- What Commercial property sales in Canada fell across most sectors in 2024, according to Green Street’s Sales Comps Database
- Why There was a lack of participation among REITs and other large public entities, along with rising vacancies capping rent growth and property values
- What next Tariffs could impact future investment appetites
Commercial property sales in Canada fell 27% year over year in 2024, with only the multifamily sector recording an uptick in volume, according to data compiled by Green Street.
For 2024, the total volume of deals worth at least $5m was $32.75bn, down from $44.63bn in 2023. In terms of sector performance, industrial racked up the most deals by value, but the tally of warehouse trades was down sharply from the year prior. Office sales, on the other hand, were flat, indicating the beleaguered sector may have bottomed out.
“There weren’t really many winners” in 2024, Colliers senior vice president Nicholas Kendrew told Green Street News.
Among the trends at play in the market last year, institutional buyers such as pension funds and REITs continued to stay on the sidelines, opting to track the market rather than pull the trigger on deals.
“I think [institutional investors are] waiting to see where the stability in the interest-rate world comes – and a couple of political things that are coming down the pipe – before they make any major strategic moves,” Aik Aliferis, senior managing director of investments for Marcus and Millichap’s IPA division, said.
In addition, rising vacancy across property sectors weighed on rent growth and property values – particularly in the case of industrial – as new space came on line that was not fully absorbed.
“Buyers used to buy a lot of buildings at a premium in the major markets like Vancouver, Montréal and Toronto because they knew they would get a lot of lift in the rental rates,” said Chad Piche, JLL’s national research manager. “But that growth is no longer there.”
Across the board, sales spiked in the second quarter as investors looked to close deals ahead of a proposed increase to the federal capital-gains inclusion rate. That measure has been scrapped since then.
“We did multiple deals only because of [the proposed capital-gains increase], so it was a big driver for 2024,” said Aliferis.
Multifamily makes gains
Bucking the broader market’s lackluster performance, sales of multifamily property jumped 17% to $8.23bn, according to Green Street’s Sales Comps Database, making it the second-largest asset class by deal volume last year.
Market pros attributed the rise in deal activity to ongoing supply constraints driving more favourable yields for investors, combined with readily available access to low-interest financing.
“It starts with debt,” said Mark Sinnett, executive vice president and head of Avison Young’s Québec capital-markets team.
“The financing is better for multifamily. It’s insured by the Canada Mortgage and Housing Corp., and it allows for a lower interest rate and [longer] amortization [period]. With favourable financing, you can leverage more and you can buy with less.”
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Activity was largely driven by private buyers rather than institutional investors or pension funds – historically the largest buyers of domestic real estate. With access to competitive financing, private entities now are better equipped to go head-to-head with larger investors on acquisitions.
“If I can finance 85% to 90% of the building price, that competitive advantage that the pension fund had doesn’t really hold as much,” Sinnett said.
The year’s largest transaction was Brookfield’s $437.2m acquisition of two Toronto apartment buildings with 1,188 units. In the largest single multifamily acquisition, Allied Properties REIT paid $248.4m to take on additional ownership in a 464-unit mixed-use Toronto apartment property.
Other notable multifamily deals include the trade of a 1,108 unit property in Montréal by KingSett Capital and Starlight Investments to a local investor group for $197.5m.
Industrial appetite waning
Demand for industrial properties was markedly cooler in 2024 following several years of white-hot interest. Volume totaled $10.64bn, down 44% from the year before.
“There was really a spike from 2021 to 2023, not surprisingly because of how hot the industrial market became and how underweight a lot of investors realized they were in industrial, so there was a lot of purchasing,” said JLL’s Piche. “2024 represents a pullback from that.”
As domestic institutional investors moved to the sidelines, the space opened up for foreign buyers. San Francisco-based Prologis, in particular, made some high-profile acquisitions during the year, including a $361m purchase of a 1.3m sq ft Milton, Ont., distribution centre, the most expensive deal for that category last year. Another notable deal was Amazon’s $312m acquisition of a fulfillment centre in Belleville, Ont.
Prologis also picked up a 1.6m sq ft distribution centre in Brampton from Canadian Tire for $258.1m.
