Land investments the lone bright spot as Ottawa CRE investments dip 36% in 2020
Land investments the lone bright spot as Ottawa CRE investments dip 36% in 2020
As a tumultuous year came to a close, the economic impacts of the COVID-19 pandemic were felt both globally and locally in 2020, especially in the Ottawa commercial real estate market. Uncertainties throughout the year led to a hesitancy to purchase among many investors, and ultimately the Ottawa market finished the year with $1.5 billion in total investments, representing a 36% decrease from the record setting $2.5 billion seen in 2019. While deal volumes also dipped, they only decreased by 3%, indicating activity continued but at smaller transaction values. Investors navigated the Ottawa commercial real estate landscape with caution which was reflected in the lack of high-profile transactions seen in previous years, as larger institutional buyers maintained a wait-and-see approach throughout 2020. Another factor resulting in the lower than expected total investments was the continued bid-ask gap between buyers and sellers throughout the year. Overall, the fourth quarter recorded $498 million in volume, down only 8% compared to 2019.
Most asset classes saw a significant drop in total investments, yet the land sectors (residential and ICI land) were the only asset classes to experience growth, both displaying a 5% increase in total 2020 investments compared to the previous year. ICI land investments totalled $212 million and residential land $332 million, which attests to the need for new supply of both residential and commercial space in the burgeoning Ottawa market. As seen in prior years, the apartment and office sectors once again led in total investments, registering $396 million and $361 million, respectively. However, these investment totals were stark decreases, as they represented 34% and 46% drop-offs compared to 2019. The most significant declines in total 2020 investments were in the industrial sector with $82 million, dropping 75%, and in the retail sector with $99 million, dropping 72%. According to Altus Group’s Investment Trends Survey for Q4 2020, the Ottawa market sits on the positive end of the buy/sell ratio and has experienced upward momentum as the fourth most preferred major market by investors. Cap rates across all asset classes have compressed, with the exception of Tier I Regional Malls that recorded a quarter-over-quarter increase.
Notable Ottawa investment transactions during Q4 2020:
81 Metcalfe Street, Downtown – Office
Acquired by Toronto based Marlin Spring, this 12-storey, 57,170 square foot office building was the largest office transaction seen in the quarter. The transaction involved a 75% interest stake in the property for $12.5 million. The asset is favourably located in Ottawa’s central business district and marks the first investment into the Ottawa market for Marlin Spring.
2105 Bantree Street, Gloucester – Industrial
At $11.5 million, this 108,500 square foot property was the largest industrial sale of the quarter. Previously occupied by Greyhound Canada, the building was acquired by Manulife Financial whose ultimate plans are to re-develop the nearly 10-acre site.
Homestead Land Holdings Ltd. CAPREIT Multi-Family Portfolio 2020, Gloucester & Downtown – Apartment
This 380-unit, two-property multi-family portfolio was sold by Homestead Land Holdings Ltd. and acquired by CAPREIT for $95,500,000. The portfolio included a 330-unit townhouse complex located in Gloucester and a 50-unit, seven-storey apartment building located in downtown Ottawa. At the time of sale, the combined properties had a 99% occupancy rate.
Royalton Place, Gloucester – Apartment
Located at 3360 Paul Anka Drive, this 12-storey, 232-unit apartment building was also sold by Homestead Land Holdings Ltd. and was marketed for sale together with the assets mentioned above that were purchased by CAPREIT. Acquired by Starlight Investments for $53.8 million, this property sits on nearly 3.6 acres and offers the potential for additional density to be added in the future.
Albert At Bay & Best Western Plus Hotel Portfolio, Downtown – Hotel
Purchased by a private investor, this two-property downtown Ottawa hotel portfolio was acquired for a total of $79.4 million. The two properties were permanently closed at the time of sale and were formerly operating under the hotel banners Best Western Plus and the Albert on Bay. The new owners are seeking to convert these hotel assets into rental apartment buildings.
After a trying year that included restrictions, lockdowns and work from home, the Ottawa commercial real estate market was undoubtedly impacted by the pandemic. Still, investment activity is predicted to rebound with the promise of vaccine distribution on the horizon bringing some relief to current uncertainties. Given the strong outcomes closing out 2020 with fourth quarter investments totalling nearly $500 million, the Ottawa market looks to carry this momentum forward into 2021.
All references in this article are to arms-length transactions.
Source Altus Group. Click here to read a full story
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