Avison Young reports that private capital has been BC's primary source of commercial investment in the last six months
The vast majority of activity in British Columbia’s commercial investment segment during the first half of 2023 stemmed from private buyers and sellers, according to Avison Young.
Taken together, these private investors completed fully 98% of commercial real estate transactions over this period.
“Private capital has been the primary source of investment in the last six months,” Avison Young said. “Across all asset classes, private buyers accounted for 85% of all purchasers. Similarly, private vendors represented 98% of all sellers across all asset classes.”
However, the province’s total commercial real estate investment volume during the first two quarters of this year fell by 59% annually, settling at just around $1.1 billion.
“Institutional investors have largely been preserving cash and rebalancing their portfolios,” Avison Young said. “It is expected that institutional investors and other non-private actors will resume market activity once there is greater certainty surrounding interest-rate movements.”
Divisional research director Marc Meehan told Canadian Mortgage Professional that the year would see commercial real estate “find its footing” after the pace of change in 2022 failed to match expectations amid a still-sluggish market.https://t.co/9uTHTwgQd8
— Canadian Mortgage Professional Magazine (@CMPmagazine) March 8, 2023
At the same time, stricter financing policies and a surge in construction-related costs (including higher premiums and new building-code provisions) have decelerated commercial development across BC.
“Heightened interest rates and cost pressures have reduced development appetite,” Avison Young said. “Many developers have seen their yields fall, with financing costs impacting future cash flows. Coupled with rising development costs, confidence to deploy capital in H1 2023 was low, and is expected to continue until interest-rates stabilize.”
Still, a measure of hope remains in industrial-sector investment, which registered the lowest annual rate of slowdown across all commercial asset classes. Avison Young said that this relative robustness is crucial considering that industrial activity represented 72% of all investment deals in BC during the first half of 2023.
“The industrial market has shown resilience against rising debt costs, with the number of deals exceeding the first halves of 2016 to 2020,” Avison Young said.
“While private buyers and sellers have been the primary actors during the last six months, institutional investors are starting to redeploy capital as of the mid-year turning point.”
