Retail and industrial assets top Q1 sales: report

Tuesday, May 5, 2015

According to Avison Young’s Greater Toronto Area Commercial Real Estate Investment Review Q1, office, retail, industrial, multi-residential and ICI land property sales dropped 27 per cent from the Q4 in 2014 to $1.9 billion.

Report author Bill Argeropoulos, principal and practice leader of research (Canada), found few deals prompted the decline, a 47 per cent drop compared to the $3.6 billion in properties sold in 2014’s Q1.

Still, lending is producing reasonable yields, which will continue to benefit owners and buyers.

Retail and industrial assets proved the most significant contributors, with $471 million in trades and $446 million in sales, respectively. Yet, sales declined across all sectors for the fourth consecutive quarter.

In the retail sector, community and neighbourhood shopping centres traded the most, with purchasers being a mix of private, institutional and developer capital. The biggest retail deal recorded was the sale of Walmart-anchored Agincourt mall in Scarborough for $97 million.

The report states that while industrial asset sales went down 13 per cent quarter-over-quarter from $515 million, they boasted highest sales compared to other classes due to a “low and stable availability, a conservative development pipeline and steady demand.”

In fact, this sector offered the highest annual return at 9.2 per cent, according to the IPD index in 2014.

Office sales scored lowest at below 55 per cent quarter-over-quarter and below 71 per cent year-over-year. But this sector also recorded the only $100-million-plus deal with GWL Realty Advisors acquiring Yonge Richmond Centre in Toronto’s financial core for about $154 million.

That sale amounted to 42 per cent of the sector’s quarterly total. According to the report, the next major downtown office building coming to market in 2015 is Ontario Power Generation’s 700 University Avenue.

Looking at the multi-residential sector, which contributed $332 million to 2015’s Q1 and levelled with sales over the past five years, this asset class showed greatest improvement in deal flow compared to last year’s Q1.

Starlight Apartments helped contribute to this number after buying two high-rise and four low-rise buildings in two separate transactions for $106 million. CAP REIT, a vendor of the transaction, also bought $54 million worth of multi-residential assets during this year’s Q1.