Investors pump more into commercial market

More landlords are switching from the residential to commercial as the market hits a record high.

The commercial landscape across Canada continues to heat up with investors purchasing almost $6.8 billion in the first quarter of 2014, up 12.2 per cent from the same period in 2013.

According to the latest statistics from CBRE, over 35 per cent of those that snapped up properties in this market were private investors, demonstrating the appetite amongst landlords to capitalize on the high rents and returns in the market.

“The purchaser profile has varied significantly over the past year. REITs were dominant initially, only to have private buyers come to the forefront and now pension funds are moving into an increasingly dominant position,” said John O’Bryan, Chairman of CBRE Limited. “Pension funds will likely remain a force to be reckoned with as they are raising their allocations to commercial real estate and have a pool of cheap capital to draw upon.”
Demand for office buildings, land and retail properties, especially in Eastern Canada, is fuelling the market, says CBRE.

Investment volume topped $3.6 billion in Toronto and $1.1 billion in Montreal in the first quarter, while in Western Canada, Vancouver, Calgary and Edmonton reported investment volumes that were more consistent with historical averages.

Meanwhile, the commercial mortgage market reached $185 billion according to CMLS Financial’s 2013 survey, with originations accounting for $39 billion in 2013. These numbers represent an increase of eight per cent in outstanding balance and an 18 per cent production jump year over year.

According to the survey, renewal rates fell in 2013, which the lender attributes to increased competition within the sector.

The survey also found that senior unsecured and CMBS are the “primary threats to origination volumes,” with both seeing five-year issuance highs in 2013. The trend is expected to continue.

 

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