Overall commercial real estate investment in Canada was down by 35 per cent in 2023 versus 2022, the most significant percentage drop since the first year of the pandemic, according to data from Altus Group.
Canadian transactions declined from $79 billion in 2022 to $50.8 billion in 2023, according to Altus’ most recent figures.
The slowdown in activity was largely due to higher interest rates, uncertainty about the economy and a growing bid-ask separation between buyers and sellers, says Raymond Wong, vice-president, data solutions at Altus.
However, the attractiveness of the Canadian market grew to foreign buyers, with foreign investments by dollar value representing just over 50 per cent of the Top-30 Canadian transactions in 2023. Indeed, the top three transactions in 2023 by dollar volume all involved foreign buyers.
“Canada has always been seen as a safe haven for foreign dollars, especially with our population growth based on immigration over the last few years,” Wong says.
Retail prominent in major transactions
Given the reduced number of buyers in the market, it was a good opportunity for some investors to make a move, he adds.
While industrial and multiresidential real estate remains strong with investors because rents in the asset classes continue to rise, several of the Top-15 transactions in Canada in 2023 involved retail properties.
Most of 2023’s Top-15 transactions are in the GTA and in Ontario’s Greater Golden Horseshoe area.
As for a 2024 forecast, Wong expects a slow start in the number of transactions until interest rates begin to drop.
Activity should increase by mid-year as long as rates start to come down, but “I don’t think we’re going to reach the $79 billion we reached in 2022.”
The Canadian Top-15 list
Here are the 15 largest (by dollar value) commercial real estate transactions in Canada in 2023, according to Altus:
1. Allied Properties REIT sold its Toronto-based Canadian data centre portfolio to Japanese telecom firm KDDI Corporation for $1.35 billion. The transaction included freehold interests in 151 Front St. W. and 905 King St. W. and a leasehold interest in 250 Front St. W. KDDI owns and operates data centres in Asia, Europe and the U.S. through its subsidiary Telehouse.
2. Global alternative asset management firm TPG acquired a 75 per cent interest in two Oxford Properties Group industrial business parks in the GTA for $990 million. Oxford has retained a 25 per cent interest in the Brampton Business Park and Vaughan Business Park and will continue to manage the 5.1-million-square-foot, fully leased portfolio. It’s the first JV between TPG and Oxford. Tenants include Mondelez, Best Buy and Campbells, and there are several long-term leases.
3. Ohio-based Welltower expanded its relationship with Cogir Real Estate after spending $885 million to purchase from Desjardins 12 seniors’ residences with 4,173 units in the Montreal and Quebec City areas. Cogir is managing the properties as part of its five per cent stake in the JV deal. Welltower said the buildings have margins of more than 40 per cent and a low need for capital expenditure improvements.
4. U.S.-based REIT W.P. Carey spent $638.3 million to acquire four pharmaceutical R&D and manufacturing campuses in the GTA operated by Canadian global generic drug giant Apotex Pharmaceutical Holdings. The portfolio of 10 properties in the GTA and one in the Golden Horseshoe represents the majority of Apotex’s global operations, comprising 11 properties which cover about 2.3 million square feet of space. Apotex remains as a top tenant.
5. Ivanhoé Cambridge sold a 49 per cent stake of the 1.5-million-square-foot Vaughan Mills regional outlet mall to LaSalle Investment Management as part of a $470.2 million syndication deal. Under the syndication, Ivanhoé Cambridge and LaSalle will serve as co-owners of the more than 20-year-old centre, while Ivanhoé will continue to act as asset manager. Ivanhoé called the retail transaction one of the largest it has made over the past few years. Located at Highway 400 and Rutherford Road in Vaughan, the 250-tenant mall is 97 per cent leased.
6. Pinewood Group invested $425 million to acquire 33.5 acres of land and a 570,000-square-foot building that Pinewood operates as a movie studio at 101 Commissioners St. in Toronto. Build Toronto Inc. was the seller. The Pinewood Toronto Studios facility is the largest of its kind in Canada.
7. Axium Infrastructure and AgeCare Health Services invested $378.7 million to acquire the Chartwell Retirement portfolio in Toronto and Hamilton. The deal, a combination of a share sale and market transaction, included 16 long-term care homes, two of which include retirement residences, with 2,418 beds. AgeCare also operates retirement residences in Alberta and B.C. Axium is an independent portfolio management firm.
8. Primaris REIT purchased the Halifax Shopping Centre for $370 million in an investment the REIT called an attractive one due to the city’s recent population growth. Located in the city’s west end, the Halifax Shopping Centre was operated by Cushman & Wakefield Asset Services Inc., on behalf of OPB Realty Inc., the real estate arm of the Ontario Pension Board. Built in 1962 at 7001 Mumford Rd., the 170-store mall is scheduled for a renovation this year.
9. Montreal-based Groupe Mach and Sarees Investments acquired ONE60 at 160 Elgin St. in Ottawa for $277 million. The million-square-foot downtown complex appealed to Mach for several reasons, including long-awaited average lease terms of just over eight years, credit-worthy large tenants, a vacancy rate of only three per cent, recent renovations that brought it up to par and a selling price that was well below replacement value.
10. The Ontario Pension Board sold the Erin Mills Town Centre in Mississauga for $272 million to the Pemberton Group, Metrus Properties, HBNG Holborn Group, The Remington Group and Condor Properties. Built in 1989, the 850,000-square-foot centre sits on 84 acres of land.
11. Primaris REIT bought the Conestoga Mall in Waterloo from Ivanhoé Cambridge for $270 million. The 585,000-square-foot enclosed mall is located on 49.8 acres of land and has 94.4 per cent in-place occupancy.
12. Dream Unlimited Corp. and Great Gulf Group invested $259 million to buy 259-291 Lake Shore Blvd. E. in Toronto from the Toronto Waterfront Revitalization Corp. The site, covering about 4.6 acres, is zoned for high-density residential. Dream Unlimited is developing the Waterfront Toronto property on Lake Ontario.
13. Swedish lithium-iron battery manufacturer Northvolt spent $240 million to acquire from Quartier MC2 Inc. a 420-acre site in Saint-Basile-le-Grand and McMasterville, Que. Northvolt will build a new multibillion-dollar electric vehicle battery plant about 30 kilometres east of Montreal. The project’s first phase is valued at $7 billion.
14. Walia Group of Companies acquired eight retail properties – four in Calgary and four in Winnipeg – from Artis REIT for $222 million. The four Calgary shopping centres include Crowfoot Corner, Crowfoot Village, Sunridge Pointe and Sunridge Spectrum, totalling 293,660 square feet. The Winnipeg properties are Linden Ridge Shopping Centre, Linden Ridge Shopping Centre II, McGillivray Boulevard and the Shoppes of St. Vital.
15. CentreCourt Developments purchased the 830,000-square-foot Pickering Town Centre from the Investment Management Corporation of Ontario (IMCO) for $203 million. CentreCourt has announced plans to build 10 high-rise condominium buildings around the mall that will include more than 6,000 residences.