GTA Sales Activity Rebounds From Five Straight Quarters of Decline

Q2 2019 registered a total of 563 investment property sales transactions over $1 million, representing a total investment value of $5.8 billion

TORONTO – Altus Group, a leading provider of software, data solutions and independent advisory services to the commercial real estate industry, today announced the second quarter of 2019 results for commercial real estate investment in the Greater Toronto Area (GTA). Total investments for the first half of 2019 reached $10 billion, down 13% compared to the $11.4 billion registered in the first half of 2018. After five straight quarterly declines, total investments were up 43% compared to first quarter 2019, with strong momentum heading into the second half of 2019.

GTA Property Transactions – All Sectors by Quarter

Second quarter transactions managed to record the fourth highest quarterly investment totals ever after five consecutive quarterly declines. Confidence in the GTA market remains high as investors continue to view the GTA as a stable and attractive market, which provides a strong potential for higher returns. Re-development sites remain a driving force as it accounted for nearly 38% of all investments.

The office and residential land sector lead all asset classes this quarter, each representing about 20% of the $5.8 billion total. The largest transaction seen this quarter was the $640 million sale of Atrium on Bay, a one million square foot office property located in the heart of downtown Toronto. Pent up demand and low office vacancy rates, 3.1% in Downtown Toronto and 6.8% in the GTA for the second quarter, have resulted in growing demand for office space in submarkets just outside of the core.

Q2 2019 GTA Property Transactions – Total $ Volume by Sector

The land sectors collectively accounted for $2.2 billion, which represents a 20% increase compared to the previous quarter, but a 25% decrease compared to the same period last year. The ICI land sector was up 69% compared to the previous quarter and registering $701 million in transactions, but down 47% compared to the same quarter last year. A notable ICI land acquisition this quarter was a 129 acre site located in Ajax which was purchased by Crestpoint Real Estate Investments Ltd. for a total consideration of $72,975,500. As reported by Altus Group’s Q2 2019 Investment Trends Survey, respondents had a positive outlook with regards to industrial land in the GTA market.

Future high density re-development sites comprised nearly 60% of the $1.1 billion recorded in the residential land sector this quarter, with the largest sale being 39 Newcastle Street located in Etobicoke. This 2 acre parcel, which was acquired by Vandyk Group of Companies for $90 million, is ideally situated within a short walk to the Mimico GO station. As housing demand persists due to the rapid population growth in the GTA, residential re-development projects will continue to be in the forefront. Investors continue to look at options to re-position and maximize their returns through the intensification of excess lands existing on current assets. This example is evident in recent development applications submitted on two prominent shopping malls in the City of Toronto, Sherway Gardens and Dufferin Mall. The application for Sherway Gardens in Etobicoke would see an infill development of the existing parking lot with eight new mixed-use buildings containing residential, retail, office and hotel uses, adding approximately 3.2 million square feet of space. The application for Dufferin Mall seeks to re-develop the northern portion of the site for purpose built rental towers containing 1,135 residential units and retail space which would provide an additional 1.1 million square feet of space to the asset.

The apartment sector saw a 266% jump from the first quarter and also a 52% increase compared to the same period last year. The largest transaction recorded this quarter was the $220 million sale of Rossland Park in Oshawa. The 911 unit complex which sits on 40 acres was acquired by Q Residential who may look to add density to the site in the near future.

The retail sector was the most traded asset this quarter and saw a 25% increase in investments compared to the same quarter last year. Investors continue to re-position and evolve their retail assets amid competition with e-retailers by offering more customer on site amenities and experiences. The largest transaction this quarter was the 50% interest sale of Stock Yards Village, a 500,000 square foot multi-building shopping complex which sits on nearly 20 acres. This retail complex, which was formerly anchored by Target, was acquired by RioCan REIT who now owns a 100% interest stake in the property.

According to the Altus Group Investment Trends Survey, investors remain particularly confident in the industrial sector as vacancy in the GTA remains tight, with second quarter vacancies sitting at 0.8%. The industrial sector recorded $944 million of investments this quarter, which is up 22% compared to the previous quarter and up 20% in comparison with the same period last year. With the emergence of e-commerce resulting in the expectation of same-day deliveries, warehouse space within proximity of the GTA has lead to a growing demand for larger format warehouse facilities containing higher than average ceiling heights.

Two notable transactions this quarter include:

· 2562 Stanfield Road, a two building 361,800 square foot property with ceiling heights up to 36 feet. The property, which is located in the City of Mississauga, was acquired by Pure Industrial Real Estate Trust for a total consideration of $38 million.

· 1602 Tricont Avenue, a 258,000 square foot property with ceiling heights up to 35 feet. The property, which is located in the Town of Whitby, was acquired by Dream Industrial REIT for a total consideration of $35.8 million.

Purchaser activity this quarter was predominantly comprised of private investors, while institutional buyers and public investors acquired the larger trophy assets. Once again, foreign investors were not as prominent this quarter. It is anticipated that the record activity that occurred in Q2 2019 will continue into the second half of 2019. Challenges remain in the market as willing buyers are being met with a lack of product.