Transactions in the Greater Toronto Area (GTA) once again dominated Canada’s commercial real estate activity in 2019.
“Toronto continues to be the No. 1 place to invest or look for real estate in Canada from an investor standpoint, both domestic and foreign,” Altus Group’s vice-president of data operations Ray Wong said while discussing the Top-10 2019 CRE transactions in the GTA with RENX. “It was sort of a continuation of 2018.”
Topping the charts in 2019 were a development land transaction and a multiresidential portfolio sale.
First Gulf‘s $690-million sale of the East Harbour Lands to Cadillac Fairview was the largest single-property transaction. The 38-acre site is located three kilometres from the downtown core.
Toronto city council approved the East Harbour Master Plan in 2018. It provides for 10 million square feet of commercial development including office, hotel, retail, institutional, entertainment and cultural space.
“The urban landscape will continue to be in demand, as well as opportunities for expansion and growth, especially on the commercial side and residential side,” said Wong. “So, that created quite a buzz in the marketplace based on that acquisition.”
Late in December, Starlight Investments closed on a major portfolio deal, acquiring 44 multiresidential high-rise buildings from Continuum REIT for $1.735 billion. The majority of the sites are spread across the GTA, though some of the properties are also located in Hamilton and Ottawa.
In all, Starlight acquired 6,271 units in the buildings, which include towers at 2450 and 2460 Weston Rd., 125 Bamburgh Circle and 77 Roehampton Ave., among others.
Meanwhile, the Atrium on Bay acquisition ranked third. H&R REIT (HR-UN-T) sold the 1,079,870-square-foot office and retail complex to KingSett Capital & TD Greystone Asset Management for $640 million.
“It’s such a good asset to have,” said Wong. “It’s always been a well-performing asset.”
Investment activity declined in 2019
Speaking of performance, though final numbers are not yet available the overall volume of investment activity decreased across Canada during 2019. The Toronto region also saw lower investment, but not for lack of interest from investors.
“It’s not because Toronto capital wasn’t available,” Wong said. A combination of factors contributed to the lower numbers, including a “limited number of opportunities” available to purchasers and the scale of properties on the market.
There was also more caution from potential buyers.
“What we were finding with some of the investors is that they were a little bit more selective . . . on the assets and the properties that they bid on.”
Wong contrasted the current environment to 2017 when “we saw a number of bidders in the marketplace.” At that time, he said, there was “a lineup of buyers” for assets coming onto the market.
“You still have a few buyers, but not the same amount of buyers,” Wong said.
Toronto industrial remains hot sector
Industrial properties continued to be prized assets in 2019, with two transactions on the Top-10 list.
“The GTA industrial vacancy rate is less than one per cent,” Wong said, noting for Q3 it was at 0.8 per cent.
With escalating rents and continuing demand for e-commerce space, the industrial sector “continues to do well from both the tenant perspective/investor standpoint, as well as the owner-users.” As a result, there is record buyer interest.
“It’s the first time, third-quarter 2019, that industrial has hit over a billion dollars of transactions. So, it shows you the amount of demand there is for industrial assets in the GTA.”
It’s also an asset class that is consistent across the country.
“You’re also seeing that in Vancouver,” he said, adding the West Coast city’s industrial vacancy rate is hovering in the two per cent range.
“So, industrial has performed well across the board, just because of the growth of e-commerce and the demand for warehouse distribution space.”
Here are the rest of the Top-10 GTA transactions, according to Altus data:
Oxford Properties Group and the Canada Pension Plan Investment Board (CPPIB) sold Dynamic Funds Tower for $473 million. The 650,000-square-foot downtown Toronto complex was acquired by GWL Realty Advisors (50 per cent), Investors Group (25 per cent) and OPTrust (25 per cent).
“That’s a core downtown asset,” said Wong, noting there are “very low office vacancy rates downtown.”
The Dynamic Funds Tower complex includes: Dynamic Funds Tower at 1 Adelaide St. E., a 30-storey LEED Gold-certified office tower; 20 Victoria St., a nine-storey boutique office building; and 85 Yonge St., a three-storey retail building.
Sixty-one acres of residential land was sold to Aspen Ridge Homes by Celestica for $348 million.
“That’s the old IBM Celestica site,” said Wong. He called the redevelopment site a “fantastic parcel” due to the Metrolinx Crosstown LRT expansion along Eglinton and Don Mills.
Aspen Ridge Homes’ Crosstown plan encompasses 18 condo buildings and 30 townhome buildings housing more than 10,000.
It’ll also boast 300,000 square feet of office space, restaurants and cafes, more than five acres of parks and playgrounds, and a large community centre.
Gazit Globe created a joint venture with Dori Segal’s Gazit TripLLLe Canada and a private investor to purchase this low-rise office and complex at Yonge Street and York Mills Road in December for about $240 million from Manulife Investment Management.
Sitting atop the York Mills subway station, the 570,000-square-foot complex includes about 35,000 square feet of retail.
It’s situated in a neighbourhood which is undergoing major redevelopment and intensification, with seven active multiresidential projects on the go and several more planned.
TD Bank Group purchased a 30 per cent stake in this 1.2 million-square-foot office tower, which remains under construction by Cadillac Fairview, for $229 million.
“We have it as ICI land, but that’s the new office building that Cadillac Fairview is building,” Wong said, noting TD will also be the anchor tenant in the building.
TD Bank Group will occupy 840,000 square feet over 33 floors of the downtown tower, which is now owned 50 per cent by Cadillac Fairview and 20 per cent by Investment Management Corporation of Ontario (IMCO).
The Ontario Teachers’ Pension Plan will occupy 340,000 square feet in the now fully leased, 46-storey building valued at approximately $760 million.
The 911-unit Rossland Park property in Oshawa was sold to Q Residential by H. Kassinger Construction Limited for $220 million. The property includes about three dozen townhome, low-rise and high-rise buildings in a 50-acre park-like setting bordering Rossland Road between Wilson Avenue and Ritson Road.
“That deal is just representative of the demand for multires in the market,” Wong said, adding “even in Oshawa, there’s sizable demand for that type of asset.”
AIMCo purchased this suburban Richmond Hill data centre property from a joint venture between Urbacon Properties Limited and Summit Industrial Income REIT for $215 million. It’s part of a larger development at the Barker business park site, which currently includes two data centres but is designed to contain as many as five of the facilities at full build-out.
The 118,135-square-foot property is located near Highway 404 and Elgin Mills Road East.
10. 2200 Yukon Court
Another major industrial transaction: DSV Solutions Inc. sold the 1.1 million-square-foot Milton property for $180 million to London Life Insurance Company (45 per cent), GWL Realty Advisors (25 per cent), Canada Life Insurance Company (20 per cent), and Canada Life Assurance Company (10 per cent).