The commercial real estate market in British Columbia surpassed previous highs for activity and dollar volume in 2017.
Dispositions of 230 office, industrial and retail properties achieved a total of $7.5 billion according to a new report from Avison Young. That almost doubled the previous record set a year earlier ($4.1bn).
Large pools of investor capital helped achieve the record year but that was not the only reason for the strong market.
The low interest environment, mindset of market participants, and a shortage of available development land, all played their part.
Interestingly, while many property owners decided to sell in the belief that significant peaks had been achieved, buyers were happy to pay higher prices believing that the peak is still to come.
"Ongoing price appreciation in all asset classes is being driven almost exclusively by land value and redevelopment potential," comments Avison Young Principal Bob Levine. "The acquisition of retail assets has morphed in many cases into land deals with lesser consideration or interest for the income in place or the retail asset itself. This approach has spread to office and even industrial properties as investors seek to secure land in hopes of redevelopment."
By asset class:
- Office investment sales activity achieved record levels in 2017 with 46 transactions valued at $2.7 billion, representing 36% of overall record dollar volume of $7.5 billion.
- Retail assets achieved blockbuster heights in 2017 with 96 transactions valued at $3.63 billion – surpassing the previous record of 59 retail details worth $1.22 billion set in 2015.
- Robust demand for industrial assets pushed deal and dollar to record levels in 2017 with 88 deals valued at more than $1.2 billion, capturing just 16% of total 2017 investment proceeds of $7.5 billion but claiming 38% of the total number of deals.
- Multi-family investment activity surpassed the billion-dollar mark for only the second time in BC history after registering more than $1.275 billion in 89 sale transactions in 2017.
Private purchasers remained the most dominant buyer group in 2017, accounting for 87% of transactions but just 46% of dollar value.