Commercial Real Estate: 20-per-cent drop in commercial property sales
However, the total dollar volume of commercial property sales remained about the same, year over year, at $3.90 billion in the last quarter, only a 0.9 per cent decrease from $3.93 billion in Q3 2017.
Evan Duggan
The Vancouver Sun
Commercial real estate sales in the region fell in the third quarter of this year by 19.5 per cent, when compared to the same quarter last year, according to data from Commercial Edge, a commercial real estate system operated by the REBGV.
There were 565 commercial real estate sales in the Lower Mainland in Q3 2018, down from 702 sales in Q3 2017.
However, the total dollar volume of commercial property sales remained about the same, year over year, at $3.90 billion in the last quarter, only a 0.9 per cent decrease from $3.93 billion in Q3 2017.
“We expected a slow-down, but not to this degree,” said Bal Atwal, a principal with Avison Young in Vancouver who specializes in investment properties and development sites.
“Many investors are still sitting on the sidelines to see to how things shake out, possibly expecting pricing may come down further, especially on land,” he said.
“Pricing has come down, but the sales volumes have been impacted due to buyers remaining cautious,” he said. “We’re in a bit of a wait-and-see period right now.”
Atwal remained optimistic about the economic fundamentals of the local commercial market. “We need to remember that Vancouver is still a very tight market,” he said. “I don’t think pricing will adjust down much further, if at all, but currently that is essentially the state of the market.”
While sales figures are down, the overall dollar volumes are nearly on par with the five-year average, said Charlie Hughes, an investment broker with Colliers International in Vancouver, who focuses on land and apartment building deals.
“There is still close to $4 billion in transactions this year, which is really a tremendous amount of capital,” he said.
“I would just say that looking at the number of commercial transactions doesn’t really do the market justice because there were a number of transactions this year that were quite large,” Hughes said. “So, when you’re gauging investor sentiment, I think it’s more accurate and fair to look at the dollar volume.”
He said the market is on track for about $5 billion in deals for 2018.
“I would say all asset classes on the commercial side are still in strong demand,” Hughes said. “There hasn’t been the slow down and the pause that you see in some of the detached housing markets and some of the residential side. The commercial side of things is still going quite strong.”
Of all the asset classes, commercial land sales saw the largest decrease in sales, falling by nearly 35 per cent, from 305 deals in Q3, 2017 to 199 deals in Q3, 2018, the report said. Total commercial land sales totalled just over $2-billion in Q3, this year.
“Definitely the land market has seen a pullback from a year ago,” Hughes said. “(But) compared to the last five or 10 years. There were record setting years from 2015 through 2017 where the volume of land transactions grew exponentially almost.”
He said a pullback on the super-heated land market “was probably needed”.
Looking forward to 2019, Hughes said the investment market should remain relatively strong.
Investors who chase properties here look for low vacancy rates, a diverse economy, population growth and general stability, he said. Those things all appear to be in place despite rising interest rates, political uncertainty and the major ongoing trade war involving China and the U.S.
“2019 will be a pretty solid year, maybe not the frenzy of the last couple of years,” he said.
Atwal agreed. “The market has already started to stabilize and we’ve started to establish the floor for the next cycle, but it will still take a couple of months for buyers to come to that same realization,” he said. “There is no blood in the water.”
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