Investment in commercial real estate remains strong across Canada as economic fundamentals continue to support the market.
That’s despite rising interest rates, tight supply, and the lateness of the investment cycle, according to a new report from Avison Young.
The Toronto-based real estate firm’s Fall 2018 North America and Europe Commercial Real Estate Investment Review highlights the attractive yields that are still available to investors – and that Canada’s CRE is regarded a safe haven.
"Canadian and international investors continue to view the country in a favourable light," notes Bill Argeropoulos, Principal and Practice Leader, Research (Canada) for Avison Young. "Toronto and Vancouver remain the primary destinations for investor capital, but investment was relatively evenly distributed among the asset classes nationwide in first-half 2018. In fact, Toronto is in good company among North America's major markets – the only Canadian market to crack the top 10."
Offices are hot right now
The Canadian office market is strong with tech and co-working firms demanding space.
"Among the top five transactions by dollar volume in each of the six major Canadian markets, office building sales outnumbered all other asset types as investors paid top dollar for these prized properties, including a 50% interest in Toronto's Bay Adelaide Centre, which was sold to a foreign investor for $850 million," says Argeropoulos.
But there is also interest in other CRE asset types with increased urban density driving demand for industrial and retail; while tight supply of homes is boosting investor interest in multifamily assets.
Robin White, Avison Young Principal and Chair of the firm's capital markets group, adds: "Despite the challenges being faced in many parts of the world, Canada's economy has maintained its resilience with low unemployment and moderate growth. This situation has translated into continuing demand for real estate as an asset class from domestic and international investors, both private and institutional. They have been attracted to the strong fundamentals of the asset class, and there is no sign of this interest dissipating in the near term."