Investment boom for BC commercial real estate

Report highlights diverged market opinion sparked records

Investment boom for BC commercial real estate
Steve Randall

A difference of opinion between property owners and investors saw record highs for commercial real estate in British Columbia last year.

Many owners believed they were selling at a peak while investors were sure there was more gas in the tank and were happy to pay higher prices.

A report from Avison Young shows that 2017 achieved 230 dispositions of combined office, retail and industrial properties, with a total value of $7.5 billion, a new record high, almost doubling the $4.1 billion from 147 deals seen in 2016.

Large pools of investor capital from local and foreign sources came from both institutional and private investors. Private buyers accounted for 87% of the transactions but just 46% of the dollar value, the lowest share of dollar volume for private buyers since 2012.

Since 2014, private investors have increased their significance in the BC commercial real estate market with local investors in particular gaining significant capital from the sale of previous properties at high profit.

Land values have been rising due to low supply, the report says, and investors have also been encouraged by the low interest environment of recent years.

"Ongoing price appreciation in all asset classes is being driven almost exclusively by land value and redevelopment potential," comments Avison Young Principal Bob Levine. "The acquisition of retail assets has morphed in many cases into land deals with lesser consideration or interest for the income in place or the retail asset itself. This approach has spread to office and even industrial properties as investors seek to secure land in hopes of redevelopment."