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June 24, 2020

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National investment volumes totaled $9.6 billion in the first quarter of 2020, representing strong year-over-year growth.

In fact, investment volumes grew 26.4% compared to the same period in 2019, a sign that despite the emergence of COVID-19 Canadian commercial real estate investment activity was initially largely unaffected.

The multifamily and industrial sectors performed particularly well. While it remains to be seen how the rest of the year will look – and how economists’ projections of a “v-shaped recovery” will come into play – interest in Canadian real estate was strong to start the year and is likely to attract investors as the crisis abates.

CRE Investment Volumes Strong in Lead Up to COVID-19

A Strong Start and a Major Headwind

Q1 fell just short of the $10 billion investment volume threshold for only the second time since Q2 2018. It’s also the 12th time in 13 quarters that national investment volumes surpassed $9 billion. Acquisition totals recorded in January were in line with average monthly totals from 2019, signaling that momentum was building for another year of record-setting investment.

And while COVID-19 has slowed that momentum, economists are predicting a sharper recovery than what was seen following the Global Financial Crisis, and investor activity could rebound in line with the economy.

Multifamily Demand

The most active asset class in the first quarter was multifamily. The sector saw volumes total $2.8 billion, and while investment activity was down slightly quarter-over-quarter, the sector was the only asset class to outperform its three-year trailing quarterly average.

The most active markets for multifamily properties were Toronto, Montreal, Edmonton and Halifax. The fundamentals that have supported strong multifamily investment remain – limited supply of available housing to meet strong demand and growing populations.

CRE Investment Volumes Strong in Lead Up to COVID-19

Industrial Investment

Industrial was the second most active asset class, with investment volumes totaling $2.2 billion in the first quarter. As with multifamily, the underlying economic and demographic fundamentals of the sector are expected to support the asset class in the coming months. With more and more Canadians shopping online during COVID-19, the demand for logistics and distribution centres is only expected to grow.

Investor Breakdown

Notable investment transactions from the quarter include the sale of the Quadreal Atlantic Canada Multifamily Portfolio to CAPREIT for $39.1 million; the World Trade Centre office asset in Montreal sold to Allied REIT for $276 million; and the 1100-1150 Rene Levesque Blvd W office asset in Montreal was bought by Groupe Petra and Mach for $225 million.

The most active purchasers were private Canadian investors and REIT-REOCs, which accounted for 41.5% and 32.3% of national investment volumes, respectively.

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