Big transactions boost commercial real estate

Natalie Wong
Canadian Real Estate Wealth

Canadian commercial real estate investment reached new heights in the second quarter, boosted by a pair of big acquisitions and by the lure of attractive, income-producing property.

 

Transactions reached C$16.5 billion ($12.5 billion). That’s 38 percent more than the previous record, set in the first quarter of last year, and more than twice the five-year quarterly average, CBRE Group Inc. said in a report Monday. Deal volume for the first six months was C$26.8 billion, a half-year record.

Two large purchases that closed in the second quarter dominated the action — Choice Properties’ acquisition of Canadian Real Estate Investment Trust, and Blackstone Property Partners’ purchase of Pure Industrial Real Estate Investment Trust. Together the deals accounted for 45 percent of the total.

Single-property purchases included Hines and Oaktree Capital Management’s C$107 million purchase of the First Tower office building in Calgary and Tigra Vista Inc.’s C$256 million acquisition of Toronto’s Parkway Place. The average deal size was C$9.4 million, up 67 percent from a year earlier.

“What investors really want today, as we get longer into the cycle, is great real estate that will stand the test of time,” Peter Senst, president of Canadian capital markets at CBRE, said in an interview. “On top of that, you’ve got term and covenant, so if the market does change, you’ve got something that can pay out dividends for an extended period of time.”

Toronto accounted for more than a third of all transactions in the quarter, at C$5.7 billion. That’s the city’s highest quarterly investment volume ever and 20 percent more than the previous record, set in 2013. Vancouver had more than C$3.2 billion in transactions, nearly double its five-year average. Toronto and Vancouver have had the two tightest downtown office-vacancy rates for four quarters in a row and the two lowest industrial-availability rates for six consecutive quarters in North America, Senst said in a statement.

Industrial sales outperformed all other assets, largely due to Blackstone’s acquisition of more than 25 million square feet of industrial properties across Canada and the U.S. Deals in this segment represented 37 percent of investment volume, at C$6 billion, another record. Apartment-building deals also performed well, with C$1.9 billion in transactions, 40 percent more than in last year’s second quarter.

“Investors want multifamily exposure because it is a good long-term investment strategy,” Senst said in the statement. “No matter the economic or political state, people are always going to need places to live, which translates to a consistent flow of income for investors.” 

Copyright Bloomberg News

Copyright © 2018 Key Media Pty Ltd

TREB to regulate sales data

Canadian Real Estate Wealth

The Toronto Real Estate Board is threatening real estate companies it says are “jumping the gun” by releasing Greater Toronto Area home sales data from unknown sources before the board has permitted it.

The board sent cease-and-desist letters, warning it will take away data access and TREB memberships or bring legal action against members it believes are violating its user agreement by posting sale numbers online “in an open and unrestricted fashion.”

The board’s lawyer Brian Facey said in an email to The Canadian Press recently that the letters are an attempt to find out the source of the members’ numbers and “ensure no one has breached their contracts with TREB.”

The data has been a contentious issue for TREB ever since the Competition Bureau began pushing to allow realtors to post it through password protected webpages called virtual office websites seven years ago, saying it impedes competition and digital innovation.

Citing privacy and copyright concerns, TREB fought its release for seven years at three different judicial bodies, but lost every time.

Its latest blow came in August when the Supreme Court of Canada refused to hear the case. TREB then said it would permit its members to publish the data after the board takes 60 days to prepare for its release and make it available to members — an allowance given to the board by the Competition Tribunal years ago when the case was studied at the quasi-judicial body.

The Competition Bureau believes the 60 days passed in between TREB’s appeals to various courts, but TREB claims the clock has yet to run out.

“TREB has not gone ‘live’ yet, but is trying to do so by mid-September to comply with the Order early to allow all members to be on a level playing field as soon as possible,” said Facey.

“If a member has been posting sold data at the current time, TREB does not know the source of this information.”

Read more: Single-family detached market crushed under weight of bureaucracy

Toronto realtor David Fleming says no one really knows why the source of the information is so important for TREB, but it could be of value to the board because it is trying to find out if these data sources are out of their jurisdiction.

