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Multi-family speculation skews commercial market

Land deals accounted for more than half of the dollar volume during the first quarter in Metro Vancouver
2016 First Quarter Commercial Sales Chart

Sales of residential land and apartment buildings dominated Metro Vancouver’s record-setting commercial real estate market in the first quarter of this year, according to a new survey.

Four of the five top transactions in the $2.7 billion buying binge during the first three months of this year involved residential land. In all, sales of residential land accounted for more than $1.3 million and represented more than half of the total sales volume. Altus suggests some of the land is being bought on speculation of higher-density zoning.

“The appetite for development land appears insatiable,” said Paul Richter, director, commercial research at Altus Group. Investors, Richter noted, even for “sites that require long hold periods and deep community planning involvement.”

Altus reports that overall dollar volume for commercial property in the first quarter increased 7 per cent and, for the second quarter in a row, set an all-time record. Residential land sales advanced 60 per cent from the previous quarter.

Each of the top residential land sales in the first quarter are developer acquisitions and located in the City of Vancouver. These include the $302 million purchase of the 24-acre Dogwood Pearson Land by Onni Group; a 1.3-acre site on West 8th Avenue that was bought by Delta Group for $70 million; and approximately one-third of an acre in Vancouver’s West End, for which an unknown investor paid $59 million.

Further evidence of the dominant influence of residential in the commercial sector is that sales of (mostly older) rental apartment buildings, at $243 million, were worth more in the first quarter than sales of all office buildings and retail property combined.