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Greater Vancouver investment deals stalled in third quarter

Metro Vancouver deals slow but stabilizing interest rates offer hope
Wesgroup’s $152.8 million purchase in September of the Coronation Park site in Port Moody was among the biggest investment deals of the third quarter.

A range of macroeconomic factors led by rising interest rates stalled real estate investment in the third quarter, putting Metro Vancouver on track for strong but not record-breaking performance in 2022.

Third-quarter sales data from Altus Group indicate 435 deals were done with an aggregate value of $2.3 billion. Total deal value was down nearly 39 per cent from a year earlier, and continued the slowing trend seen since the first quarter, when nearly $5 billion worth of transactions took place. This was off from a peak of $5.2 billion worth of investment activity in the final quarter of 2021.

“The macroeconomic headwinds that have been building since the start of the year have finally impacted investor sentiment to such an extent that a significant drop in dollar volume in the third quarter was the result,” Andrew Petrozzi, director, commercial research, Western Canada with Altus said in his analysis of the data. “This reduced level of activity is expected to continue to impact most asset classes and persist through the fourth quarter.”

Slow deal activity in the third quarter puts the Metro Vancouver market on track to fall short of the record $16.1 billion in transactions recorded last year.

“The year will still remain one of the strongest in terms of overall dollar volume recorded in recent history,” Petrozzi noted.

The most resilient segment of the market was land, with residential and ICI deals totaling nearly $1.6 billion.

Residential land, with $962 million worth of transactions saw the greatest activity and also recorded the smallest decline in activity from a year ago at 15 per cent. The quarter’s largest deal, Wesgroup’s purchase of the Coronation Park land assembly in Port Moody in September, was the most significant residential land transaction. It involved nearly 60 residential properties totaling 14.8 acres. The total value was $158.2 million.

ICI land transactions totaled nearly $631 million, down 31 per cent from a year ago but still more resilient than commercial or industrial properties. The most notable deal was Conwest’s acquisition of an 18.4-acre site at 56th Avenue and 264th Street in Langley for $43.2 million in July. The site is intended for light industrial development as part of the Gloucester Industrial area, pending approval from the Township of Langley.

The greatest decline in the quarter was seen for multifamily rental properties, which saw just short of $65 million in deals – a decline of 83 per cent versus a year earlier.

“This decline occurred not because demand for the asset class had diminished but could be the result of investors holding onto multifamily residential assets due to rising immigration levels and the asset class continuing to provide stable returns in a volatile environment,” Petrozzi said.

Stepping back and viewing the quarter in context, residential and ICI land continued to see strong growth in the first nine months of the year. Residential investment activity was up 70 per cent by value and ICI transactions were up eight per cent. Retail and industrial assets also continued to see strong demand in the first nine months of the year as demand for logistics space remained strong and retail properties found their feet with the ebbing of pandemic-related concerns.

A stabilizing interest rate environment will help deals move forward in 2023, with some signs of recovery beginning to be seen in preliminary data from the last quarter of 2022.

“We have seen moderate deal activity in October and November, and with that we anticipate there will be a fair amount of cautious optimism moving into 2023,” Petrozzi said. “There is continued interest in the market for a wide range of assets.”