“If TREB is sending threatening letters to its membership, it seems to reason that they would probably like to send the same threatening letter to people who are providing the data,” he said, noting that it is also a possibility that TREB is looking to determine sources so it can create a meaningful partnership with them.

Members, he said, are already lamenting that the fight could continue.

“I feel we have not seen the last of this,” he said.

In late August, Facey said the board was still considering whether to fight for adjustments to an order allowing the data’s online publication.

On Tuesday, TREB refused to say how many letters it has sent to members it believes are violating orders, saying “TREB does not find it productive to publicly discuss the details of internal matters, and/or matters that can/may end up before the courts.”

A copy of the letter obtained by The Canadian Press shows TREB is threatening recipients that violators could “lose access to the data, have their membership in TREB revoked or face further legal action in the courts,” if they don’t comply with TREB’s terms.

Zoocasa chief executive officer Lauren Haw confirmed her real estate website received a letter. She said her company first posted the data without password protections because of a “technical issue,” but immediately corrected the mistake and installed password protections.

TREB has yet to respond to a request from her seeking clarity around how data can be posted, she added.

“I am just disappointed we are now in a state of grey,” she said. “I am now, as a business operator, afraid of my own membership body based on threatening legal letters…, which is the definition of, I think, anti-competitiveness.”

Joseph Zeng of HouseSigma Inc. also received a letter after his real estate company released the information. He hired a lawyer to communicate with TREB to clarify how the company can release data without violating TREB rules.

“We are very confused,” he said. “When we received the letter, me and my team were really puzzled about what exactly TREB is trying to do.” 

The Canadian Press

Copyright © 2018 Key Media Pty Ltd

Microsoft to open office in Toronto

Steve Randall
Canadian Real Estate Wealth

Toronto is home to some of the world’s most innovative technology companies and now arguably the most famous name in tech has announced a major real estate investment in the city.

Microsoft will base its Canadian operations in a new state-of-the-art headquarters in 132,000 square feet over four floors of 81 Bay Street, CIBC Square, with a move-in date of September 2020.

The inclusion of Microsoft to downtown Toronto will only serve to reinforce the city’s reputation as a technology hotspot, good news for commercial real estate.

The GTA’s residential real estate market is also likely to feel some impact as staff from the existing Mississauga headquarters seek a shorter commute and more jobs are created in the downtown centre.

Welcomed with open arms
“This announcement by Microsoft offers yet more evidence of the strength of Toronto as a global technology centre, and as a desirable home for major corporations. By choosing South Core as its new home, Microsoft is embracing one of the hottest new areas of downtown and Toronto welcomes them with open arms,” said Toronto Mayor John Tory.

Along with its Canadian headquarters relocation, Microsoft is also planning the relocation and expansion of its research and development lab in Montreal, relocation of its Vancouver sales office, and renovation and redesign of its Ottawa, Calgary and Montreal sales offices.

Copyright © 2018 Key Media Pty Ltd

FVREB showed a 38% drop in sales

Steve Randall
Canadian Real Estate Wealth

Home sales in the Fraser Valley fell 10.5% in the month from July to August to a new 2018 low.

The 1,155 sales represented a 38.5% drop from August 2017 while prices continued to rise (year-over-year) across all main property types according to figures from the Fraser Valley Real Estate Board.

“With demand slowing down and prices staying put, both buyers and sellers can expect to see an easing of competition with less multiple offer situations,” said John Barbisan, President of the Board. “Right now, effective pricing is key and will be the determining factor for a successful transaction.”

Attached homes continue to dominate the market and accounted for more than half of all sales in August with 294 townhouses and 318 apartments sold.

Prices keep climbing The Board’s HPI benchmark prices for the main property types were all higher in August compared to a year earlier.

• Single Family Detached: decreased 0.9% month-over-month and increased 2.9% year-over-year to $1,008,700.
• Townhomes: decreased 1.7% month-over-month and increased 11.5% year-over-year to $548,300.
• Apartments: decreased 1.6% month-over-month and increased 26.9% year-over-year to $443,200.

