Record Q2 for Canada’s commercial real estate market

It was a record second quarter for Canada’s commercial real estate market, according to a new report released Monday by CBRE

In its Canada Investment Marketview, the company said investment volume reached $14 billion as a result of 2,550 transactions, marking the third largest quarterly investment volume on record.

“Investors are looking ahead and are making significant bets on the future. A growing pipeline of property listings and an improving COVID outlook (relative to this time last year) suggest that this trend has legs,” said CBRE Vice Chairman Paul Morassutti. “Canada is on pace to reach a full-year investment total of almost $50 billion in 2021. This would represent the largest annual investment total ever, surpassing the previous record set in 2018.”

The CBRE report said Investors were most active in Toronto, Vancouver and Montreal, which together accounted for $10.1 billion of the $14 billion. The total investment volume was 29.3 per cent higher than in Q1 and 149.2 per cent higher than the same period of last year, when COVID paused the global economy. The second quarter results also mark the fourth consecutive quarter of non-M&A volume growth for the nation, a strong indicator of rising conviction across the investment landscape, it said.

“Investors in the second quarter continued to target commercial real estate sectors with the strongest underlying fundamentals and long-term outlooks: industrial ($4.1 billion in investment), multifamily ($3.7 billion), and ICI land ($2.9 billion). These asset classes performed well during the pandemic and are also reflecting the turnaround in the economy,” said the CBRE.

“The next most active asset class in the second quarter was the retail sector, with investment volumes of $2.0 billion. Retail has seen renewed interest from investors as lockdown measures have been rolled back and in-person shopping allowed to resume in most locations. The office and hotels sectors continue to see the lowest investment activity levels, given the uncertainty regarding trends within each asset class. Despite muted investment totals, however, both of these sectors recorded quarter-over-quarter increases in investment activity in Q2.”

The report said private Canadian investors were the most active purchaser group in Q2 2021, accounting for 44.6 per cent of investment volumes. Meanwhile other buyer types increased their market share in the quarter, namely Real Estate Investment Trusts (REITs)/Real Estate Operating Companies (REOCs), which accounted for 15.3 per cent of investment volumes; Private Equity (15.3 per cent); and Pension Fund/Advisor groups (11.8 per cent). Foreign Investors also increased their purchasing activity in Q2 2021 and accounted for 7.5 per cent of national volumes, added the report.

 “We should expect foreign investors to be more active as travel restrictions ease,” said Morassutti. “This offers yet another reason to believe that record investment activity will continue and that we can feel optimistic about what lies ahead for Canadian commercial real estate.”

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