BC real estate investment plummeted in the first half of 2023 versus a year earlier, according to commercial real estate brokerage Avison Young.

Sales of all asset classes, including multifamily and land, fell 72% to $2.4 billion in the first half of the year versus $8.7 billion a year earlier.

Private investors were the primary buyers in the last six months, accounting for 85% of purchases of office, retail and industrial properties. Similarly, private vendors represented 98% of all sellers across all asset classes.

“We’ve observed private capital taking the lead in investments, while institutional investors have been cautious with portfolio rebalancing and cash preservation,” said Jessica Toppazzini, principal and managing director with Avison Young in Vancouver. “However, the industrial sector has displayed resilience, and we anticipate institutional investors gradually re-entering the market as interest-rate certainty improves.”

Sales of industrial assets fell 44% to $779.3 million on a volume of 53 transactions, making it the most resilient of asset types. It was also the most commonly traded asset type in the period, representing 72% of all transactions.

“The last 60 days have seen the return of the investor, with greater certainty about the downward direction of inflation aiding investment appetite,” Avison Young reported. “Several quietly marketed investment opportunities have come to market in the previous 90 days, which suggests there will be strong investment activity for the rest of 2023.”

The largest deal of the period was Crestpoint and AIMco’s purchase of the Coastal Heights Distribution Centre at 2325 190 Street in Surrey for $178 million from Cedar Coast & Pure Industrial REIT.

Beedie purchased 590-598 Ebury Place in Delta from Hallmark Holdings Ltd. for $62,750,000 while disposing of lands at 5838 274th Street in Langley for $33.8 million to Vulcan Way Investments Ltd.

While industrial transactions were driven by renewed confidence from institutional investors as interest rates showed signs of stabilizing, the impact of financing costs on development put the brakes on both residential and ICI land purchases.

“Some proposed residential developments prior to the interest-rate hikes were no longer deemed financially viable,” Avison Young reported. “With few profitable development opportunities, prospective buyers have been preserving cash and are more selective on when and where to deploy capital.”

Well-capitalized developers have been taking advantage of the current lending environment to pursue projects, but overall investment in residential land fell 80% in the first half of 2023 versus a year earlier.

This drove an 87% decline in the overall value of land transactions as investors stuck to the sidelines.

“Stricter financing terms and rising construction-related costs have impacted development in British Columbia, leading to reduced development appetite and lower yields for developers,” Toppazzini said.

ICI land saw a more modest decline of just 76%, institutional investors underscoring the more positive trends even as the focus remained on premier sites rather than riskier options. A case in point was GWL Realty Advisors’ purchase of 1525 Robson Street from Logan Faith Ltd. for $62.8 million, which Avison Young said “signals more positive signs for the next six months.”

Notably, the mixed-use site is zoned for residential development, highlighting that some interest remains for well-located residential sites.

Avison Young : BC Real Estate Investment Plummets in First Half 2023 by Peter Mitham | Western Investor | BIV