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Investor uncertainty, scarcity of debt financing and fewer properties for sale pushed Canadian commercial real estate investment sharply lower in the first half of the year, a report released Tuesday by CB Richard Ellis showed.
Investment in the sector, which includes office, retail and industrial properties, fell 24 per cent to $10-billion from $13.1-billion in record-setting 2007. The slowdown is expected to continue, with total investment for the year forecast at around $20-billion, a 40 per cent decline from the year before, and lower than in the previous two years.
That would put the overall level close to the $19.5-billion invested in the sector in 2005, but unlike that year, a big pickup in activity likely won't come in the second half of 2008, said Stefan Ciotlos, interim president of CB Richard Ellis.
“....a strong second half is unlikely to occur this year because what began as a sub-prime credit crisis in the U.S. has become a de-leveraging of all global asset classes impacting Bay and Wall Street's views of real estate in general. The U.S. is currently undergoing a very difficult investment climate, and investment sales in the U.S. were down 60 per cent at the end of June, according to Real Capital Analytics, a firm which reports on the U.S. commercial real estate market,” Mr. Ciotlos said in a statement.
Despite the slowdown, a U.S.-style downturn doesn't appear to be in the cards for the Canadian market, he said.
In the country's nine major markets covered in the study, Vancouver was the only one with a year-over-year increase in investment, which rose to $1.6-billion from $1.5-billion. Toronto, the country's largest market, had the biggest drop in investment, to $3.7-billion from $4.5-billion the year before. Those results, however, were skewed by the sale of three large real estate investment trusts, according to CB Richard Ellis.
