Private investors have wrestled control of the Vancouver commercial real estate market away from big pension groups and real estate investment trusts (REITs), according to report from CBRE Commercial.
The same move was seen nationally in the second quarter of this year, but the private buyers were most active in Vancouver.
“Private investors are particularly strong in Vancouver, having accounted for 80.5% of commercial real estate purchases last quarter, with private equity accounting for the remaining 19.5%,” said CBRE spokesman Ricky Hernden.
Vancouver commercial real estate sales hit $766.7 million in the second quarter, up 10% from the first three months of this year. The market was led by sales of apartment buildings and land sales, CBRE said.
Nationally, $5.1 billion of Canadian commercial real estate traded hands in the second quarter of 2014. That was down from $6.7 billion in the first quarter of the year; however, the number of transactions actually rose 9.7% quarter-over-quarter. More deals, though smaller in size, were completed. There was a notable decrease in the amount of institutional quality property that was listed for sale this quarter.
Across Canada, pension funds accounted for 11.4% of commercial property purchases in the second quarter of 2014, down from 31.6% of transactions in the first quarter.
Private investors logged a dominant performance, as their share of the total investment volume surged from 39.6% from the first quarter to 61.6% in the second quarter. REITs were responsible for a mere 8.7% of commercial property purchases in the second quarter, down slightly from 11.5% in the first quarter.
Many of the Vancouver investment deals today are the result of “creative, unsolicited offers driven by knowledgeable brokers,” said Norm Taylor, executive vice-president and managing director of CBRE’s Vancouver office. “The off-market transaction process is often better-suited to private investors than it is to institutional owners on both the buy and sell sides of the business.”
“Private buyers benefit most from low interest rates as they are looking to leverage newly acquired assets,” noted Ross Moore, CBRE’s director of research “You have to think that the REITs are near the bottom in terms of purchasing activity. I would expect that REITs will be more active going forward.”
