolio, Pacific Centre shopping mall, Oakridge Centre and Solo District office sales in Burnaby.
Retail sales in B.C. claimed the largest portion of sales dollar volume, claiming 48 per cent or $3.6 billion of 2017’s 7.5 billion investment total.
The year’s single biggest transaction was the $1.9-billion sale of Pacific Centre and surrounding office towers. It was B.C.’s second commercial real estate deal to surpass $1 billion, following the $1.05-billion sale of Bentall Centre in 2016.
Avison Young do not anticipate a billion-dollar transaction in 2018 and believes institutional buyer demand will slow, leading to an annual dollar volume decrease.
Tanya Commisso Western InvestorMarch 22, 2018