Multifamily cap rate movement unremarkable in Q1

Monday, May 2, 2022
 

Vancouver is the rare exception where market analysts foresee upward cap rate movement in the multifamily sector for the second quarter of 2022. However, that’s in the context of taking claim to Canada’s lowest cap rates yet again during the first three months of the year.

Elsewhere, cap rates are mostly expected to hold steady this spring, but push downward in Halifax, Waterloo and Winnipeg. The latter market presented investors with Canada’s highest cap rates, in the range of 5 to 6 per cent for both high-rise and low-rise acquisitions, during the first quarter.

Colliers Canada pegs Vancouver’s Q1 cap rates in the range of 2.25 to 3.5 per cent for high-rise product and 2.5 to 4 per cent for low-rise. Toronto posted the next low rates among the 10 markets Colliers surveys at 3 to 3.75 per cent for high-rise and 2.75 to 3.75 for low-rise buildings.

Canada-wide, multifamily again registered the lowest average cap rate — at 4.1 per cent — of any property type. That compares to a national cap rate average of 5.33 per cent across all first quarter investment. Colliers analysts foresee other factors will keep investors interested in the coming months.

“The interest rate and inflation issues will hurt consumers most as the era of cheap financing ends,” they maintain. “Prospective first-home buyers may remain renters as their purchasing power diminishes, leading to strong fundamental growth prospects for the multifamily sector looking ahead.”

Colliers’ executive director for Toronto, Tim Loch, points to the robust price-per-unit vendors are now attaining, which was notably seen in Q1’s biggest deal. Hazelview Investment paid more than $154 million for a three-building portfolio comprising 382 units, equating to more than $403,000 per unit.

Q1 cap rates also settled below the national average in nearby Waterloo — ranging from 3.25 per cent to 4 per cent for high-rise and 3.5 to 4.25 per cent for low-rise. Karl Innanen, Colliers executive director for Waterloo, projects vendors will be able to entertain multiple offers as rising rents further drive down cap rates into the future.

Oliver Tighe, Colliers executive director in Ottawa, notes compressing cap rates have not frightened off investors who perceive upside potential to increase rents either through upgrades or infill development on existing sites. A lack of available institutional-grade product in the city has also weighed in that decision-making. Colliers pegs Q1 cap rates at 4 to 4.75 per cent for high-rise and 3.75 to 4.75 for low-rise product.

“There are a number of new stabilized multi-family buildings expected to come to market in the first half of 2022, which should set a benchmark for what investors are willing to pay for a new stabilized asset in Ottawa,” Tighe observes.

Looking west, Rob Preteau, a Colliers senior associate in Winnipeg, suggests investors are likewise “taking a buy/renovate approach to increase rental rates”, while Perry Gereluk, Colliers vice president in Edmonton, underscores rebounding economic activity and provincial in-migration trends that should bode well for rental housing demand. He predicts cap rates “may edge lower” toward the end of 2022.

Calgary and Edmonton registered cap rates in a somewhat similar range — at 4 to 4.25 per cent at the low end and 5.25 to 5.5 per cent at the high end — during the first three months of this year. That’s predicted to remain stable for Q2.

On the west coast, the quarter’s largest deal in Vancouver saw Centurion Apartment REIT acquire a four-building, 514-unit portfolio for $81.7 million or approximately $159,000 per unit. A notable deal in Victoria was the $28-million sale of 93-unit building, equating to $301,000 per unit and a cap rate nearing 3 per cent.

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Sales activity in the Lower Mainland’s commercial real estate market reached the second-highest annual total on record in 2021.

There were 2,659 commercial real estate sales in the Lower Mainland in 2021, a 65.3 per cent increase from the 1,609 sales in 2020, according to data from Commercial Edge, a commercial real estate system operated by the Real Estate Board of Greater Vancouver (REBGV).

Last year’s sales total is the second highest on record behind 2016 when 2,848 sales were recorded.

The total dollar value of commercial real estate sales in the Lower Mainland was $14.396 billion in 2021, a 66.7 per cent increase from $8.635 billion in 2020.

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Smaller hotels and motels in B.C. outlier markets had outperformed occupancy rates of urban flags that rely on corporate and tourism trade, but times are changing                          -Frank O'BrienMar 18, 2022 7:05 AM
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Great opportunity to purchase a three (3) storey, twelve (12) unit, multi-family apartment building, centrally located in Maple Ridge. The property provides a significant upside for income growth, with the current Net Operating Income (NOI) being $76,619.65. The property includes balcony space, shared laundry, and secured parking. Zoned RM-2 (Medium Density Apartment Residential District). The property is situated on 224th Street, just South of Lougheed Highway, and is within walking distance to the town centre, many retail amenities, restaurants & cafes, Brickwood Park, and the Port Haney Wharf. 
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There were 148 restaurant business ONLY sold in 2021 in Greater Vancouver area including 2 restaurant spaces For Lease. Price range $100,000-$200,000 has the most restaurant business sold, next in line was total 49 restaurant businesses sold under $100,000.

TOP 1, Vancouver - 62 SOLD

TOP 2, Surrey - 17 SOLD

TOP 3, Burnaby - 12 SOLD

FULL REPORT

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17 Years Pride of Ownership. Very Well Maintained 54 Units Apartment Building in Coquitlam. Very low Vacancy. 39,600 SQFT Corner Lot. Roof was done in 2009, New Plumbing and New Boiler in 2011. Half of units updated with laminate floor. All adult tenants (40+), no kids, no pets, no BBQ, no party. Always quiet and clean.
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$264 million deal is the largest retail acquisition in the Co-op’s history

(Most of the stations being sold are in B.C. and Alberta)


Saskatoon-based Federated Co-operatives Limited (FCL) is investing $264 million to purchase 181 Husky retail fuel sites in Western Canada from Cenovus Energy Inc., the largest retail acquisition in the Co-op's history.

The December 2021 announcement was made on behalf of local Co-ops in the Co-operative Retailing System.

The acquired retail fuel sites include a mix of gas bars, on-site car washes and convenience stores. Once the deal is complete, FCL said, it will transfer the sites to several independent local co-ops across Western Canada. 

 

"These new locations will strengthen our presence in Western Canada and will bring our unmatched service and support to new geographic areas,” stated the FCL in a release.

The deal is part of about $660 million in asset sales Cenovus announced December 7. It’s subject to regulatory review by the Competition Bureau of Canada, which may determine which sites stay in the deal.

Those that stay will be transferred over to local Co-ops, while others will remain with Husky branding for a short time while being suppled, according to FCL.


FULL STORY

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The most affordable motel currently listed in the Lower Mainland. Prime location in Hxx. Opportunity to own a motel business in beautiful Hxx. This motel is located just within walking distance to shopping center, restaurants, gas stations and some fast food chains. It has 22 rooms on huge .587 acre of flat and useable land. 
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PROFITABLE Barber + Salon for sale, $250,000 in NW Calgary, AB

--The ONLY barber in the community
--gross sales $380k in 2020, $500k in 2021
--Rent is $4800/month including op cost, utilities $500/month
-- 3 hair cut tables, 6 salon tables, 2 sinks
-- 2.5 yrs lease left, 5 yrs renewal option
-- 2 barbers, 2 hair stylists

--contact for confidential details @403-805-7766
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