The commercial real estate market in the Greater Toronto Area is set for a strong if volatile year, amid sustained attention from cash-wealthy investors magnetized by favourable borrowing costs, according to a new report by Avison Young.
“Unlike 2020, 2021 opened with variants of concern and another round of business closures which continues to impact day-to-day life and cloud investor sentiment,” Avison Young said in the Q1 2021 edition of its Commercial Real Estate Investment Review covering the GTA. “However, mass vaccinations offer a ray of hope and the prospect of an eventual return to pre-pandemic capital flows into what is otherwise a relatively sound property market.”
Read more: Bank of Canada on the commercial market’s outlook for the coming year
Q1 total sales of office, industrial, retail, multi-residential, and ICI land assets valued at, or greater than, $1 million across the GTA amounted to $3.9 billion, a mere 3% quarter-over-quarter decline and a significant 39% annual increase. This marked the best first-quarter readings since 2018, Avison Young said.
Much of the investor focus is on the industrial segment, while the retail and land sectors also exhibited robust gains.
“After posting a high-water mark of $4.6 billion in sales in 2020, the industrial sector remains a hot commodity among investors with $1.4 billion worth of industrial properties changing hands in the first quarter of 2021 (representing 36% of the GTA total),” Avison Young reported. “Retail investment increased for the third consecutive quarter with $693 million (18% share) in first-quarter sales – up 25% quarter-over-quarter and 30% year-over-year.”
In particular, the sustained tightness in the industrial and housing markets has pushed demand for land to unprecedented heights, “with a view to developing parcels over a three-to-five-year timeframe,” Avison Young said. “ICI land sales rebounded 33% quarter-over-quarter to $807 million (21% share) – up almost 80% year-over-year.”