Avison Young on Toronto's 2021 commercial market performance

Market investment "made up for lost time" in 2021, Avison Young reports

Avison Young on Toronto's 2021 commercial market performance

Total commercial real estate investment in the Greater Toronto area amounted to nearly $23.5 billion in 2021, up by 92% year-over-year and exceeding the record-high annual total set in 2019 ($17.7 billion) by 33%, according to a new report from Avison Young.

“After being held back by uncertain circumstances in 2020, investors made up for lost time in 2021, taking advantage of free-flowing capital and low borrowing costs,” Avison Young said. “Against the backdrop of heated development and robust housing demand across the GTA, industrial, ICI land and multi-residential assets were the top priorities for buyers once again.”

Sales of office, industrial, retail, multi-residential, and ICI land assets valued at $1 million or higher totalled $7.7 billion in Q4, representing increases of 10% quarterly and 90% annually.

“Deal activity increased quarter-over-quarter, with nearly 700 transactions taking place across the GTA market. Distressed-asset sales remained in check through 2021, with a total of 26 transactions totalling $165 million – similar to 2020 levels,” Avison Young said.

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The cap rate across the GTA fell by 20 basis points (bps) over the course of the year to end 2021 at 4%. This continued a downward trend that has manifested on an annual basis since 2009, with the exception of a 10-bps increase in 2020.

“The decline in the overall average cap rate was led by the industrial sector, with single- and multi-tenant industrial assets compressing by 40 and 50 bps, respectively, to 3.8% and 4% at year-end,” Avison Young said. “Multi-residential assets posted the lowest cap rates of any sector, falling 40 bps year-over-year to an average of 3.2%.”