Avison Young releases Q2 2013 Commercial Real Estate Investment Review
TORONTO, July 30, 2013 /CNW/ - Relying on healthy commercial real estate
market fundamentals and a seemingly endless war chest of capital,
buyers and sellers pushed the total investment dollar volume for the
Greater Toronto Area (GTA) to a record level in the second quarter of
Office, industrial and retail properties, along with a number of
portfolio transactions, propelled commercial real estate investment
sales to a high-water mark of $4.5 billion. Although capitalization
rates remain low, the compression rate appears to have moderated
between quarters for some property types.
These are some of the key trends noted in Avison Young's Second Quarter 2013 Commercial Real Estate Investment
Review - Greater Toronto Area, released today. The quarterly report tracks GTA office, industrial,
retail, ICI land, and multi-residential property sales transactions
greater than $1 million.
"Clearly, the recent performance is no indication of a slowdown in the
sale of commercial real estate properties, as investors continue to
look for ways to strategically deploy capital across asset type and
geography, with properties transacting in both the open-bid market and
in off-market scenarios," comments Bill Argeropoulos, Vice-President and Director of Research (Canada) for Avison Young.
"Something that's definitely on everyone's mind is the recent rise in
interest rates, and though they have had little effect in keeping
buyers and sellers apart thus far, a further increase may curtail the
demand for real estate product and lift cap rates upwards - something
we will have to watch for in the coming quarters. The bigger question
is: If we do experience another spike in interest rates, will there be
a greater appetite for risk-taking?"
According to the report, overall investment sales volume across the GTA
reached $4.5 billion between April 1 and June 30, 2013, eclipsing the
previous peak of nearly $4 billion in the fourth quarter of 2006. The
second-quarter 2013 tally was $2.4 billion (+116%) higher than the
first quarter of 2013 and almost $1 billion (+28%) more than the second
quarter of 2012. As a result, the total investment sales volume
year-to-date in 2013 stands at $6.5 billion - an increase of 15%
compared with the same six-month period in 2012.
The Canada Pension Plan Investment Board and the Ontario Pension Board
(OPB) were on either end of the largest single office asset sale.
Meanwhile GE Capital Real Estate, Greystone Managed Investments, Slate
Properties, KingSett Capital, Primaris Retail REIT, OPB and Dundee REIT
were on either ends of portfolio sales.
"With relatively stable leasing fundamentals, the historically low cost
and availability of debt (although tempered slightly into the start of
the third quarter) and the increasing allocation of capital to real
estate as an asset class, the record transaction volume is of no
surprise to us and is very much reflected in our transactions both
locally and across Canada," adds Robin White, Avison Young Principal and Executive Vice-President, Capital Markets
Group. "All property classes are in demand from investors across the
buying spectrum. We anticipate more of the same for the coming
quarters, but with perhaps a slight increase in overall cap rates
achieved due in part to a minor debt-cost adjustment and the risk
profile of properties coming to the market."
The report goes on to say that office sales posted the biggest quarterly gain (+547%), as sales skyrocketed
to $1.5 billion - capturing 35% of the total investment dollar volume.
For the first six months of the year, office sales stood at $1.8
billion, down 34% from the impressive $2.7 billion that changed hands
in the first six months of last year. Industrial came in with $1.3 billion (30% share) in sales, an impressive 142%
improvement over the prior quarter and a 207% rise from the same
quarter in 2012. Unlike the office sector, the industrial sector
recorded the greatest year-over-year increase, up 109%. Falling short
of the $1-billion mark, the retail sector recorded $986 million in sales (22% share), more than triple
(+240%) its first-quarter output to bring the six-month total dollar
volume to $1.3 billion - twice that of one year ago. The multi-residential sector managed only $336 million (-48%) in trades in the second quarter
to close the first half of 2013 at $986 million, while ICI land sales slowed to just $280 million (6% share), from $337 million in the
first quarter of 2013, leaving the six-month tally at $617 million - a
modest 4% decline compared with the same period in 2012.
Debt capital markets stayed the course for much of the second quarter of
2013, with lenders ready to participate in financings.
"As is typical for this time in the yearly cycle, longer-term funds
(i.e. 10 years and longer) became scarcer and as a result, slightly
more pricey. The U.S. Federal Reserve announcement of what was
interpreted by most as a tapering-off of the quantitative easing
program caused bond prices to deteriorate and the associated mortgage
interest rates to rise. Nearly all lenders have held the 'spread line'
during this market move," explains Avison Young's Norman Arychuk, Mortgage Broker, Capital Markets Group. "Looking forward, it appears
that some of the anticipated Fed tightening will remain baked into the
markets, and we expect lenders to hold steady with spreads or to move
them out modestly."
Avison Young is the world's fastest-growing commercial real estate
services firm. Headquartered in Toronto, Canada, Avison Young is a
collaborative, global firm owned and operated by its principals.
Founded in 1978, the company comprises 1,300 real estate professionals
in 49 offices, providing value-added, client-centric investment sales,
leasing, advisory, management, financing and mortgage placement
services to owners and occupiers of office, retail, industrial and
For further information/comment/photos:
Bill Argeropoulos, Vice-President and Director of Research (Canada), Avison Young: 416.673.4029 or cell 416.906.3072
Robin White, Principal, Broker & Executive Vice-President, Capital Markets Group,
Avison Young: 416.673.4009
Norman Arychuk, Mortgage Broker, Capital Markets Group, Avison Young: 416.673.4006
Sherry Quan, National Director of Communications & Media Relations, Avison Young: 604.647.5098; cell: 604.726.095
Avison Young was a winner of Canada's Best Managed Companies program in 2011 and requalified in 2012 to maintain its status as a
Best Managed company.
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SOURCE: Avison Young Commercial Real Estate (BC)
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