Vancouver the most expensive commercial real estate market in Canada: Avison Young

Vancouver’s pricey commercial real estate market is driving investment volumes across Canada.

This according to commercial real estate firm Avison Young, which released a report Tuesday morning indicating the Canadian commercial real estate market in 2010 had already surpassed 2009 sales totals.

At the end of the third quarter, more than $12 billion in commercial real estate assets had changed hands in 2010, a 57% increase when compared with the same nine-month period in 2009.

Although Toronto remains the most active commercial real estate market across the country, Vancouver is the most expensive.

According to Avison Young, Vancouver accounted for $2.4 billion in commercial real estate sales in the first nine months of 2010.

That represents a 34% increase when compared with the same period last year and is 20% of the total investment volume across the country in 2010.

As well, the national average cap rate for major property types, that is the ratio between a property’s net operating income and its capital cost, has declined 50 basis points to 6.75%.

Across Canada, cap rates range from an average low of 5.97% for multi-residential properties to 7.47% for multi-tenant industrial buildings, Avison Young said.

Vancouver’s 6.12% average cap rate makes it the highest-priced market in Canada.

Avison Young principal Mike Gill explained, "The recent influx of foreign capital from Europe, the far east and the Middle East, together with competition from local investor capital, has applied further pressure to already declining cap rates for the premier assets."

The real estate firm predicts further “compression” of cap rates across Canada based on increased bids for assets, low interest rates, ample liquidity and a steady flow of product to the market.
source: www.bivinteractive.com