COVID drives down sales of commercial real estate
Office sector hits lowest transaction total since 2010 as investors show `hesitance'
The $82.5-million sale of Plaza 500, an older apartment building, was the most notable commercial real estate transaction for its dollar value in the third quarter of 2020, according to Altus Group's latest report.
But despite its prime location — across from Vancouver City Hall and City Square and two blocks from the Broadway-City Hall Canada Line station — and its redevelopment potential, the sale price was below the property's assessed value of $86.212 million.
With “continued uncertainties amid the second wave of rising case numbers,” investment in commercial real estate has slowed in Vancouver, Altus said. There were “more restrictive measures across the city, and with it remained a hesitance amongst investors.”
There were 343 transactions valued at a total of $1.5 billion in the third quarter, bringing the yearto-date total to $5.6 billion, down 22 per cent from the same period in 2019.
Commercial real estate sales in the third quarter posted the lowest total since the second quarter of 2014, but investor interest in industrial and multi-family buildings remained strong, with year-to-date volume in both these categories increasing almost 16 per cent compared to last year.
The office sector showed the greatest drop, dropping 66 per cent compared to the first three quarters of 2019 and by 72 per cent compared to the third quarter of 2019. At only $47 million in transactions, it was the lowest total dollar volume since the beginning of 2010.
Residential land deals are also under pressure, with year-to-date totals down by 24 per cent compared to 2019 as many developers seem more comfortable holding cash than land. One notable sale in this category included the $40-million sale of residential land at 495 West 41st Ave., at 41st Avenue and Cambie Street across from the massive Oakridge redevelopment site. It used to be an Esso gas station and was last sold in 2014 to Coromandel Properties, which bought it for $15.8 million. The new buyer is the PCI Group.
The largest industrial sale involved a 200,000-plus-squarefoot Port Coquitlam warehouse and distribution centre on Coast Meridian Road. It was sold in a share-sale deal for a reported $51.3 million.
The largest deal in the industrial, commercial, investment land category was the sale of a site at 473-475 Hastings St. and 398 Richards St. in Gastown. It was sold for $31.25 million.
Altus said that while there was a loss of momentum in the third quarter, Vancouver remained a market where there is more buyers than sellers and it is among the top three markets in Canada for investors.