Sizzling commercial real estate set for record year with more properties on the block

BannerV1.jpgCommercial investment activity is poised to break another record in 2017, according to a new report out Tuesday.

Canada’s six major markets saw commercial real estate investment sales of almost $19 billion in the first half of 2017 — up $4.3 billion, or 29 per cent higher compared to the whole of 2016 — which itself was a record year with $28.4 billion — Avison Young said in its mid-year global investment review.

“With record amounts of capital still seeking a home, investors continue to find ways to buy into Canada’s finite investable commercial real estate sector,” said Bill Argeropoulos, principal and practice leader of research in Canada for the commercial real estate firm. “Capital from domestic and foreign investors continues to be largely directed towards Vancouver and Toronto.”

The early numbers from the second half of the year already include another $3.5 billion changing hands, counting the sale of the 1.1-million-square-foot Constitution Square office complex in Ottawa for $480 million and the Dream Office Real Estate Investment Trust $1.4-billion office portfolio sale in Toronto, as well as a half-interest in Scotia Plaza.

Overall, office and retail are driving demand and account for more than $10 billion of the first half trade or 55 per cent of total investment activity in the first two quarters.

“The remainder of the year and start of 2018 hold the promise of several more large-asset sales,” said Robin White, a principal of Avison Young and chair of the firm’s capital markets.

He noted 1000 Rue de la Gauchetière, a 917,000-square-foot office tower in Montreal and the 2.2-million-square-foot Bay-Adelaide Centre office complex in Toronto could trade, while Cominar REIT intends to sell its non-core assets outside of Quebec and Ottawa, which comprise 6.2 million square feet.

“Taking current market trends and forthcoming deals into account, the overall 2017 investment total could match or exceed the record level registered in 2016,” said White.

The real estate company also said that capital that cannot be placed in Canada is increasingly going south of the border, as Canada has retaken top spot as the source of foreign investment in U.S. commercial real estate.

“Canadian institutional buyers, such as Ivanhoe Cambridge, Oxford Properties and the Canada Pension Plan Investment Board — on their own or in joint ventures — were active during the first half of 2017 across major U.S. markets, including Chicago, Los Angeles, New York, San Francisco and Washington, DC, with office properties being the most notable assets purchased,” said Argeropoulos.

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