The first quarter of 2023 is in the books and looks to have been defined and influenced by the impacts of the Bank of Canada’s rapid interest rate hikes which began near the middle of 2022.

It's a trend being felt broadly across Canada, according to CBRE.

However, now heading into Q2, some respite is emerging as the pause in interest rates has potentially provided a sufficiently stable environment to encourage normal levels of CRE activity. 

Hamilton transactions

In contrast to the $346 million worth of commercial real estate transactions recorded in the Q1 2022 in the Hamilton region, there has been a decline of 38.4 per cent in transactions completed in Q1 2023. Only $213 million worth of transactions were recorded.

Both of those stats can be mainly attributed to the cost of debt.

During Q1 2023, only 59 transactions were completed, compared to the 99 transactions completed in the first quarter of 2022.

Hamilton typically witnesses around 85 transactions in any given quarter.

The 59 transactions represents the second-lowest total for any quarter since Q2 2020 when pandemic lockdown measures were in effect and stifled the market with 51 transactions taking place.

$346 million is still the record amount for Q1 transactions and by contrast, $213 million for 2023 is fairly average.

Considering the incredibly low volume of transactions, it’s encouraging to see values are relatively healthy, coupled with the fact the first quarter of the year usually witnesses lower dollar volumes than the ensuing quarters.

The largest transaction in Q1 was completed in January, as an approximately 86,000-square-foot industrial building located on 21.5 acres of land at 400 Jones Rd., sold for $25.5 million.

The high purchase price is also reflective of the demand for logistics assets with land to accommodate trucking and storage.  

Residential land

Land transactions, both commercial and residential, have also quietened for the past several months.

Q1 2023 did, however, witness a bevy of interesting deals located near the core and priming downtown for high-density development in the foreseeable future.

A 0.70-acre parking lot at 117 King William St. was purchased by Brad J. Lamb Realty Inc. for $7 million (representing $10 million per acre), which is more or less on par with high-density development land value.

Within the immediate vicinity, other parking lots have been purchased by Rosehaven Homes, Kaneff Group and Emblem Developments within the past several years.

Staying in the core, 169 Jackson St. E. was purchased by Fengate Asset Management for $3 million or approximately $13,050,000 per acre.

In December, Fengate had also purchased the adjacent corner site, totalling a potential development site of 0.63 acres.

Next door, Vrancor Group recently completed the construction of its multiresidential development Walnut Place.

Fengate is also involved with the currently under construction residential developments Cobalt and 75 James.

Finally, 205 Cannon St. E., an existing commercial building located on 0.74 acres downtown, was purchased by Aventus Developments for $2.55 million or just under $3.5 million per acre.

This marks Aventus Developments’ second purchase in Hamilton after originally purchasing the former Tivoli Theatre site in Q1 2022.

Directly across Cannon Street East, Vrancor Group has also completed a 12-storey multiresidential development.

Nearly all land transactions, and a healthy chunk of other large commercial real estate transactions, are requiring large VTBs.

Developments

A few interesting developments were proposed at Hamilton’s Design Review Panel this past quarter.

Main Margaret Inc. pitched a 171-unit development for 392 Main St. W. The proposed mixed-use development would feature commercial uses on the first floor and eight additional floors above for residential use.

This strip of Main St. W. is witnessing multiple land purchases and development projects with Westgate Condos the furthest along and currently under construction.

DiCenzo Construction Company also proposed a plan to build 751 units on 117 Jackson St. E. The project consists of two mixed-use towers of 30 and 39 storeys erected adjacent to the tallest tower in Hamilton, Landmark Place.

New Horizon Development Group plans to construct new units at 1284 Main St. E. with 975 units proposed on and around the former Delta Secondary School building.

The design includes 14-storey additions surrounded by stacked townhouses along the perimeter.

Summary

Overall, based on the Q1 transactions and market conditions, we can conclude that the year started at a slower pace.

There could be a silver lining, however.

After nearly a year of higher interest rates, the resulting stability could provide investors, who have been on the sidelines, with a fresh perspective on how to approach the remaining quarters of 2023 and ultimately increase activity.

This could be a reason why we’re beginning to see increased activity during Q2.

However, until interest rates soften, Hamilton and most of Canada, should continue to expect muted transaction volumes for the foreseeable future.