Pensions, Private Buyers Head to the Malls

Big investors power growth in commercial real estate.

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mallThe commercial real estate investment market continues to recalibrate following a summer in which interest rate movements spurred pension fund demand and spooked real estate investment trusts (REITs), according to a report.

CBRE’s Canadian Investment MarketView indicates that, as the year has progressed, private buyers came to the forefront and are now the primary source of demand for commercial property.

In the third quarter of 2013, $6 billion of commercial property traded hands across the country and $20.2 billion on a year-to-date (YTD) basis. Total volume was down 19.5% from the third quarter of 2012, but for the year, investment volume is only 9.2% below the first three quarters of 2012.

The company says private buyers, who had been crowded out of the market as the REITs dominated, are back buying near more normal levels and are taking advantage of still-low borrowing costs and their ability to understand and adjust to changing local market conditions.

And pension fund/advisors made up 8.4% of purchases in the third quarter, and 11.9% YTD, with private equity purchasers totalling 8.4% this quarter and 11.1% YTD.

“The Canadian commercial real estate investment market has cooled slightly, with REITs accounting for a mere 7.5% of transactions this quarter and Canadian pension funds increasingly focused on adding international assets to their portfolios,” says Ross Moore, CBRE’s director of research.

“Despite this shift and what is turning into one of the quietest years in recent memory for office investment, there has been a year-over-year increase in commercial property transactions in Edmonton and Calgary, and most other markets are proving to be quite resilient.”

Overall, CBRE expects commercial property investment is likely to total $26.5 billion in 2013, one of the top three years for commercial property sales in Canadian history.

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