The region saw a 67% quarterly increase in total investment volume
The greater sense of stability and predictability imparted by frozen interest rates has given investors more confidence to transact in major commercial markets like the Greater Toronto Area, according to Avison Young.
“Inflation in Canada appears to have begun to stabilize, implying that interest rates may remain stable or even start to decline in coming quarters,” Avison Young said in a new market report.
This has become quite apparent in the GTA, which saw a 67% quarterly increase in total investment volume to reach $6.3 billion during Q1 2023.
The industrial sector accounted for the bulk of these gains, with a 77% quarterly increase to $3.5 billion. This represented fully 56% of GTA’s quarterly total.
Current trends indicate that the region is now shifting towards a “more balanced, less overheated” commercial market.
“Capital is available once again after a period of heightened caution from lenders,” Avison Young said. “Increased selectiveness or scrutiny from lenders, in many ways, shows that the market may be closer to returning to ‘normal’ after a period of frenzied activity that has lasted for a number of years, predating the pandemic.”
However, Avison Young warned of the possibility of distress sales, which might begin to increase “as borrowers whose mortgage payments have risen in recent years struggle with the costs of holding or developing their assets.”
“Although unlikely to be widespread, distressed-asset sales are expected to experience an uptick. Non-income-producing assets (such as future development sites) are most likely to be at risk if owners’ financial models did not account for rising interest rates and elevated construction costs including materials, labour and development charges.”
