Investment activity in commercial real estate in British Columbia has continued its bull run in the first half of 2018.
A new report from Avison Young says there were 102 deals with a total value of $3.04 billion, the second highest on record for both deal count and total dollar volume.
However, a more cautious approach is being shown by investors in residential land amid rising political uncertainty, rising construction costs, and affordability issues.
Investors are questioning the high land values, especially in Vancouver. But for other CRE sectors, demand remains strong.
“Rising land values had the effect of increasing the cost of not only land, but any and all commercial real estate assets that included a land play,” comments Avison Young Principal Bal Atwal. “This has been one of the contributing factors of cap rate compression for a large majority of investment sale transactions over the last few years. As the land market now starts to take a slight breath, it remains to be seen over the next few months if the market will maintain its recent upward trajectory, stabilize at current levels or begin to falter.”
How the sectors are performing
Office investment sales activity in BC generated more than $1 billion in the first half of 2018 with 23 transactions valued at $1.04 billion.
The sale of BC retail assets remained exceptionally strong in the first half of 2018 with 43 transactions valued at $1.55 billion following the record-smashing retail investment sales performance of 2017.
Industrial investment activity still remained strong in the first six months of 2018 with 36 industrial transactions valued at $449 million – a slight decline from the first half of 2017 when 37 deals valued at $456 million were completed.
Sales activity of BC multi-family assets remained at historic heights with 42 transactions valued at $674 million in the first half of 2018 with the number of deals falling just short of the first half of 2017 (46) but with greater dollar volume ($652 million) than what was recorded a year ago.