Commercial Real Estate Continues Upward Momentum
Latest results indicate that 1.5 acres of land and air in downtown Toronto worth as much as 94 sprawling acres in the suburbs
Toronto, ON, August 7, 2014 – As we sail past the mid-way point in the year, the numbers for Q2 commercial sales activity in the Greater Toronto Area (GTA) are in. The quarter ending June 30th showed slight softening from the previous quarter driven by the number of large deals closing in the quarter ending March 31st but together, the first two quarters of 2014 represent the second best Q1 and Q2 results in the past ten years reaching $6.9 Billion in overall activity.
“The decline in the dollar volume activity in the second quarter was more a function of the lack of larger transactions that were present in Q1 of 2014”, noted George Carras, President of RealNet Canada Inc. While the sales activity show a decrease in overall dollar value, the number of transactions over $1 million surged to 497, totaling $2.6 billion.
The commercial market continues to be stoked by institutional investors, REITs, Pension Funds etc. who have the financial assets and mandate to build their portfolios. This combination has made for a very competitive acquisition landscape, and compressed cap rates. This is largely seen in the western reaches of the GTA, where the industrial market accounted for more than a third of GTA industrial activity - a very active segment with $600 million in total activity.
As we look at the Q2 sales activity from RealNet® to see where the gains were this quarter, the land sectors saw gains compared to a year ago. The land sector with the greatest increase was Residential with a 29% year-over-year increase with two opposing examples driving the marketplace. In Milton, 94 acres of residential land sold for $55 million driven by the continued consumer demand for residential inventory west of Toronto while in Toronto’s downtown core, 1.408 acres sold for $53.5 million. “These two transactions show that vertical development continues to be the focus of urban Toronto growth and that our Toronto air is worth as much as raw land in suburban Toronto,” says Lucie Piazza, National Commercial Manager at Royal LePage Canada.
“When I talk to our commercial agents focused on land sales, their sentiment sometimes sounds similar to those focused on investment sales,” says Piazza. “We have the buyers ready to buy, the challenge is finding good product. This sentiment isn’t anything new and proves we continue to see strength in the market.”
So, what will Q3 bring us in the commercial market? We anticipate continued strength in the GTA commercial market as Canadian investors continue their focus of long-term investment strategies. Canada’s commercial figures continue to tell of a burgeoning market, with promising signs of strength in the period to come.
For more information, please contact:
National Manager - Commercial
Royal LePage Canada