Investors look ahead despite continued pandemic-related challenges as Canadian CRE investments reach a new peak in first half of the year

  10/4/2021 |   SHARE
Posted in Commercial Real Estate by Vanguard Realty| Back to Main Blog Page

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With disruptions to the global economy due to COVID in the first half of last year, 2021 already looks to be showing signs of recovery. For the second quarter of the year, the total number of investment transactions registered at 3,255 representing $17.8 billion. For the first half of 2021, total investment volume recorded $33 billion, a 57% increase from the same period last year when the pandemic disrupted the global economy. The most active markets in the first half of 2021 were Toronto, Vancouver, and Montreal, respectively, which represented 74% of total market share. The most dominant sectors across the country were, to no surprise, Industrial, Apartment, and Land (ICI and Res. Land), accounting for about 81% of total volume. These asset classes have proven to be resilient during the pandemic and retained investor interest as they were able to withstand market uncertainties and challenging market conditions.

Altus Group

Investment activity in the Greater Vancouver Area saw significant gains in the second quarter, largely driven by the multifamily and industrial sectors pushing volume to new levels in a post pandemic market. There was a total of 666 transactions worth $3.9 billion in Q2 of 2021 pushing the first half of 2021 to $6.8 billion, a 60% increase from the first half of 2020. Transaction volume in the Edmonton market on the other hand, dipped by 26% in the first half of 2021, however it is still slowly showing signs of recovery as the province shifts towards mandatory COVID protocols. Calgary did relatively well in the first half of the year with a 26% increase in investment volume compared to last year, although, Q2 showed a slight dipped after three consecutive quarters of recovery. Surprisingly, Calgary had one of the largest office transactions in Q2. The Bow office tower located in downtown Calgary sold for $1.2 billion. The GTA was the strongest market overall for market activity in the first half of 2021, registering record-breaking volumes of $13.2 billion, a 68% increase since the same period last year. The industrial and land sectors were the most desired assets and development activity has resumed across the GTA, showing signs of confidence in the market. The Ottawa market had a strong start to the year followed by an even stronger second quarter resulting in record investment volumes for the first half. Residential land and retail investments were the leading asset classes representing close to 50% of total investments in the Ottawa market. Investment activity in Montreal also continued to show signs of strength in investment activity, an increase of 27% in volume and 77% in transactions compared to the same period last year. The top two traded assets for the first half of 2021 were multi-family and industrial assets representing a combined investment volume of $3 billion, almost 67% of total investment for the Montreal market.

According to Altus Group’s Investment Trends Survey for Q2 2021, the top 3 markets preferred by investors were Toronto, Vancouver, and Montreal, respectively. All major markets except for Halifax also showed an increase in interest amongst investors surveyed compared to the previous quarter, indicating renewed confidence in the overall market and economy. The top preferred product-markets were Calgary – Single Tenant Industrial, Montreal – Industrial Land, Vancouver – Food Anchored Retail Strip, Toronto – Food Anchored Retail Strip, and Edmonton Single and Multi-tenant Industrial. Meanwhile, retail, as one of the more struggling assets, posted as some of the least preferred products, specifically for Montreal’s Tier II Regional Mall, Quebec City’s Enclosed Community Mall and Tier II Regional Mall, and Ottawa’s Enclosed Community Mall and Tier II Regional Mall.

Altus Group

Given the uncertainty of last year and the ongoing challenges for asset classes such as office and retail due to pandemic restrictions, many markets across Canada have remained resilient and managed to push ahead in the first half of 2021, primarily due to low interest rates, pent up demand, and lack of inventory. The industrial sector for single and multitenant properties along with industrial land were the most sought-after products throughout the pandemic as market conditions remain tight and demand stays strong largely from the growth of e-commerce. The multifamily sector also continued to remain a stable asset class, but under tight market conditions, however, development in this asset class picked up significantly in 2021, particularly in the GTA. The office and retail sectors had some of the most challenges although investors have taken a medium to long term view when scoping out product in these asset classes. Retail, more so food-anchored retail product continues to be in demand, but mostly for product with strategic locations and redevelopment potential. Similarly, the office sector had some movement, but mostly for product with future redevelopment potential. There will be ongoing uncertainty in the office sector as employees and companies work through a hybrid workplace model and a contemplation of a reduction in the total office footprint. Although the economy has recovered incrementally since the onset of COVID-19 and employment levels in the FIRE sector have seen an increase in the second quarter, commercial real estate will remain at an inflection point as we await a looming fourth wave and as employee continue to work [and shop] from home.

Source: Altus Group



Commercial Real Estate, Commercial Real Estate Investments, GTA Commercial Real Estate, Toronto Commercial Real Estate