- What Office deal volume of $2.86bn through Sept. 30 is 2.5% ahead of last year’s total
- Why Most deals involve private wealthy buyers
- What next Valuations in some markets have started trending higher
Sales of office properties across Canada are outpacing 2023’s volume, JLL said in a report due out this week.
The firm tallied $2.86bn of transactions for the first nine months, up 2.5% from $2.79bn at the same point a year earlier. Third-quarter volume dipped compared with the second quarter, though the total for that period was inflated as sellers raced to close transactions ahead of the new capital-gains inclusion rate enacted on June 25.
While transaction activity remains low on a historical basis – annual volume topped $18bn in 2017 and $7bn in 2021 and 2022 – there were more trades in the past two quarters than in the three previous ones, indicating that volume may have hit bottom.
Valuations also have started to recover in some markets, JLL said, with Calgary and Edmonton experiencing the largest quarterly improvement. Toronto, on the other hand, continues to see compression.
The brokerage noted that the financing environment remains challenging, with lenders remaining selective on backing deals. “As a result, most office trades have involved private high-net-worth buyers who are less dependent on debt financing,” JLL said, adding that institutions are largely on the sidelines for now.
Transaction volumes in Vancouver ($640m through Sept. 30), Calgary ($279m), Edmonton ($163m) and Montréal ($525m) are expected to exceed last year’s total, while Toronto ($906m), Ottawa (230m) and southwestern Ontario ($54m) are lagging.
Among the largest deals in the quarter was Morguard’s purchase of a 20% stake in Vancouver’s Telus Garden from TD Asset Management for $99m, or an implied $888/sq ft. That values the 557,000 sq ft property, at 510 West Georgia Street, at $494.8m and represents a 4.6% capitalization rate.
