Investment dollar volume dips, but not indicative of investor demand in Greater Toronto Area
Avison Young releases its First Quarter 2016 Greater Toronto Area Commercial Real Estate Investment Review
TORONTO, April 27, 2016 /CNW/ - The Greater Toronto Area (GTA)'s commercial property investment market took a pause to start 2016 as first-quarter investment dollar volume did not keep pace with the investment capital deployed in the fourth quarter of 2015. Despite the slow start to 2016, overall investment dollar volume is up year-over-year and pricing is thus far holding fairly steady as the market continues to trade in a historically low interest-rate environment.
These are some of the key trends noted in Avison Young's First Quarter 2016 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 or equal to $1 million.
"It's not unusual for the market to see investment volumes trail off to start the year, especially after a strong finish to the prior year," comments Bill Argeropoulos, Principal and Practice Leader, Research (Canada) for Avison Young. "Perhaps there is something else weighing on the market's investment potential other than what has become the standard industry response – that dollar volume is constricted by the lack of available product for sale. While that is a contributing factor, the pause we experienced – and may experience again – may have something to do with a growing difference between buyers' and sellers' price expectations."
Avison Young Principal Richard Chilcott, based in Toronto, adds: "The slowdown in investment volume in the first quarter of the year was also due to investors' 'wait-and-see' approach to the overall economy. We now see capital once again ready for deployment into commercial real estate and, provided product becomes available, we expect to see similar volumes in 2016 as those of 2015. Despite the appeal of downtown assets, it's worth noting that suburban and user sales continue unabated as capital from all buyer groups searches for yield, value or a safe haven."
Notable First-Quarter 2016 Investment Highlights:
- GTA investment volume in the first quarter of 2016 came in at $2.1 billion, down 44% quarter-over-quarter, but up 13% year-over-year.
- The industrial sector was the most active asset class by dollar volume during the quarter, with nearly $580 million in sales (27% of the overall GTA total). Driven by the record-low cost of debt and limited supply, user sales accounted for 70% of transactions and 44% of dollar volume.
- Following a robust fourth quarter of 2015 with $2.1 billion in trades, office building sales slowed to $510 million (-76% / 24% share) to start 2016. Though major downtown asset trades were largely absent, suburban product remains top-of-mind for investors.
- ICI land was the only asset type to show any meaningful improvement since year-end 2015 as sales jumped 52% quarter-over-quarter and 54% year-over-year to $439 million (20% share). Notable sales demonstrate developers' hunger to secure large tracts of land near urban cores to meet demand for fulfillment centres.
- The retail sector logged $349 million in sales – down 21% quarter-over-quarter and down 26% year-over-year. Investor demand for retail product is underscored by the high price-per-square-foot achieved in the upscale Yorkville retail shopping district.
- The multi-residential sector was the least-traded property type with sales of $268 million (12% share), down 42% quarter-over-quarter. The sector's low cap rates (4.3%, tied with retail for the lowest in the GTA) and high rate of price appreciation are reflected among the quarter's top transactions, and indicative of investors' demand for these assets.
- On average, capitalization rates were marginally lower quarter-over-quarter and year-over-year.
Argeropoulos concludes: "The second quarter is already off to a great start, with more than half a billion dollars' worth of commercial real estate assets having changed hands as the month of April comes to a close."
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 2,200 real estate professionals in 77 offices, providing value-added, client-centric investment sales, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial and multi-family properties.
For further information/comment/photos:
• Bill Argeropoulos, Principal and Practice Leader, Research (Canada), Avison Young:
416.673.4029; cell 416.906.3072 [email protected]
• Richard Chilcott, Principal, Avison Young: 416.673.4053 [email protected]
• Martin Dockrill, Principal and Managing Director, Ontario, Avison Young: 905.283.2333
[email protected]
• Sherry Quan, Principal, Global Director of Communications & Media Relations, Avison Young:
604.647.5098; cell: 604.726.0959 [email protected]
Avison Young was a winner of Canada's Best Managed Companies program in 2011, 2012, 2013 and 2014 and requalified in 2015 to maintain its status as a Best Managed Gold company
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Editors/Reporters
∙ Please click on link to view and download Avison Young's First Quarter 2016 Greater Toronto Area Commercial Real Estate Investment Review: http://www.avisonyoung.com/fileDownloader.php?file=files/content-files/Research/Links/2016/GTAInvestmentReviewQ12016.pdf
SOURCE Avison Young Commercial Real Estate (BC)
Bill Argeropoulos, 416.673.4029, [email protected]
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