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Canada’s Mid-Year Commercial Real Estate Transaction Volumes and Prices Increase
August 18, 2010
The combination of lower bond rates and increased availability of debt bolstered purchaser activity in Canada’s commercial real estate market, driving year-over-year transaction volumes up during the first six months of 2010, according to CB Richard Ellis’ Mid-Year National Investment Report released this week.
Canadian commercial real estate transaction volumes from January through June increased 60.2 per cent, year-over-year, from $4.9 billion halfway through 2009 to $7.8 billion halfway into 2010. Mid-year through 2010, the number of commercial transactions was 2,243, up from 1,565 transactions completed halfway through 2009.
Despite the significant national year-over-year increase in transaction volume, it is important to note, the report says, that mid-year figures from last year were far lower than the historical average, due to the global economic crisis that characterized much of 2008 and 2009. When comparing the current national mid-year figure to mid-year 2005 – a year more reflective of the country’s normal commercial real estate activity levels – volume is up by 22.8 per cent.
"Current mid-year transaction volumes and prices for Canada's commercial real estate market reflect healthy, more normal and sustainable numbers when compared to the same period last year. There is indication in the numbers that the market has rebounded from the recession," says John O'Bryan, vice-chairman, CB Richard Ellis Limited. "As the second half of the year typically shows stronger activity than the first, the commercial real estate market is poised to finish on strong and stable footing."
In the first half of this year, real estate investment trusts (REITs) and local private investors comprised the majority of buyers in the Canadian commercial real estate sector, with foreign investors playing a very small role in the market. Both the private groups and REITs led the charge using available debt aggressively.
Looking across the country, mid-year levels of commercial real estate transaction volume were up in all major cities, indicating that buyer demand is strong in all regions. Toronto, Vancouver and Montreal recorded the highest transaction volumes, respectively.
"Unique to this year is the fact that market activity is consistently up across all major cities – a trend that does not happen often," says O’Bryan.
Toronto recorded the highest mid-year commercial real estate activity volume of all the major cities, with $2.9 billion in transaction volume, and 563 transaction deals. Current debt levels and available capital gave the Toronto commercial real estate market a boost – factors that have been missing from the market since 2008's economic downturn.
The REIT and private investor groups have been particularly active in Toronto's commercial real estate market over the past several months. As one of the last-standing tax shelters, REITs have been extremely active in the market since the recession occurred, and are benefiting from the economy's rebound.
In Vancouver 632 commercial real estate transactions took place from January through June 2010, totalling over $1.6 billion in transaction volume. Market activity was up across the industrial, retail and multi-residential classes – a trend that is unique to this year. In Vancouver, the greatest year-over-year increase was recorded in the small to mid-size buildings, with the $5 million to $20 million assets receiving the most attention.
Commercial real estate activity in Montreal continued to rebound positively in the first half of 2010, with increased market activity across all asset classes. During the first two quarters, 446 real estate transactions took place, totalling over $1.1 billion in transaction volume.
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