Sales to end users were more prevalent in 2024, Piche said. “That’s actually one buyer profile that actually increased year over year in industrial, where everything else basically decreased and where investors were a lot more hesitant.”
Looking ahead, the sector’s strong fundamentals are expected to buoy demand for industrial properties, though tariffs announced by the U.S. could weigh on the market.
“If you look at the overall fundamentals of the industrial sector, we’re definitely starting from a position of health,” Avison Young’s Sinnett said.
Green shoots for office
After languishing amid work-from-home trends established during the pandemic, the office sector recorded $4.99bn of sales in 2024, flat with the year-before total. Although still down markedly from the $7.28bn notched in 2022, last year’s performance indicates stability may be returning to the space.
“I think office has already had the wind taken out of its sails. So I do think, with some caveats, that as we continue into 2025 there’s a lot of positive momentum behind the fundamentals for office,” Colliers’ Kendrew said.
“For office not to have declined any further in terms of investment, I think that speaks to an asset class where it really has bottomed out in terms of demand, whereas you have other asset classes – industrial, for instance – where there is growing vacancy.”
Owner-occupiers were also major participants in deal activity last year. For example, George Brown College paid $232.5m to buy the 479,000 sq ft 25 Dockside Drive in Toronto from H&R REIT, and provincial agency Infrastructure Ontario acquired a Class-A Toronto office tower at 438 University Avenue, where it had been an anchor tenant, for a little less than $105m.
“It’s become very expensive to build out office space, so … if this is a really great location for you, then maybe you are better off owning your building rather than just leasing from third-party landlords,” Kendrew said.
Grocery-anchored retail in demand
Although retail property sales dropped 12% to $4.77bn, pros see demand remaining steady as owners have room to drive higher rents, particularly in strip centres.
Marcus & Millichap’s Aliferis expects grocery-anchored retail properties will remain top of mind for investors.
“The demand for necessity-anchored retail is extremely strong … and will continue to be strong,” he said.
Grocery-anchored retail properties remained hot commodities in 2024. Among those deals, an Alberta strip centre at 25 Quarry Street in Cochrane sold for $138.7m, while a Laval, Qué., power centre anchored by a grocery store fetched $126m.
The preference of consumers for necessity-anchored retail arose out of the pandemic, and market watchers expect the trend to continue into 2025, with ongoing uncertainty casting a pall over the economy.
In the case of shopping malls, the demand is certainly there, market pros have said, but very little construction is taking place. What’s more, with the construction of mixed-use residential towers seeing a significant slowdown, less podium retail space has come to market, meaning buyers have even fewer options.
The largest retail property deal of the year was Cadillac Fairview’s purchase of a 50% stake in a mall in Laval, Qué., from TD Greystone Asset Management for $553.2m. It was followed by Primaris REIT’s $370m purchase of the 562,000 sq ft Halifax Shopping Centre from OPB Realty.
Hotel sales dip
Hotel sales retreated 24% last year, with just over $1bn in sales reported. Pros attributed the drop to an overall lack of buyers as well as a disconnect in the market over appropriate pricing.
Hotel trades are expected to grow this year. With little new supply, the few hotel properties that have come to market have fetched multiple offers.
Post-pandemic, buyers were driven largely by pent-up demand for leisure, which turned lodging into a desirable asset class for investors.
“We’re not seeing double-digit growth, but there’s very strong interest in the sector, and I don’t think that’s going to change anytime soon,” said Brian Flood, vice chair and head of the Canadian hospitality and leisure group at Cushman & Wakefield.
Much of the interest in hospitality assets is coming from Canadian investors.
“On those larger assets, we’re just not seeing much interest from outside of the country,” Flood said.
The trade war with the U.S. also is expected to drive demand for Canadian assets.
“We’re already seeing that happen,” Flood said. “Border crossings and flights are down. I suspect that’s going to continue. A lot of people feel that the Canadian market will pick up some of that growth.”
The largest lodging deal tracked by Green Street last year was InnVest Hotels’ acquisition of a portfolio of Marriott hotels in Toronto and Sudbury for $311m.
