Rates are expected to remain stable entering Q3, according to Avison Young.
Private investors are still salivating over property opportunities in Vancouver
That’s according to a July 16 report from real estate services firm Avison Young, which found the city’s capitalization rates to be among the lowest in Canada during the second quarter of 2024.
Cap rates are used to measure the potential rate of return for investment properties. And Vancouver’s low multi-residential cap rates indicate a lower risk level and a potential for a greater return on investment.
However, sales volumes in Vancouver remained at the bottom in comparison to other Canadian cities with less than $1 billion.
Multi-residential cap rates in Vancouver stayed generally below the average of the biggest markets in Canada, with low-density suburban property rates in the city at exactly the median of 4.8 per cent.
Nonetheless, Toronto represents the lowest cap rates across all subtypes in the country.
For industrial and office cap rates, Vancouver had the lowest in all subtypes with the exception of downtown class A office properties, where Toronto represented the lowest rate once more with 6.25 per cent, 0.05 per cent less than Vancouver.
In the busy retail sector, Vancouver’s cap rates were scattered amongst the highest and the lowest.
For community mall properties, Vancouver’s rates were near the top, tied at seven per cent with Montreal and below Edmonton with 8.5 per cent.
On the other hand, rates were the lowest for street-front properties at 4.5 per cent.
Avison Young predicts Vancouver cap rates will remain stable going into the third quarter.
In other parts of the country, investor enthusiasm is steadily increasing, with lower interest rates, a growing population, increased sales activity in Toronto and Montreal, and a shift in focus to office and retail spaces among the contributing factors.
As this shift occurs, the report highlights some current market trends to look out for.
In the office property market, opportunistic local buyers are acquiring properties at a discount and gaining the advantage. Local market knowledge and networks allows them to develop ways to fill up vacant space quickly, according to the report.