New listings were down 11.8% from July to 2,921 (2.2% below August 2017) while active inventory was down 0.8% from July to 7,339, a 28.5% increase from August 2017.

Copyright © 2018 Key Media Pty Ltd

Vancouver rent prices up slightly

other

Sept. 10, 2018

While the media often talks about the skyrocketing rent prices in Vancouver and Toronto, in August, most major Canadian cities saw a drop or a minor increase month-over-month. The largest jumps were actually in suburban communities and smaller cities. Aside from Halifax – where rent has crept up for one bedrooms – the East Coast is holding steady.

National Rankings

Looking at housing in terms of overall rental prices rather than rent increases and decreases, it’s clear that Toronto and Vancouver still have the highest rent levels. Interestingly, while Toronto leads the pack in 1 bedroom prices, Vancouver has the most expensive 2 bedrooms. The next 3 expensive cities are all part of the Greater Toronto Area (GTA).

By Fort McMurray, the 6th city in the rankings, there is a steady drop in rent prices. In fact, there is a $500-$1,000 difference between rental prices in Fort McMurray, versus Toronto and Vancouver.

Two more Ontario suburbs and Montreal round out the top 10. While cities 11-15 are less dominated by the GTA, the majority of the cities are still in Ontario. The rest of the rankings show a broader spread throughout the country. The lowest rankings include a number of East Coast cities, as well as several locations in Alberta.

Rent Insights

While prices in Vancouver remain high, we expect to see prices drop leading into the fall and winter months.

Toronto is a mixed bag, with 1 bedroom prices decreasing and 2 bedroom prices rising.

Ultimately, though, the real insight comes in looking at Toronto’s prices compared to the GTA. Many people believe that living outside Toronto probably means much cheaper rents; but, as the infographic shows, this isn’t always the case. In fact, prices are quite high in several parts of the GTA – and they are still creeping upward. Renters searching for lower prices may have more luck looking in less expensive Toronto neighbourhoods than just outside the city.

The challenge in Toronto proper is the low vacancy rate. At this point, it can be challenging to find options in the city. This is forcing people to relocate outside the core, a shift that is contributing to the soaring prices in the GTA. As more development occurs in the city, prices outside the core may soften over time.

If you have the ability to live anywhere in the country and want to prioritize affordable housing prices, your best bet is to avoid Ontario. Instead, look at the East Coast or the Northern Territories. In terms of major cities, focus on Halifax and cities in the Prairies.

Affordable Markets

The most affordable markets on the list are on the East Coast. While prices there are lower, there are also challenges in the area, including high unemployment. This keeps availabilities high, but can make it difficult to want to move to the area unless you already have a job secured.

Windsor is another affordable market – the most affordable in Ontario. On top of that, prices are still dropping in the area for 1 bedrooms. At the same time, Windsor is considered high in economic attractiveness. This could make now the perfect time to enter the Windsor housing market. For young people, Windsor can be an ideal spot to go to school, start a career, or have a family.

Another affordable market to consider is Quebec City. If you are looking to live in Quebec and want to be in an urban area, Quebec City is a much more affordable option than Montreal.

Hot Markets

As always, Vancouver and Toronto are the hottest markets. However, rental prices in certain parts of the GTA are not too far behind, like Richmond Hill. Not only are Richmond Hill’s prices about $100 behind Toronto’s, but they are rising fast. Etobicoke is seeing even faster growth, with 1 bedrooms leaping up a whopping 6.9%. If you are looking at affordable housing in the city, both Richmond Hill and Etobicoke may be worth avoiding, but you might find an affordable gem of a rental in the outskirts of these towns! Mississauga and Oakville also have high rents, especially in luxury buildings.

While not as high on the National Rankings, Ottawa and Kitchener are both expensive compared to surrounding areas. This makes them the hottest markets in their areas. With Kitchener, this may be due to the fact that it is quickly becoming a Toronto bedroom community. Ottawa’s prices are often high for the area as many people flood to the city for government work. Luckily, for those seeking affordable housing, there are a variety of less expensive options in close-by cities.

