GTA Investment Transaction Stats – Q2 2018
GTA Commercial Real Estate Investment Sets a New First Half Record, But…
The second quarter of 2018 saw a total of 574 investment property sales transactions over $1 million, representing a total investment value of $5.6 billion
TORONTO – Altus Group, a leading provider of commercial real estate services, software and data solutions, today announced the second quarter of 2018 results for commercial real estate investment in the Greater Toronto Area (GTA). Total investments for the first half reached $11.3 billion, surpassing the record-setting first half of 2017 by 6%. Despite the amount of capital focusing on commercial real estate and due to a lack of available investment product, investment activity is likely to be below 2017. Investors will continue to move cautiously and remain selective in the bidding of assets as investment product remains limited, especially core assets.
Property Transactions – All Sectors by Quarter
Land markets were once again the primary contributors to the activity in the Greater Toronto Area this quarter. Residential land saw a total of $1.5 billion and ICI land recorded $1.3 billion. Together, these land sectors combined for 50% of the total capital flows this quarter, proving that developers remain confident in the GTA market. The quarter was highlighted by the $825 million ICI land sale of the Bombardier Downsview site (365 acres) in North York. The massive site which benefits from proximity to public transit and highways, was acquired by the Public Sector Pension Investment Board (PSPIB) who will look to re-develop the lands for mixed-use in 3 to 5 years when Bombardier vacates the property.
Q2 2018 Property Transactions – Total $ Volume by Sector
Investment on the residential land side declined this quarter by 15% compared to the previous quarter. The top transactions occurred outside of the downtown Toronto core in Markham (3575 Elgin Mills Rd, $187M, 70 acres) and North York (5800 Yonge Street, $122.2M, 8 acres). The first half of 2018 saw a total investment of $3.2 billion. Despite the uncertainty created by local and provincial policy reform, we continue to see a sustained demand in residential redevelopment sites throughout the GTA.
The office sector saw the greatest decrease compared to the previous quarter at 59%. This was attributed to the lack of portfolios which closed in the second quarter, as well as the lack of landmark office properties closing as we’ve seen in recent quarters. The most significant transaction and the lone office property which surpassed the $100M threshold in Q2 was the sale of Parkway Place in North York which was acquired by a foreign investor for $256.3 million. Despite the drop in activity, the Altus Group Investment Trends survey indicates that the demand for office properties remains strong. Vacancy rates in the GTA remains steady at 9%, with the downtown core at approximately 5%, in comparison to the national average of 12%. The GTA downtown office vacancy rates remain tight as office rents increased by approximately 11% which is attributed to limited inventory constraints.
The retail sector saw a decrease in total investments by 28% in comparison to the previous quarter. However, the first half of 2018 recorded the highest total investments since the same period in 2014. Deal volume was healthy this quarter with a total of 124 transactions, though 80% of these transactions fall below the $5 million dollar price point, proving that private investors are entering the market and acquiring smaller assets. As we’ve seen in the office sector, constrained market conditions have resulted in the lack of institutional purchases of prominent retail assets this quarter. According to respondents to the Altus Group Investment Trends survey, the Toronto retail sector remains highly sought after.
The apartment sector nearly doubled this quarter in total investments. Coming in at $560 million, this sector posted its strongest quarter since Q1 2013. Although cap rates continue to compress, the apartment sector remains one of the most in demand assets and has proven to be one of the more stable investments in the GTA market. The most significant transaction this quarter was the Blackstone & Starlight Investments joint venture acquisition of a six property multi-residential portfolio located in Toronto and Montreal for a total of $222.5 million, of which $182.4 million was invested in Toronto.
But…regulatory and lending policies as well as trade disputes may cause some uncertainty surrounding the economy, leading investors to be more selective with their acquisitions. The appetite for investment real estate remains strong in the GTA, coupled with the limited available product and a few reservations, suggesting activity in 2018 will likely be lower than 2017.
ABOUT DATA SOLUTIONS
Data Solutions connects the Canadian real estate industry through the delivery of data with unparalleled breadth, integrity and relevance. We cover new homes, investment transactions and commercial market inventory in key markets, and also provide intelligence on the national housing market and consumer home buying and borrowing patterns.
Our solutions are used by real estate industry stakeholders to gain market intelligence, identify and validate opportunities, benchmark, strategically plan, manage risk and more.
Data Solutions is part of Altus Analytics, the software and data solutions business of Altus Group, where our focus is to empower real estate clients and partners to work collaboratively to enhance decision making, drive performance and optimize transactional efficiency. Our solutions enable firms to better organize and manage data and connect with the right information and analytics to help them gain a complete picture of real estate assets, portfolios and transactions.
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ABOUT ALTUS GROUP LIMITED
Altus Group Limited is a leading provider of independent advisory services, software and data solutions to the global commercial real estate industry. Our businesses, Altus Analytics and Altus Expert Services, reflect decades of experience, a range of expertise, and technology-enabled capabilities. Our solutions empower clients to analyze, gain insight and recognize value on their real estate investments. Headquartered in Canada, we have approximately 2,500 employees around the world, with operations in North America, Europe and Asia Pacific. Our clients include some of the world’s largest real estate industry participants across a variety of sectors. Altus Group pays a quarterly dividend of $0.15 per share and our shares are traded on the TSX under the symbol AIF.
For more information on Altus Group, please visit: www.altusgroup.com.
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