Greater Toronto Area - Avison Young

Second Quarter 2018 / Commercial Real Estate Investment Review

Greater Toronto Area

GTA Investment Activity by Sector and Dollar Volume

14%

14%

34% Q2 2018

$3.9B

18% 20%

Q2 2018

Q1 2018

Q2 2017

ICI LAND $1.3B

$492M

$591M

INDUSTRIAL $787M

$780M

$977M

OFFICE $712M

$1.96B

$1.4B

MULTI-RESIDENTIAL $560M

$288M

$332M

$781M

$841M

RETAIL $540M

Partnership. Performance.

Buoyed by solid property fundamentals, eager sellers capitalizing on record-high asset values and equally willing buyers deploying an abundant war chest of capital traded $3.9 billion worth of office, industrial, retail, multi-residential and ICI land assets (>=$1 million) across the Greater Toronto Area (GTA) in the second quarter of 2018. Although the quarterly total (boosted by a record-breaking performance by the ICI land sector) represents a 9% decline quarter-overquarter, the GTA’s first-half investment tally reached $8.2 billion – up 26% yearover-year – and is on pace for another record full-year result. Meanwhile, investor demand has kept cap rates for most asset types at historically low levels.

twice the dollar volume traded in the first six months of 2017. At this pace, the land sector will most certainly surpass 2017’s record $2.2 billion in sales. The biggest and most notable secondquarter transaction (not only in the land sector but among all asset classes in the GTA) was Bombardier’s sale of its Downsview Airport property to the Public Sector Pension Investment Board for $825 million – the largest ICI land sale on record in Canada. This massive transaction made the City of Toronto the top performer among the GTA’s regions by dollar volume, with $972 million (73% of the quarter’s total). Durham Region, however, was top-ranked by land area traded, as 1,064 acres changed hands.

ICI LAND Traditionally a laggard, ICI land sales set a new quarterly benchmark of $1.3 billion (34% of the GTA total), nearly triple the first-quarter result, making this the only sector to break $1 billion in quarterly sales. In all, $1.8 billion in land traded in the first half of 2018 – almost

INDUSTRIAL Industrial sales were on par with the first quarter (up 1%) and a distant second to ICI land, with second-quarter investment of $787 million (20% share), bringing the six-month total to $1.6 billion – down 9% on a year-over-year basis. The sector is characterized by historically

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34%

$8.2B

ICI land sector's share of total second-quarter 2018 GTA dollar volume

GTA-wide total investment dollar volume in the first half of 2018

GTA Investment Volume

3.8% Average capitalization rate for multi-residential properties

GTA Select Capitalization Rates 8.5%

16

14

7.5%

$ in billions (CAD)

12

10

6.5%

8

5.5%

6

4

4.5% 2

3.5% '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Q2'18

'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD Q2'18

0

Office

Industrial

Downtown Class AA Office

Single-Tenant Industrial

Retail

Multi-Residential

Tier I Regional Mall

Multi-Tenant Industrial

ICI Land


Multi-Residential

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$256M Foreign investor Tigra Vista Inc. purchased the 865,000-sf Parkway Place complex from Agellan Commercial REIT

low availability, strong demand and new supply struggling to keep pace. Summit Industrial Income REIT was an active buyer, acquiring just over $135 million worth of industrial product from three different vendors, capturing three of the top five industrial sales during the second quarter. Led by Mississauga, the Region of Peel retained its position as the most active in the GTA, with $263 million in sales (33% of overall volume) in the second quarter. OFFICE After starting 2018 with nearly $2 billion in sales, the office sector came down to earth, as second-quarter sales plunged 64% to just $712 million (18% share). Nevertheless, investors have poured $2.7 billion into office properties in the first half of 2018 – more than any other asset class, and a 35% year-over-year increase. Unlike the first quarter, suburban office buildings captured the top five sales in terms of dollar volume during the second quarter. The biggest office trade by a wide margin (and second-

largest transaction overall) during the quarter was the long-anticipated sale of Agellan Commercial REIT’s suburban office complex – Parkway Place – to a foreign buyer for $256 million. All eyes now turn to the anticipated sale of Queens Quay Terminal in downtown Toronto. MULTI-RESIDENTIAL Multi-residential investment nearly doubled quarter-over-quarter to $560 million (14% share) – the sector’s best sales performance since the second quarter of 2015, when $705 million worth of multi-residential assets changed hands. Noteworthy second-quarter sales included global real estate investment giant Blackstone’s foray into the Canadian multi-residential sector (the GTA portion of the portfolio: $182 million) through a joint venture with Starlight investments, while homegrown Homestead Land Holdings continued its buying spree, purchasing its first properties in Ajax – Windjammer Apartments – for $108 million. The uptick in second-quarter sales