Another hottish market is Montreal. While Montreal is not as pricey as some others, prices are still substantially higher than in other cities in the area. If you are trying to avoid high housing costs, look to the suburbs, which remain more affordable.

Copyright © 2018 Rentals.ca, Inc.

Q2 2018 38 per cent above previous high

Steve Randall
REP

Investment in Canadian commercial real estate has reached a new record high, beating the previous record set in Q1 2017.

Q2 2018 saw $16.5 billion of CRE transactions, 38% above the previous high of $11.97 billion and 105% above the 5-year quarterly average. The half-year total is also a new record high at $26.8 billion.

CBRE reports that two major M&A closings in the quarter – Choice Properties’ acquisition of CREIT and Blackstone’s acquisition of PIRET – accounted for 45% of the total activity in the quarter.

Activity was further driven by large single asset deals including Hines and Oaktree Capital Management’s $107 million purchase of Calgary’s First Tower office building and Tigra Vista Inc.’s $256 million acquisition of Toronto’s Parkway Place.

“With two large M&A transactions closing within the second quarter, it’s not surprising that investment volume was the strongest ever in Canadian history. In fact, the average deal size in Q2 was up 67% year-over-year to $9.4 million, which is reflective of the size and significance of the investors in real estate today,” Peter Senst, President, Canadian Capital Markets at CBRE Canada.

A tale of two cities

Toronto and Vancouver are still the clear leaders for commercial real estate investment.

CBRE’s figures show that Toronto accounted for more than a third of total Q2 2018 transactions with more than $5.7 billion, a new quarterly record for the market and beating the previous high ($4.7 billion in Q2 2013) by 20%.

Vancouver saw more than $3.9 billion of CRE investment in the quarter.

Compared to the 5-year quarterly averages Toronto was 82% above and Vancouver was 91% above.

Calgary, Montreal and Edmonton rounded out the top five with $2.5 billion, $1.7 billion and $1.5 billion, respectively.

“Interest in Canadian commercial real estate today has a lot to do with Canada’s global market leading fundamentals. Toronto and Vancouver together have maintained the two tightest downtown office vacancies for four consecutive quarters and the two lowest industrial availability rates for six consecutive quarters in North America,” added Senst.

Industrial, multifamily lead

Although industrial investment outpaced all other sectors in Q2 2018 (37% of the quarter’s total CRE investment of $6 billion), CBRE says that without the M&A activity multifamily and industrial tied at $1.9 billion.

Simply put, investors want multi-family exposure because it is a good long-term investment strategy. No matter the economic or political state, people are always going to need places to live, which translates to a consistent flow of income for investors,” said Senst.

Copyright © 2018 Key Media Pty Ltd

Home ownership across Canada decline

Ephraim Vecina
REP

The proportion of home owners across Canada shrunk for the first time in nearly 5 decades as 11 out of 13 provinces saw their ownership rates declining from 2011 to 2016, according to the latest analysis of Statistics Canada numbers by Point2 Homes.

The 2016 StatsCan census found that the ownership rate nationwide fell to 67.8%, declining by 1.2% from 5 years prior.

The only two Canadian provinces that saw their proportion of home owners go up were Quebec (61.3%) and the Northwest Territories (53.7%). Meanwhile, Nunavut – long laboring under prohibitive cost and supply constraints – posted the lowest rate nationwide (20%).

Of the 100 metropolitan markets analysed by Point2 Homes, Caledon in Ontario showed the highest ownership rate (90.8%), while Montreal had the lowest (37%).

Amid these results, renting has become an increasingly important force in the national housing market. Around 32.2% of Canadians were renting their homes in 2016, up from 31% in 2011 and accounting for 4.6 million people nationwide.

However, while Montreal, Victoria, and Vancouver have long enjoyed significant renter presence, none of the 100 cities studied have seen a majority switch from ownership to renting between 2011 and 2016, according to StatsCan.

And while the sharpest declines in ownership were observed in Waterloo (7.2% drop), Nanaimo (5.9%) and Abbotsford (5.6%), home owners still comprised a clear majority in these markets.

