First Quarter 2018 / Commercial Real Estate Investment Review. Greater .... 2018 Avison Young Commercial Real Estate (On
First Quarter 2018 / Commercial Real Estate Investment Review
Greater Toronto Area
GTA Investment Activity by Sector and Dollar Volume 7% 11% Q1 2018
18%
46%
$4.3B 18%
Q1 2018
Q4 2017
Q1 2017
$456M
$601M
$891M
$445M
OFFICE $1.96B RETAIL $781M
INDUSTRIAL $780M
$844M
$746M
ICI LAND $492M
$628M
$363M
MULTI-RESIDENTIAL $288M
$547M
$247M
Partnership. Performance.
Greater Toronto Area (GTA) commercial real estate investment sales increased 28% quarter-over-quarter to $4.3 billion in the first quarter of 2018. Bolstered by strong office property sales (in particular that of Bay Adelaide Centre), this total represented the region's best firstquarter tally since 2014 – and an 80% year-over-year increase. This followed another record year in 2017, when $14.5 billion of GTA commercial property – including office, industrial, retail, multiresidential and ICI land assets (>=$1 million) – changed hands. However, the strong total masks reduced quarter-overquarter volumes in four of five sectors. Investors remain hungry, but cap rates flattened from year-end 2017, indicating possible re-pricing of some asset types. OFFICE The office sector was the most active and alone in cracking $1 billion in firstquarter sales as dollar volume more than quadrupled quarter-over-quarter to almost $2 billion (46% of the GTA total). For perspective, $4.2 billion worth of
office product changed hands in all of 2017. The biggest office trade during the quarter in terms of dollar value was the sale of a 50% non-managing interest in Brookfield Properties’ 2.2-million-squarefoot (msf ) two-tower Bay Adelaide Centre complex in Toronto’s Financial Core to foreign buyer Dadco Investments for $850 million (representing 43% of office sales). This surpassed Dream Office REIT’s sale of a 50% interest in the 2-msf Scotia Plaza in 2017 to KingSett Capital (with partner AIMCo) for $682 million. Meanwhile, Cominar REIT executed on its disposition strategy, selling more than $348 million worth of office buildings to Investors Group and Slate Asset Management (Slate). RETAIL After posting its best quarterly result of the year and being the top-performing asset class in the fourth quarter of 2017, retail investment sales declined 12% quarter-over-quarter to $781 million (18% share) – however, sales were up 75% over last year’s opening-quarter
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Greater Toronto Area
First Quarter 2018 / Commercial Real Estate Investment Review
$100M
$124B
46%
GTA-wide total investment dollar volume since the Great Recession
Office sector's share of total first-quarter 2018 GTA dollar volume
GTA Investment Volume
Six first-quarter investment sales exceeded this threshold
GTA Select Capitalization Rates 8.5%
16
14
7.5%
$ in billions (CAD)
12
10
6.5%
8
5.5% 6
4
4.5%
2
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Q1'18
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Q1'18
3.5%
0
Office
Industrial
Downtown Class AA Office
Single-Tenant Industrial
Retail
Multi-Residential
Tier I Regional Mall
Multi-Tenant Industrial
ICI Land
Partnership. Performance.
Multi-Residential
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Greater Toronto Area
First Quarter 2018 / Commercial Real Estate Investment Review
$850M Dadco Investments purchased a 50% non-managing interest in the 2.2-msf Bay Adelaide Centre complex from Brookfield Properties Pictured: Bay Adelaide Centre (L and R) and Scotia Plaza (centre)
tally. The top five asset sales by dollar volume comprised a mix of urban and suburban single-asset and portfolio sales, with a diverse vendor-purchaser profile. Cominar REIT was also busy on the retail front, selling two properties for more than $278 million, including the biggest retail deal of the quarter – Dixie Outlet Mall, sold to Slate for almost $181 million. On the portfolio front, the Toronto portion of Main and Main’s urban income and development properties located in Toronto and Ottawa sold to Trinity Development Group for $45.5 million. INDUSTRIAL Buoyed by solid leasing fundamentals and a nationwide record-low firstquarter 2018 vacancy rate of just 1.7%, investors are looking to boost their industrial allocations. Coming off a record-setting $3.5 billion in sales last year, investment for industrial product fell a modest 8% quarter-over-quarter to $780 million (18% share) in the first quarter of 2018, but was up marginally year-over-year. The top industrial transaction during the quarter came
in March as KingSett Capital reacquired American Business Park (33 acres, 553,000 sf, 13 properties) in Mississauga from Cominar REIT for almost $91 million after having sold the portfolio for $63 million in May 2014. This helped the Region of Peel to regain its position as the most active in the GTA, with $368 million in sales (47% of overall volume) in the opening quarter of the year. ICI LAND ICI land sales slipped 22% to $492 million (11% share) in first-quarter 2018 from $628 million in fourthquarter 2017. However, sales were up 36% year-over-year. The quarter’s top deal was Sun Life’s acquisition of a 101-acre future commercial development site on the edge of Milton, with the rest of the top five transactions comprising a mix of agricultural, commercial- and industrial-zoned future development sites, sold to a mix of institutional, user and private buyers. Strong sales in Markham, Whitchurch-Stouffville and Vaughan ranked York Region as
the most active of the GTA’s regions by dollar volume, with $174 million in sales (35% of overall volume). York also accounted for 46% of total acreage traded during the quarter, although Caledon (in Peel) was the municipality with the greatest acreage sold. MULTI-RESIDENTIAL In a market starved for product, multiresidential was the only sector not to approach or set a new high for sales volume in 2017. The shortage was reflected in first-quarter 2018 sales, which plunged 47% quarter-overquarter to $288 million (7% share) – a four-quarter low. Though Realstar, Homestead and Akelius remained active buyers (combining for almost $101 million in sales during the quarter), retirement provider Sienna Senior Living was the top purchaser. Sienna acquired a 10-building seniors’ residence portfolio from BayBridge Senior Housing – the GTA portion (3 properties / 300 units) amounting to just over $67 million. Strong demand and scarcity of product have kept cap rates at historic lows.