lifted total investment in the multiresidential sector in the first half of 2018 to $848 million – positioning the sector to match or surpass the $1.6 billion sold in all of 2017. RETAIL Surprisingly, retail was the GTA's least-traded asset class, a position usually held by the product-starved multi-residential sector. Quarter-overquarter, retail asset sales declined 31% to $540 million – the lowest quarterly result since the first quarter of 2017 ($445 million) – leaving the sector’s first-half total at $1.3 billion, marginally ahead of 2017’s first-half performance. Retail is coming off a near-record total $2.9 billion in trades in 2017, which was second only to the office sector. On the transaction front, Scotiabank continued pruning its retail branch network – the GTA portion comprising nine of a 13-building portfolio in Ontario for almost $37 million to Silver Hotel Group. This follows a similar sale of an Ontario/Quebec bank-branch portfolio for $58 million between to Metrus Properties in the fall of 2017.


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Significant Transactions by Sale Price Sector

Office

Total Price

Price psf

Purchaser

Vendor

Parkway Place

$256,250,000

$296

Tigra Vista Inc.

Agellan Commercial REIT

5775 Yonge St.

$85,150,000

$311

True North Commercial REIT

Sun Life Assurance Company of Canada

1004 Middlegate Rd.

$64,965,000

$248

Rogers

Crown Realty Partners

5075 Yonge St.

$38,100,000

$438

Davpart Inc.

Slate Asset Management

111 Gordon Baker Rd.

$36,000,000

$218

Montez Corp. / Adgar Investments

Alegus Property Corp.

Industrial

Total Price

Price psf

Purchaser

Vendor

Epic Realty – Summit REIT Portfolio

$70,000,000

$218

Summit Industrial Income REIT

Epic Realty Partners Inc.

2485 Surveyor Rd.

$37,000,000

$197


Orlando Corporation

915 & 945 Lake Shore Blvd. E.

$30,892,912

$456

Toronto Economic Development Corp.

Canada Post

4455 North Service Rd.

$28,110,000

$114


Voortman Bakery

10862 Steeles Ave. E.

$24,891,000

$607

Pride Truck Sales Ltd.

North American Development Group

Retail

Total Price

Price psf

Purchaser

Vendor

132 Queens Quay E.

$45,546,900

$442

George Brown College

Daniels Corp.

Scotiabank – Silver Hotel Group Portfolio

$33,607,314

$586

Silver Hotel Group

The Bank of Nova Scotia

477-485 Queen St. W.

$28,913,130

$960

YM Inc.

KingSett Capital

Cadence Education – Gross Capital Portfolio

$25,000,000

$479

Gross Capital

Cadence Education Inc.

Scarboro Village Mall

$20,950,000

$285

2634699 Ontario Inc.

476992 Ontario Ltd.

Multi-Residential

Total Price

Price per unit Purchaser

Vendor

Private Investor – Starlight / Blackstone Portfolio

$182,365,000

$340,233

Blackstone R. E. Advisors / Starlight Investments

Private individual(s)

Windjammer Apartments I

$56,201,439

$253,160

Homestead Land Holdings Ltd.

Ram-Land Property Management

Windjammer Apartments II

$51,798,591

$258,993

Homestead Land Holdings Ltd.

1003362 Ontario Ltd. / 77 Falby Court Limited Partnership

1040 Cedar St.

$37,500,000

$142,045

Medallion Corp.

Davpart Inc.

Lynde Creek Retirement Community

$34,010,000

$165,097

Extendicare Inc.

Canadian Baptists of Ontario and Quebec Foundation

ICI Land

Total Price

Price per acre Purchaser

Downsview Airport

$825,000,000

$2,261,823

Fifth Line

$39,375,750

$922,272

191 Mill St.

$29,600,000

Eglinton Ave. W. 9151 Huntington Rd.

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Vendor

Public Sector Pension Investment Board

Parc Downsview Park Inc. / Bombardier Inc.

DSV Solutions Inc.

Menkes Developments

$17,993,921

Toronto District School Board

Infrastructure Ontario

$26,187,600

$4,283,920

Minuk Construction

The Erin Mills Development Corp.

$22,400,000

$401,010

Anatolia Group

Private individual(s)

Bill Argeropoulos Principal & Practice Leader, Research (Canada) 416.673.4029 [email protected]

18 York Street Suite 400, Mailbox #4 Toronto, ON M5J 2T8 416.955.0000

© 2018 Avison Young Commercial Real Estate (Ontario) Inc., Brokerage Some of the data in this report has been gathered from third party sources and has not been independently verified by Avison Young. Avison Young makes no warranties or representations as to the completeness or accuracy thereof. Investment sales data sourced from Avison Young, RealNet Canada Inc. and Altus InSite.