According to a new report released by RealNet Canada Inc., property valuations have become so high in Vancouver’s commercial market that it is starting to take a toll on the number of deals that are closing.
The company says that capitalisation rates, which are the implied rate of return on a property, in British Columbia, have dropped so low that the 13 per cent slump in the first three months of this year can be linked to it. The lower the cap rate, the higher the property value.
Paul Richter, the director of research with RealNet, said, “Transaction volumes experienced declines as the general market adjusts to changing value expectations in a record low cap rate environment.
“Investment activity experienced a decline, however, demand for quality assets and development sites remains high.”
RealNet stated there were 217 transactions of $1million or more in the Vancouver market in the first three months of the year, which added up to $1,06 billion in activity. This figure was down significantly from the fourth quarter levels of 2012, when more than $1.2 billion in real estate closings were recorded. The first quarter numbers were still high enough to be 10 per cent above the long-term quarterly average.
The largest transaction to be completed in the first quarter was the purchase of 349 West Georgia Street in Downtown Vancouver by British Columbia Investment Management Corp. The property took up an entire city block, encompassing 2,984 acres of land. The property’s previous owner was Canada Post and the selling price as a reported $166 million.
Previous Post
Airbus Creates 300 UK Jobs
