By Kruti Desai, National Research Insights Manager | May 28, 2020

Vancouver commercial real estate market saw modest gains before the global pandemic took hold

Investment volume in the Vancouver commercial real estate market edged upward in the first quarter of 2020 from the previous quarter, while posting near identical numbers to a year ago – $2.1 billion in investment volume and 354 transactions – less than a 2% change in both categories compared to the same quarter last year. Although tensions are starting to weigh on investor sentiment, momentum in the Vancouver market remained positive, down slightly from the previous quarter.  According to results from Altus Group’s Investment Trends Survey, overall cap rates showed signs of compression at varying levels across the asset classes. As the Vancouver commercial real estate market is brought to a standstill, the second half of 2020 will bear the full brunt of the COVID-19 shutdowns and physical distancing measures.

Vancouver property transactions by year - 2010 to Q1 2020

(Vancouver property transactions – all sectors by year)

First quarter activity was nearly balanced between land and improved assets. Land transactions totaling $986 million made up 46% of the overall investment total. Residential land sales slumped to $462 million, their lowest level since Q3 2014 and well below near peak numbers of $1.5 to $2 billion per quarter from 2016 through 2018.

The largest single sector contribution came from industrial, at nearly $544 million in sales – a 105% increase from Q1 2019. Interest in all industrial property types was prevalent with acquisitions made of quality long term holds, redevelopment sites and strata properties, both new and resell.

The apartment market had been building momentum through 2019 and continued into Q1 2020: 14 transactions totaling almost $297 million – a 276% increase from Q1 2019. Twelve transactions took place in the City of Vancouver with the West End neighborhood posting six alone.

Overall, seven transactions in the first quarter exceeded $50 million, with only one of those over the $100 million threshold. Five of the seven were either apartment or industrial – the two asset classes that are expected to best endure the current market conditions due to demand, despite COVID-19 setbacks. Well-established, local private investors were the most active purchasers to start the year acquiring all but one of the top 15 transactions, the outlier being a Coquitlam retail property acquired by Choice Properties REIT that offers future redevelopment opportunities.

Vancouver overall capitalization rates Q1 2005 - Q1 2020

(Vancouver market area cap rates – Q1 2005 to Q1 2020)

Notable Vancouver investment transactions:

7725 Lougheed Highway; 3131-3171 Lake City Way, Burnaby – Industrial
This $146 million industrial property was acquired by Larco Investments Ltd., a private investor headquartered out of Vancouver. Fully occupied by two food related tenants, the 252,833 square foot building sits on 19 acres and is located within 150 metres of the Skytrain Millennium Line. The Lake City area of north Burnaby is expected to undergo extensive transformation due to densification of industrial properties and the introduction of a wider mix of uses beyond industrial.

1230 Nelson Street, Vancouver – Apartment
A 107-unit, 21-storey concrete rental building located in the West End neighbourhood of downtown Vancouver was acquired by a local private investor, Mayfair Properties, in mid-March. The property, known as Harley House, sold for $51 million representing a price per unit of $476,636.

2121-2181 160th Street, Surrey – Office
The largest office transaction of the quarter took place in early January. A local private investor acquired Grandview Pointe, a 39,044 square foot, suburban office building located in south Surrey for a total consideration of $20,750,000, representing a price per square foot of $531. The ten-year-old, three-storey office building contains some ground floor retail space and was fully occupied at the time of sale. 93% of the space had either been recently leased up or had entered new five-year options, ensuring that there is scheduled income in place for years to come.

Grouse Mountain Resort, North Vancouver – ICI Land
Northland Properties Corp. acquired this local ski hill located atop the north shore mountains overlooking downtown Vancouver. The property traded in July 2017 for $38.68 million, and again in January for $58.55 million. In both cases, the prices paid reflect only the freehold transfers, any leasehold land or business-related valuations were not reported. The property is improved with year-round outdoor tourist and recreation facilities.

Vancouver property transactions by asset class Q1 2019 vs Q1 2020

(Vancouver property transactions by asset class – Q1 2019 vs Q1 2020)

As we proceed through this unprecedented period, levels of uncertainty are expected to result in a dramatic decrease in transactions in the second half of 2020. “Investors are taking the time to reassess their existing portfolios and work with their existing tenants to minimize fallout. Stimulus packages, historically low vacancy rates in the industrial and apartment markets and resilient businesses will all contribute to the eventual recovery of the Vancouver commercial real estate market,” noted Paul Richter, Director, Data Solutions at Altus Group.

 

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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.

For more information on Data Solutions, please visit www.altusgroup.com/data.

ABOUT ALTUS GROUP LIMITED

Altus Group Limited is a leading provider of software, data solutions and independent advisory services 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.

MEDIA CONTACT:

Elizabeth Lambe
Manager, Communications
Altus Group
(416) 641 – 9787
elizabeth.lambe@altusgroup.com

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