GTA property investment tumbles in first quarter


Ontario Construction News staff writer

Following a slow finish to 2022, commercial investment activity in the Greater Toronto Area continued to tumble in the first quarter of this year to $4.6 billion, roughly 50 per cent below the corresponding 2022 period, says a new report from commercial real estate intelligence firm the Altus Group.

It blames the decrease in activity on a slowing economy and the rapid climb in interest rates that began last year. With volatile market conditions to contend with, investors and sellers are continuing to exercise caution while struggling to determine asset prices.

The land sectors (residential, ICI and residential lots) continued to be prominent in the GTA. Residential land was the most popular sector with $1.21 billion in total investment, followed closely by ICI land, which came in at slightly less than $1 billion for the quarter, the report says. These findings represent a dramatic decrease compared to the first quarter of 2022 – a 50 per cent drop in residential land, and a 38 per cent drop in ICI land.

Industrial properties led the way among improved properties with $864 million in total investment, which still represents an almost 50 per cent drop from the first quarter of 2022. Industrial fundamentals remained strong with the availability rate at less than 2 per cent while rental rates continued to rise based on a limited supply of listings.

Office investment transactions dropped to $0.5 billion in the first quarter from $1.9 billion in the same period last year due to the lack of blockbuster office trades, such as the sale of Royal Bank Plaza in the fourth quarter of 2022. Uncertainty around the office asset class persisted but with multiple significant office transactions this year the report says, “investors continue to show optimism for this asset class as the return to office trend continues to emerge across some industries.”

The pause in market activity in the latter half of 2022 continued into 2023 due to a bid ask price gap between sellers and buyers. The closing of some transactions saw challenges where the investors frequently had to renegotiate with lenders – both when the deal was initiated and then at the closing date. To help get the deal over the finish line, purchasers had to bridge the gap with higher interest rates, the report says.


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