Copyright © 2018 Key Media Pty Ltd

Detached homes could see a boost is sales

Neil Sharma
REP

Vancouver’s single-family detached market could see a boost in sales this autumn.

According to numbers from the Real Estate Board of Greater Vancouver, detached home sales increased 37.1% this past August over the same month last year.

While it will be considerably tamer than it was a couple of years ago when buyers had essentially no bargaining power, they’re in the driver’s seat of a market segment in the midst of moderation.

“For single-family homes, the rate of increase in price over the last couple of years has been nothing short of breathtaking, and we think the market scaling back is healthy,” said Brad Henderson, president and COE of Sotheby’s International Realty Canada. “It will relieve some pressure on some of the other areas that have been quite attractive as well.”

Vancouver’s suburbs have benefitted immensely from the unaffordability crisis that’s gripped the city core because buyers have had no choice but to move there or further out. However, downward pressure on pricing in the single-family detached market might impel a noteworthy cohort to move back into the city.

“In Vancouver, as the centre becomes more expensive, its suburbs become, by default, where people find more attractive and reasonably priced homes, but that means people have to travel furterh away from work and further from family,” said Henderson. “So as prices moderate in the centre, it allows people to come back, which will also soften prices in the markets surrounding the centre of the city.”

Buyers should not become too excited, though. Prices are not expected to drop dramatically, if at all, and the provincial government may once again intervene in the market with new policies.

“At best, prices will go up slower than they have been, or perhaps they come down a little,” said Henderson. “I think the wild card factor that’s really causing some concern in the marketplace is whether there will be additional intervention from the government. If the government declares victory and says they’ve done an effective job shaping demand, where it’s now become more balanced, the market can continue on with confidence. But if there’s a threat of intervention, then we’ll continue seeing softening of prices.”

Mortgage brokers are noticing more activity in the single-family detached market, which slogged along for most of the year. That signifies bargaining leverage for buyers.

“We had a few years where any offer with subjects was a non-starter, so on the buyer side, for clients to be able to take their time and have some negotiating power with sellers is huge,” said Ryan Zupan, a mortgage broker with Dominion Lending Centres City Wide Mortgage Services in Vancouver. “Over the summer, I’ve seen a big pick up of detached purchases from clients waiting on the sidelines. Now they’re getting deals.”

Copyright © 2018 Key Media Pty Ltd

New Westminster waterfront has most ownership

Kay Rivera
REP

The riverfront city of New Westminster, British Columbia, was recorded to have the highest growth in homeownership rates in the country, according to a new research by real estate online portal Point2Homes.

Basing on the figures from the last four Census polls – 2001, 2006, 2011 and 2016, it was found that New Westminster’s homeownership rate has climbed most in those 15 years. In fact, the city’s numbers grew from 48% in 2001 to 56% in 2016, registering an increase of 17.6%.

Considering the population growth during the period, New Westminster’s higher rate was deemed the sharpest growth of all 100 cities studied.

Reporting on the performance of other cities in terms of improvement in homeownership, Vancouver Courier revealed that Vancouver was ranked 11th out of 100 cities, climbing from 44 % in 2001 to 47% in the latest Census. Regardless, the city of Vancouver was still seen to be holding the third lowest spot in homeownership across the country, following Montréal and Victoria.

“Elsewhere in B.C., Burnaby saw high homeownership growth in the same period, rising from 56% to 62% of the adult population owning their home. That figure was the country’s fourth-steepest jump in homeowner rates.”

In addition, Vernon, Victoria, and Richmond were the only three other B.C. cities to be included in the top 20 for homeownership growth.

Notably, it was generated from the study that in between 2011 and 2016, 88 of the homeownership rates in the country’s largest cities decreased. Overall, the country saw its figures declining to 67.8%, marking the first time between Census polls that the country’s homeowner rate had declined.

Copyright © 2018 Key Media Pty Ltd

Recreational amenities, great views highlights The Highlands at Lakestone

Michael Bernard
The Vancouver Sun

Project: The Highlands at Lakestone

Project location: 9676 Benchland Drive, Lake Country

Project size: 109 fully serviced lots on 550 acres providing for single-family homes ranging from 2,500 to 6,000 square feet

Prices: Lot prices starting at $245,000; prices for 28 townhomes start at $669,000, and single-family homes start at from $899,000

Developer: Macdonald Development Corp.

