Foreign buyers dominate GTA, GGH Top-10 CRE transactions of 2023 • RENX

Commercial real estate investment volume fell to a combined $28.5 billion in the Greater Toronto and Greater Golden Horseshoe regions from a historic high of $41.2 billion in 2022, according to Altus Group data. There was also a significant geographic shift in companies which completed major acquisitions in the regions.

In the individual markets, transactions fell to $21.5 billion last year from $30.7 billion in 2022 in the Greater Toronto Area (GTA); and from $10.5 billion to $7 billion in the adjoining Greater Golden Horseshoe (GGH) area. Those numbers are perhaps not as low as they may initially appear, however.

Last year’s GTA figure, for example, was in a similar range to the 2017 to 2019 period, before the COVID-19 pandemic dropped volume to about $17 billion in 2020. The rebound from that low pushed record-breaking totals past $30 billion in the next two years, according to data provided by Altus Group.

The Top-10 GTA and GGH transactions represented approximately $5.9 billion in volume and foreign investors were responsible for the Top-5 acquisitions and six of the Top 10.

Altus Group vice-president of data solutions client delivery Ray Wong told RENX the foreign investment trend could continue into 2024 if large, high-quality assets — which is what those types of investors are seeking — are available.

Canadian private investors lead the way

Canadian private investors still accounted for the highest share of acquisition volume, however, at close to 40 per cent with $8.12 billion. 

Developers were responsible for $3.84 billion, foreign public investors for $2.08 billion, users for $1.81 billion, foreign private investors for $759 million, institutions for $691.5 million, governments for $574.4 million, builders for $323 million and Canadian public investors for $233.3 million.

Sector-wise, industrial had the highest total at $5.75 billion. It was followed by:

• residential land at $3.6 billion;
• office at $2.92 billion;
• industrial, commercial and investment land at $2.7 billion;
• retail at $1.74 billion;
• apartments at $1.28 billion;
• residential lots at $314.3 million;
• and hotels at $163.3 million.

Wong said retail has remained consistent as purchasers are acquiring properties both for immediate income generation and future intensification through residential or other development.

Office properties have continued to trade and the 2023 dollar amount exceeded the 2021 total despite high vacancy rates.

Some of those transactions have also involved future intensification or redevelopment plans, according to Wong.

2024 transaction forecast

While there are buyers in the marketplace, there are fewer than in 2021 and 2022 as they’re often having difficulty finding the right asset that meets their return expectations and obtaining financing can be difficult — especially for non-income-producing land sites.

“I think there are some opportunities in the marketplace provided you have access to capital,” said Wong. 

“There are still some challenges with high interest rates to be able to secure financing for certain properties, but, as interest rates start to come down later this year, we’ll see a little bit more activity.”

Morguard has already announced an agreement to sell 14 hotels in the GTA, Halifax, Ottawa and Sudbury, Ont., for $410 million to an unidentified buyer.

Wong believes this could be an early indicator of more hotel transaction activity in 2024 as more people are travelling again and room rates have been increasing.

While there weren’t many distress sales in 2023, Wong thinks mortgage renewals at higher interest rates could potentially bring more this year.

The Top 10 transactions

These were the 10 largest (dollar value) commercial real estate transactions of 2023 in the GTA and GGH, according to Altus Group data:

1. Japanese telecommunications firm KDDI Corporation acquired three downtown Toronto data centres totalling 1.84 million square feet for $1.35 billion from Allied Properties REIT on Aug. 16.
2. San Francisco-based alternative asset manager TPG acquired a 75 per cent interest in Brampton Business Park and Vaughan Business Park, which combine to include 10 buildings totalling 5.11 million square feet on 223 acres, for $990 million from Oxford Properties Group on Dec. 18. Oxford retained a 25 per cent interest in the portfolio and will continue to manage it.
3. New York City-based REIT W.P. Carey acquired 10 properties in the GTA and one in the GGH, encompassing 2.3 million square feet on 26.7 acres over four pharmaceutical research and development and manufacturing campuses, for $638.28 million from Apotex Pharmaceutical Holdings Inc. in a sale-leaseback deal on April 3. Apotex signed a triple-net master lease with fixed rent escalations over a 20-year term to remain at the properties.
4. Chicago-headquartered LaSalle Investment Management acquired a 49 per cent interest in the Vaughan Mills shopping centre in Vaughan for $470.16 million from Ivanhoé Cambridge on Dec. 20. Ivanhoé Cambridge will continue to act as asset manager.
5. London, U.K.-based Pinewood Group acquired Pinewood Toronto Studios, an 11-stage film and television studio encompassing 570,000 square feet on 33.5 acres in Toronto, for $425 million from Build Toronto on May 3. 
6. Axium Infrastructure Inc. and its affiliates and AgeCare Health Services Inc. and its affiliates acquired 16 long-term care homes with 2,418 beds in the GTA and GGH for $378.7 million from Chartwell Retirement Residences on Sept. 6.
7. Pemberton Group, Metrus Properties, HBNG Holborn Group, The Remington Group and Condor Properties acquired Mississauga’s Erin Mills Town Centre, a mall encompassing 898,578 square feet on 85.2 acres, for $272 million from the Ontario Pension Board on Jan. 31.
8. Dream Unlimited Corp. and Great Gulf Group acquired 4.6 acres of residential land at 259-291 Lake Shore Blvd. E., 200 Queens Quay E. and 2 Small St. in Toronto for $259.04 million from Toronto Waterfront Revitalization Corporation on March 1.
9. CentreCourt acquired the 700,000-square-foot Pickering Town Centre mall and a 130,000-square-foot office building on 55 acres at 1355 Kingston Rd. in Pickering for the future master-planned Pickering City Centre residential and mixed-use development for $203 million from Investment Management Corporation of Ontario (IMCO) on Dec. 15.
10. Pontegadea Group, the family office of Spanish billionaire Amancio Ortega, acquired a 422,433-square-foot industrial building on 59.7 acres at 45 Di Poce Way in Vaughan for $198.2 million from Pure Industrial on June 15.