Vancouver Investment Transaction Stats – Q4 2019
Vancouver Area Commercial Real Estate Drops from 2018 but Settles into a Consistent Pace Throughout 2019
Total investments decreased by 46% to $9.2 billion. Both overall investment volume and deal counts were steady throughout the year after experiencing a significant drop off after Q4 2018. Quarterly activity ranged between $2.0 and $2.1 billion in transaction volume, with an exception in the second quarter as the Bentall Centre complex traded for approximately $1.07 billion bringing the second quarter to $3.1 billion. Vancouver retained its position as the top market for real estate investment as investor momentum remains steady and positive on the product-market barometer, according to Altus Group’s Q4 2019 Investment Trends Survey for industrial and high-quality office properties.
(Vancouver property transactions – all sectors by year)
While the Vancouver area market remains one of the top markets in Canada, the overall effect of provincial government interventions, combined with on-going supply constraints, have made significant impacts on the investment volumes and deal velocity posted throughout the year. 2018 posted average quarterly deal counts of 539, closing the year with 2,154 transactions. 2019 average quarterly deal counts declined to 381, totaling 1,524 deals in the year, a decline of 29% when compared to 2018.
The office market was the lone asset class to record year-over-year investment gains in 2019, albeit minor. Deal counts climbed by 23%, to 134, while overall investment volume levels climbed by less than 1% to $2.3 billion, inclusive of share sales. Four of the five largest transactions in 2019, including share sales, were office assets, and include:
- Bentall Centre, Vancouver, acquired by Hudson Pacific Properties and Blackstone, $1.07 billion
- 1075 West Georgia Street, Vancouver, acquired by Kingsett/Crestpoint/Reliance, $274 million
- Airport Executive Park, Richmond, acquired by Fiera Properties, $208 million
- Metrotown Place I & III, Burnaby, acquired by Slate Asset Management, $95 million
These four transactions represent 71% of the overall office investment in 2019.
Strata office sales were also a significant contributor to the market in 2019. Considering traditional transactions only, strata office sales contributed $285.7 million, or 35%, to the overall investment market and represent 79% of all transactions. 2019 saw the release of several very successful new strata office developments throughout the region, including 34|W7 and Ironworks in Vancouver, King’s Crossing in Burnaby, International Trade Centre at Versante in Richmond, and City Centre 2 in Surrey.
The industrial market was the only other asset class to post a positive gain in terms of transaction activity, with deal counts climbing by 7% in 2019. Investment levels were down by 21% to $1.3 billion. Only five transactions topped the $25 million mark, with a national private investor, two developers, and two local private investors acting as purchasers in these transactions. Strata properties also played a large role in the industrial market. 32% of total investment was into strata properties, while 58% of the deal counts were attributed to strata acquisitions.
(2019 Vancouver property transactions – total dollar volume by sector)
Land markets in the Vancouver area continued their stall from 2018. Investment in the Residential Land markets were down 68% in 2019, to $2.2 billion, the lowest since 2013. The foreign buyer’s tax and the vacant home tax, combined with delays in the municipal planning processes, have all been significant disruptors to the residential development market throughout 2019.
The ICI land markets faired slightly better, sliding by 24% to $1.7 billion in total sales in 2019; its lowest level since 2015. The ICI land market has been buoyed to a certain degree by both industrial land sales, 34% of the total, and the sale of agricultural lands, 37% of the total.
“Declared as a ‘new normal’ at the end of the second quarter, subdued but steady investment levels have certainly played out through the balance of 2019. Quarterly performance has been well off-peak levels, but consistent nonetheless. Market interventions combined with what many considered ‘too-much-too-fast’ price growth have put considerable down force on the Vancouver area market in 2019. As developments currently under construction or in the planning pipeline come to market, we expect to see the market begin to head back toward levels recorded in 2017 and 2018,” said Paul Richter, Director, Data Solutions at Altus Group.
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