Commercial Real Estate Activity in Vancouver Remains Healthy Despite Slowing Pace
Q3 2018 registered a total of 506 sales transactions over $1 million, representing a total value of $2.9 billion
VANCOUVER – Altus Group, a leading provider of software, data solutions and independent advisory services to the commercial real estate industry, today announced the third quarter of 2018 results for commercial real estate investment in the Vancouver Market Area. Year-to-date activity has registered a total of 1,570 transactions valued at $9.7 billion, down from 2017 YTD record dollar volume levels by 10%, but surpassing that registered in 2016. Year-to-date deal velocity has continued to decline since 2016 from 2,194 to 1,758 in 2017 and 1,570 in 2018. This represents a drop of 28% and 11% for the year-to-date comparable of 2016 and 2017, respectively. Vendor expectations, combined with the cumulative effect of government interventions taken to slow price growth, appear to be taking hold and slowing down the overall market.
Despite year-to-date investment volumes in the land markets being down by 9%, land markets continue to be the dominant forces in the Greater Vancouver market. In the third quarter of 2018 land transactions made up 65% of all activity; residential land recorded 186 transactions valued at a total of $1.3 billion while ICI land posted 134 transactions valued at $599 million.
(Year-to-date Q3 2018 Vancouver Property Transactions – Total Dollar Volume by Sector)
Generally, the third quarter is trending towards market activity levels recorded in 2016, resulting in declining investment to volumes seen in 2017.
(Vancouver Property Transactions – All Sectors by Quarter)
Despite the slowing trend in overall transactions since mid-2017, the office market has seen consistent growth each quarter in 2018 in both deals, climbing from 14 to 37, and transaction volume, rising to $264 million in the third quarter. The two largest transactions in the office market were recorded in the City of Vancouver, moving away from last quarter’s more suburban-focused investment. Containers Phase 2 at 468 Terminal Avenue, in the False Creek Flats area, sold for $92,000,000 from Rize Alliance to Concert Properties, representing a price per square foot of $715. Hollyburn Properties acquired a downtown property, the Shorehill Building at 1155 West Pender Street, for $80,000,000; this will be their future head office. This transaction represents a price per square foot of $963 and a new investment avenue for the purchaser, traditionally a significant player in the apartment market.
Coming off an exceptionally strong second quarter, the apartment market has shown a marked downturn this quarter with 20 transactions totaling $134 million. Year-to-date numbers are down by 10%, however a year-to-date deal count of 67 is the lowest since 2009. Five of the top ten deals this quarter were in the City of Vancouver, with the remaining being spread throughout North Vancouver, Coquitlam, and New Westminster. The largest transaction of the quarter was Starlight Investment’s acquisition of Villa Contessa, a West End, concrete high-rise, for $15.05 million, producing a 2.2% cap rate. Despite the low yields that continue to be recorded in the apartment market, results from the Altus Group Investment Trends survey indicate that investors expect cap rates will remain unchanged with the potential for slight decompression in the coming quarters with potential future rent controls being an expected contributing factor.
Overall, this quarter has seen a balance of private investor, developer, governmental and institutional purchasers. The ICI land sector has seen mostly developer acquisitions with an eye toward servicing what seems to be insatiable demand for strata/condo office and industrial product. The residential land market continues to see foreign investment, as well as known local private investors and developers. The industrial, office and retail markets continue to attract attention from private investors and end users and are likely only slowed by the continued supply issue of industrial product within the Greater Vancouver market, and the lack of available top-quality assets in office and retail.
“Generally, we have seen a cooling off period this quarter across most sectors, which we feel will create pockets of opportunity throughout the next quarter and year. Vendor expectations are adjusting, while foreign investment has slowed since 2016/17, potentially leading to a more locally competitive market,” noted Paul Richter, Director, Data Solutions at Altus Group.
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/datasolutions.
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.
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