Partnership. Performance.
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Greater Toronto Area
First Quarter 2018 / Commercial Real Estate Investment Review
Significant Transactions by Sale Price Sector
Office
Total Price
Price psf
Purchaser
Vendor
Bay Adelaide Centre (50% interest)
$850,000,000
$767
Dadco Investments
Brookfield Properties
483 Bay Street (50% interest)
$226,250,000
$480
German investment fund
Northam Realty Advisors
55 University Avenue
$195,100,000
$742
Investors Group
Cominar REIT
Dundas Edward Centre
$167,000,000
$401
Crown Realty Partners / Crestpoint Real Estate Investments
NorthWest Healthcare Properties REIT
Cominar – Slate Office Portfolio
$153,000,000
$195
Slate Asset Management
Cominar REIT
Industrial
Total Price
Price psf
Purchaser
Vendor
American Business Park & 6325 Northam Drive
$90,600,000
$164
KingSett Capital
Cominar REIT
Granite – Sun Commercial Portfolio
$63,000,000
$109
Sun Commercial Real Estate
Granite REIT
1880 Matheson Boulevard East
$62,650,000
$161
Cosa-Nova Fashions Ltd.
H&R REIT / Crestpoint Real Estate Investments
1000 Steeles Avenue East
$24,875,000
$125
Hargobind Tower Holdings Ltd.
Bacardi Canada
1001 Thornton Road South
$23,425,000
$63
Lotus Capital
OPTrust Realty
Retail
Total Price
Price psf
Purchaser
Vendor
Dixie Outlet Mall
$180,908,000
$432
Slate Asset Management
Cominar REIT
Woodside Square Shopping Centre
$97,280,000
$331
2624237 Ontario Corp.
Cominar REIT
Main and Main – Trinity Development Portfolio
$45,500,000
$682
Trinity Development Group
Main and Main
Thickson Centre
$31,100,000
$269
RioCan REIT
Sun Life / Fieldgate Commercial
Sun Life – Savills Portfolio
$16,750,000
$484
Savills plc
Sun Life
Multi-Residential
Total Price
BayBridge – Sienna Portfolio
$67,225,913
$224,086
Sienna Senior Living Inc.
BayBridge Senior Housing
35 Valley Woods Road
$51,900,000
$384,444
Realstar Group
Valleywoods Rentals Inc. / Brookbanks Towns LP
1285 Lakeshore Road East
$27,750,000
$259,346
Homestead Land Holdings Ltd.
Wise Group
55 & 56 Eccleston Drive
$21,120,000
$176,000
Akelius Fastigheter AB
Eccleswift Apartments Inc.
1570 Lawrence Avenue West
$14,877,000
$177,107
1570 Lawrence Avenue West Inc.
Lawrcul Apartments Inc.
ICI Land
Total Price
6712 Fifth Line
$45,250,000
$452,500
Sun Life
2060859 Ontario Ltd.
8217 Winston Churchill Boulevard
$24,283,500
$597,571
Maple Lodge Farms Ltd.
Private individual(s)
10534 Hurontario Street
$16,600,000
$552,486
2598918 Ontario Inc.
NYX Capital Corp.
1675 St. Johns Sideroad East
$15,500,000
$352,273
Weslie Creek Development Inc.
721312 Ontario Inc.
70 Superior Boulevard
$15,400,000
$1,539,077
Buffalo Group
Rogers Media
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Price per unit Purchaser
Price per acre Purchaser
Vendor
Vendor
Bill Argeropoulos Principal & Practice Leader, Research (Canada) 416.673.4029
[email protected]
18 York Street Suite 400, Mailbox #4 Toronto, ON M5J 2T8 416.955.0000
© 2018 Avison Young Commercial Real Estate (Ontario) Inc., Brokerage Some of the data in this report has been gathered from third party sources and has not been independently verified by Avison Young. Avison Young makes no warranties or representations as to the completeness or accuracy thereof. Investment sales data sourced from Avison Young, RealNet Canada Inc. and Altus InSite.