Sales phone: 250-766-1213 or 877-766-1213 (toll-free)

Presentation centre: 9676 Benchland Dr., Lake Country

Centre’s hours: noon to 4 p.m., Saturday to Thursday

Website: www.lakestoneliving.com

After effectively selling out its first two phases, the developers of Lakestone, a resort-like residential development with panoramic views of Okanagan Lake, are now launching their next phase, The Highlands.

A total of 109 single-family lots ranging from 2,500 to about 6,000 square feet are planned for the Highlands phase. The first phase, Waterside, rapidly sold out a few years ago, while about 95 per cent of the second phase, The Benchlands, has been sold to date, said Don Erdely, spokesman for the developer, Macdonald Development Corp. or Vancouver.

Lakestone has a planned build-out of 1,365 homes perched on the hills on the east side of Okanagan Lake between Kelowna and Vernon. To the south are the city lights of Kelowna and the William R. Bennett Bridge, spanning the lake.

One major feature that sets Lakestone apart from other similar developments is the order in which the developer has built the two amenity buildings, Erdely said.

“Many developers have big promises, and they sell 300 homes before they start on an amenity building,” he said. “Our two are built or under construction, and we are only just now going on to the Highlands phase of the sale of lots,” he said.

The Lake Club, built during Lakestone’s first phase, is emblematic of the new direction that some developments are taking, which is steering away from traditional golf-based communities that have dominated in the Okanagan in the last few decades. For example, a developer of a major golf resort north of Lakestone found in a recent survey that the prime recreational pursuit among those buyers is not golf, but hiking.

The Lake Club is a multi-level stone and timber structure built into the rocky hillside overlooking the lake. It has a fully equipped fitness centre, a large swimming pool and two hot tubs on an expansive deck, stainless steel locker storage at the lakeside for kayaks and paddle boards, and an outdoor kitchen with barbecues.

Also reflecting the interests of Lakestone owners and buyers, whom Erdely prefers to call “empty nesters” rather than “retirees”, is what the developer has done with the beach below the Lake Club. It has been left largely in its natural state with stones and gravel rather than sand. The emphasis is more on paddle boarding and kayaking and less on power boats, which can use a community dock about 150 metres away. The beach is also near a kokanee-spawning site, which the developer has contributed to by building pilings.

A second amenity, the Centre Club located inThe Benchlands, is adding a second outdoor pool and hot tub, a yoga studio, a coffee shop and mail services, as well as tennis courts and courts for pickleball, a fast-growing sport that is a hybrid of tennis, badminton and table tennis and proving particularly popular among seniors.

Erdely says Macdonald is also paying a lot of attention to the ongoing work on the 40 kilometres of hiking trails that wind through and connect all the Lakestone neighbourhoods.

“We have 250 acres of land (of the total) that is going to be left natural and two massive parks under construction,” he said. “We also have a trail plan that shows different loops that you can take depending on where you live in Lakestone.”

Another major draw for Lakestone is that Kelowna International Airport is just 12 minutes away. It has several flights daily to Vancouver and Calgary and direct flights to Toronto and several U.S. cities. Driving time to Kelowna is about 20 minutes and about four and a quarter hours to Vancouver.

The earlier phases saw a healthy percentage of buyers from Alberta, but the emphasis has shifted to local buyers and those from Metro Vancouver, Erdely said.

Macdonald has enlisted the services of five of the Okanagan’s top builders: Candel Custom Homes Ltd., Destination Custom Homes Okanagan Ltd., Noba Vision Construction Ltd., Richmond Custom Homes Ltd. and Gibson Contracting. Gibson Contracting received multiple 2018 Tommie Awards from the Canadian Home Builders Association of the Central Okanagan.

Metro Vancouverites will get a chance to have a closer look at Lakestone when Macdonald sets up a display at the Vancouver Fall Home Show at the Trade and Convention Centre Oct. 18 to 21.

© 2018 Postmedia Network Inc.