Commercial real estate pros in swaggering Vancouver and Calgary like to boast that their markets are on a giant roll, but when compared with Canada's biggest city both cities appear like dwarfs.
In this special report with Western Investor, Toronto-based RealNet (www. realnet.ca) notes that 2012 was a banner year in all three centres, but also confirms that Toronto real estate sales are more than four times higher than they are in either of the two largest Western municipalities. And Toronto is widening its lead.
The overall research for 2012 (counting only sales worth more than $1 million) shows that commercial real estate sales in Calgary soared 80% from a year earlier and hit their second highest level in Vancouver – but set an all-time record in Toronto.
In Calgary, total commercial real estate sales last year reached $4.84 billion. Vancouver tallied a slightly higher $4.85 billion (down from the 2007 peak of $5.85 billion). Toronto showed why it is the Goliath of Canadian real estate with $13 billion in commercial real estate deals last year.
It was residential land that dominated the Vancouver commercial scene, accounting for 33% of all sales, while the apartment market had the biggest dollar gain, shooting up 27% from a year earlier to $123.9 million.
In Calgary, raw land – for both multi-family residential and commercial – made up nearly a third – $1.35 billion – of all sales, while the apartment sector saw values soar 254% to $468.4 million, the third best year on record.
While Toronto's residential land sales reached $744 million in 2012's fourth quarter alone, the office sector dominates the market, accounting for 27.6% of the total dollar volume in the fourth quarter.
Vancouver
In 2012, there were 1,298 commercial real estate transactions in excess of $1 million, but it was residential land and the multi-family market that dominated the action. Since the most recent low in 2009, investment volumes in Vancouver have increased 78%, RealNet reports.
When deals in last year's fourth quarter are broken out, those related to the residential sector account for a whopping 53.8% of all transactions. Industrial sales, by comparison, make up just 15.7%, with offices taking a mere 2.1% slice.
The low numbers for hard commercial real estate, such as warehouses, shopping malls and office buildings led partially to a RealNet warning of "a market plateau."
Calgary
Calgary has much broader mix of commercial real estate transaction than Vancouver, according to RealNet research. In the fourth quarter 2012, office buildings made up 30% of the investment market. Industrial accounted for a 20.6% share and a record for quarterly activity with $302.8 million in sales. The residential market is also strong, however, with developers paying up to $210,000 per acre.
"After lagging behind other Canadian markets, Calgary has now also reached high levels of investments," said Paul Richter, RealNet's director of research.
Toronto
Toronto hit a new milestone last year with $13 billion in commercial real estate transactions; 1,984 sales were worth maore than $1 million each, up 12% from a year earlier and crashing past the former peak in 2007 by 7%.
With the exception of retail, every property sector grew year over year. The record pace was building steam throughout 2012, ending with a record of $3.9 billion in sales in the fourth quarter.
Noted RealNet, "Underlying real estate fundamentals remain strong even while Greater Toronto Area commercial real estate reaches record levels." •
