UPDATED: Four major office transactions, a slowdown in residential development land sales and the amount of distress entering into the market were key themes in Vancouver's commercial real estate investment sector during the past year.

Kirk Kuester, executive managing director, Vancouver, for Colliers, told RENX the $9 billion in transaction volume in 2024 was consistent with 2023 transaction volume.

That's no surprise, he said, given the limited number of investors and developers in the market and the difficulty in closing deals given bid/ask pricing challenges, very tight debt and equity conditions, and the focus purchasers have on the highest-quality opportunities.  

“Many properties come to market and fail to transact due to quality and/or unrealistic pricing expectations," he said. "It appears that purchasers are now focused on the highest of quality assets on one end of the spectrum and distress opportunities on the other, and anything in between is overlooked or very softly bid." 

He called the level of office activity "interesting" given the challenges it has faced in recent years.

“These deals speak to the confidence that investors have in the long-term fundamentals of the Vancouver economy and office market," Kuester said. "Large deals of $50 million to $100 million and greater have become extremely difficult to facilitate and this is particularly evident in the development area. 

Land sales decline, trend expected to continue

“The land market in 2024 was driven by a number of owner occupiers and government type buyers acquiring sites. There is a reasonable market for development sites up to $20 million and maybe $30 million, but the sales and activity beyond these values are largely distress and foreclosure related."

Kuester expects that to continue into 2025 and perhaps increase, "as the reality of new and lower land values becomes more and more evident and hard to ignore.”

He said land represented about 40 per cent of the overall market activity - down from its peak of 50 to 55 per cent of total volume. This total is heavily influenced by large user/owner-occupier deals. 

“Larger land sales, being plus-$40 million in both the industrial and residential markets, have largely stalled given the economy and challenging development economics and this is where we expect to see the consequences three to four years from now in terms of end-product supply challenges,” Kuester observed.

“Another observation for this (past) year is how much distress or insolvency has entered into the market and this is primarily in the area of development sites. We see this trend continuing into 2025 and think that there are numerous sites that haven’t come to market that are in a soft state of insolvency with lenders and owners negotiating work-out scenarios."

Kuester said peak volume for the overall market was $16 billion in 2022.

Population growth drives retail strength

He said the retail sector was strong in 2024 from leasing and investment standpoints. High occupancy and good rental growth leads to strong investor interest when properties are offered for sale.

“We would attribute this to population growth, relatively strong consumer spending and most importantly, very limited new supply coming to market given the lack of suitable land and cost of development,” he explained.

Key active players in the overall Vancouver commercial real estate market include foreign investors, REIT's, fund managers, and private capital. The Top-10 transactions, representing 15 per cent of the total volume, include significant office, apartment, industrial and owner-occupier deals. 

“The long-term perspective on Vancouver remains extremely positive. We are a market that is constrained by the availability of land. We are a market that is incredibly difficult to acquire in, to develop in, so anything that comes to market from a cash-flow perspective, receives very good attention assuming pricing expectations are reasonable” Kuester said.

The development land market "has really slowed", meaning reduced new space coming to market in the coming years. The most heavily affected sectors could be rental apartments and condos.

“There's virtually no new CBD office that's being built. Rental apartment product is incredibly difficult to make work from an economic standpoint,"  he said. "The condominium market has slowed dramatically.

"There is little new industrial product starting construction today given how much new supply is under construction and yet to come to market,"

"So, from a new development perspective, everything's really kind of slowed, which again, reflects what's happened to the land market.”

Vancouver's top transactions

Here are the Top-10 CRE transactions in the Metro Vancouver region during 2024, according to Colliers' data:

1) 401 West Georgia St., office: Vancouver tower sold for $300M in May, by 2318665 Ont. Ltd., (CPP Investments and Oxford Properties) to Canadian Partners Fund Inc. (Deka Immobilien Investment GMBH).

2) 100 Forester St., HTEC Hydrogen Liquefaction Plant: North Vancouver facility sold for $145M by Erco Ltd., to HTEC Forester - Street Land Holding Corp. as an owner-occupier transaction.

3) 1770 Pendrell St., The Pendrell: Apartment tower sold by Westbank, to CAPREIT for $137M in August.

4) 1661 Davie St., The Zephyr: 50 per cent interest in this apartment tower sold in October for $133M by Westbank, to Crombie REIT, which is now the sole owner.

5) 400 West Georgia St., Deloitte Summit: 90% interest in this office tower sold by Westbank to Allied Properties REIT in March for $130.5 million. 

6) 1051 Broughton St., The Lauren: This apartment tower sold in June for an estimated $120 million, from Westbank and Peterson Group, to Starlight Investments.

7) 114 East 4th Avenue, M2: Office property sold for $115M by Westbank to Spear St., Capital in July.

8) 818 Thurlow St., Robson Centreplace retail centre: Retail and commercial property sold by ARON Industries to Hartleywood Holdings Ltd., for $110 million.

9) 4585 Canada Way, Canada Way Business Park / Imperial Square Canada Way: A 50 per cent stake in this multi-building office and industrial complex in Burnaby, was sold by PSP Investments to Redstone Group for $107 million. 

10) 20499 64th Ave., Langley, Costco retail centre: Sold in June for $94 million by Rockcliffe Estates Ltd., to Costco Wholesale Canada Ltd.

EDITOR'S NOTE: This article was updated after being published to make two corrections, First, two changes were made to the Top-10 list to include new information provided to RENX by Colliers after the original list had been published. Second, we corrected a reference to the 400 West Georgia office property. Erroneous information about the name of the tower had been provided to RENX. It is known as the Deloitte Summit tower.