Vancouver captured the lion's share of commercial office real estate activity in Canada in the first half of 2009, according to the latest report from Avison Young.
Vancouver sales contributed to 38% of the $1.3 billion in office sales nationally, about $506 million in the first six months of the year. That is almost three times the volume in Vancouver in 2008.
The amount is largely skewed by the sale of downtown Vancouver's Bentall V in May for $297 million to German investor Deka Immobilien Investment GmbH. It was the largest investment deal in Canada in the first half of 2009.
The deal, however, helped keep Vancouver's market from following markets in other regions of the country that have seen significant declines in total investment activity.
Vancouver's investment volumes have fallen 10% to $872 million compared with a 76% drop in Edmonton to $363 million; a 75% decline to $415 million in Calgary; and a 67% decline in Toronto to $923 million.
The report suggested the shortage of available commercial real estate product leading up to the 2010 Winter Olympic and Paralympic Games is posing challenges for buyers and sellers in the region as they attempt to narrow the price-expectation gap following last year's period of excessive demand.
Capitalization rates may prompt some industrial and retail investors to spend their increasingly available cash in other Canadian markets. However, that should be offset by Vancouver's strong appeal to international investors, which should bolster the average sale price in the region.
Industrial deals (11) outnumbered office (8) and retail (4) transactions from January to June, but office deals accounted for 79% or $506 million of the $643 million in total dollar volume. Industrial deals amounted to 15% or $96 million. Retail deals reflected a modest 6% or $41 million.
While private investors were the most active in the region, real estate investment trusts have cleaned up their balance sheets and gained access to large amounts of credit, suggesting they are likely to become more active between now and early 2010.
Government-sponsored pension plans, which have been relatively quiet in the first half of the year, are also expected to become active buyers again to maintain portfolio values.