Commercial real estate Q2 sales hit $16.5B record

Canadian commercial real estate investment reached new heights in the second quarter, boosted by a pair of big acquisitions and by the lure of attractive, income-producing property.

Transactions reached $16.5 billion. That’s 38 per cent more than the previous record, set in the first quarter of last year, and more than twice the five-year quarterly average, CBRE Group Inc. said in a report Monday. Deal volume for the first six months was $26.8 billion, a half-year record.

Two large purchases that closed in the second quarter dominated the action — Choice Properties’ acquisition of Canadian Real Estate Investment Trust, and Blackstone Property Partners’ purchase of Pure Industrial Real Estate Investment Trust. Together the deals accounted for 45 per cent of the total.

Single-property purchases included Hines and Oaktree Capital Management’s $107-million purchase of the First Tower office building in Calgary and Tigra Vista Inc.’s $256-million acquisition of Toronto’s Parkway Place. The average deal size was $9.4 million, up 67 per cent from a year earlier.

“What investors really want today, as we get longer into the cycle, is great real estate that will stand the test of time,” Peter Senst, president of Canadian capital markets at CBRE, said in an interview. “On top of that, you’ve got term and covenant, so if the market does change, you’ve got something that can pay out dividends for an extended period of time.”

Toronto accounted for more than a third of all transactions in the quarter, at $5.7 billion. That’s the city ’s highest quarterly investment volume ever and 20 per cent more than the previous record, set in 2013. Vancouver had more than $3.2 billion in transactions, nearly double its five-year average.

Toronto and Vancouver have had the two tightest downtown officevacancy rates for four quarters in a row and the two lowest industrialavailability rates for six consecutive quarters in North America, Senst said in a statement.

Apartment-building deals also performed well, with $1.9 billion in transactions, 40 per cent more than in last year’s second quarter.

Still, rising interest rates and stricter mortgage rules are set to cool home sales and price hikes, according to a Reuters poll of property market analysts released Monday.

The median forecast in a Reuters poll of 16 analysts taken Sept. 4-7 predicted national house prices will rise by a median 1.7 per cent this year, slower than the 1.9 per cent in a poll taken in June.