Greater Vancouver commercial real estate investment transactions and dollar volumes hit new highs last year, and there’s little evidence of a slowdown in 2016.
“Should all things remain the same, I see continued growth in terms of deal counts and dollar volume invested into the local real estate market,” said Altus Data Solutions Canada research director Paul Richter.
Altus Group’s research revealed transactions in excess of $1 million rose by 37 per cent from 2014 to 1,896. Total investment dollars jumped by 31 per cent to $7.95 billion.
With Greater Vancouver hemmed in by the Pacific Ocean to the west, the North Shore Mountains to the north, protected agricultural land to the east and the United States border to the south, demand for land is outstripping supply.
And with continuing low mortgage interest rates and improved infrastructure such as the extension of the Skytrain rapid transit system farther from downtown, certain areas are transitioning into high-density residential neighbourhoods and attracting developers and investors.
One in three dollars invested in residential land
Residential land accounted for 34 per cent of the deals, with 631 valued at $2.7 billion. That’s an increase of 14 per cent in dollar terms from 2014.
Industrial, commercial and institutional land transactions made up 20.1 per cent of the total sales volume at $1.6 billion as 561 properties changed hands.
While yields have lowered, purchasers are looking to the future and the potential redevelopment of residential properties that still have decent holding income.
Dollar volume of apartment deals almost doubles
The Greater Vancouver Area’s 142 apartment transactions were valued at $972 million, a 91 per cent increase from 2014.
“The apartment market had a particularly good year due in part to larger and older apartment complexes that are mid-term redevelopment plays,” said Richter.
“Langara Gardens was a 50 per cent sale worth $101.86 million to Concert Properties, where investment rationale was based on the development upside of the vacant land that was part of the property.
“It was the same story out in New Westminster, where Royal Towers sold for $28 million due in part to the developable land that accompanied the apartment building.”
Retail transactions up sharply
There were 271 retail transactions worth a record $1.1 billion, up 41 per cent from the previous year and eclipsing the previous dollar volume high-water mark established in 2013.
Industrial property transactions numbered 214, with values ranging from $1 million to $63 million. The total value was $895 million, an increase of 25 per cent from 2014.
“The industrial market has been a steady performer throughout the years, with year-over-year growth for the past four years,” said Richter.
“The strata market plays an important part of this. Larger bay units have been on the market for a few years and these bigger units get the prices over the $1-million threshold.”
Value of office deals rises by one-third
There were 72 office property deals worth $629 million, up 33 per cent from 2014.
“Office is a bit more of a choppy asset class,” said Richter. “Bigger deals that move the needle are more rare than in other classes, but we saw a lot of strata office projects released in 2015, especially along West Broadway and in suburban markets like Richmond, New Westminster and Burnaby.”
The majority of the strata office, strata retail and strata industrial sales are going to owner/user buyers, according to Richter, which he said represents “a huge part of the deal velocity in the Greater Vancouver market.”
The hotel sector was the only one to experience a downturn in 2015. There were five transactions worth $51 million, a decrease of 73 per cent from 2014.