Well, we just lived through the majority of the year with COVID-19 and most of us are still working from home. Surely the commercial real estate market has imploded. Not so fast, you will note that sales volumes are not too far off pre-COVID levels.
As a market participant, you are likely aware that the office market is suffering a high volume of office sublet space while the brick and mortar side of the retail market is struggling to get back on its feet. So you might be surprised to learn that one of the highest dollar sales was found in the office sector while the retail sector recorded 130 sales over the quarter, outpacing all of the other sectors surveyed in this report.
Much like we medically know far more today about COVID than we did in March, the real estate market also has had some time to contemplate life moving forward and, as of this writing, investors are moving ahead with deals. The one thing that is similar to the second quarter is the buyer profile continues to be led by private investors, in most cases.
So how did we make out? In the office sector there were 33 sales in excess of $1 million while we recorded 34 in Q2. Also like the last quarter, we note only 7 sales more than $10 million while we posted 8 in Q2. The difference is the dollar value of the high
dollar sale. Where we could only muster a high of $39,375,000 last time around, the winner this quarter came in at $78,500,000 with the sale of 277 Wellington Street West by Triovest to Reserve Properties and Westdale. Other than a sale in the $27 million range, the remainder of the high dollar transactions were in the $10-15 million range.
Retail Sector
We stated earlier that the retail sector wins the award in providing the high score of transaction volume against our other participants in this report. That’s really the highlight as only 9 properties traded over $10 million with the high dollar sale being located at 3080 and 3120 Dufferin Street for $30 million. It should be outlined that this was for a car dealership and not your garden variety community centre. To make matters worse, the next high dollar sale was, you guessed it, another car dealership located at 2375 Wyecroft Road in Oakville. Both properties were operating as Toyota dealerships at the time of sale if you’re looking for conspiracy theories in the results.
Industrial improves its sales performance from the previous quarter, notching 121 sales against 85 transactions last Spring. These sales volumes, though down from average quarters, are not too much off pace. There were 20 sales in excess of $10 million with the high dollar sale coming in at $30 million, just $2 million shy of last quarters topper. The property in question is in Etobicoke at 75-77 Fima Crescent, a 214,518 square foot facility. We note a sharp increase in high dollar sales this quarter in comparison to Q2 where we only saw 8 transactions over $10 million at that time versus 20 transactions in Q3 exceeding that mark. Industrial remains the darling in the commercial real estate sector as many companies learned from the outset of the pandemic that not having an online presence put your business in great peril so demand is exceeding supply with no relief in rental rates
We rebounded to normal sales volumes in the High-Rise Land sector this quarter where 50 trades were put up on the board, 18 of which exceeded $10 million in value. In Q2, only 32 properties changed hands. We suspect the brakes were put on when the pandemic took hold. Over the last quarter, there has been good intel on the residential market. Several sales centre openings saw great success, selling out beyond 75% in most cases and with selling prices showing no discount, if not even higher, than before the went into lockdown. A good example is Alterra’s planned development on Eastern Avenue, hardly a tony neighbourhood at the moment yet selling units at over $1,200 per square foot. Compare this to your friends trying to re-sell their existing units with barely a soul taking an interest while inventory continues to rise.
It is in this sector that we note the highest dollar sales with two transactions exceeding $80 million with the winner being located at 3450 Dufferin St. at $86.5 million for 5.089 acres of dirt. Next down the list was the sale of 13.766 acres at 429 Lake Shore Blvd. E. and 324 Cherry St. for just over $83 million.
Retail Sales
It is quite phenomenal that we report 130 sales this quarter yet only 9 could stretch over the $10 million wall. Retail has not shown much bench strength over the last few years, rarely having any “whoa” moments with respect to high dollar sales values. So maybe we shouldn’t be concerned with the results as it’s more business as usual in terms of both sales volumes and high dollar sales. Franky, this writer thought the results would have been far worse although investing in commercial real estate may be a smarter investment than the volatility of the stock market.
As outlined in our opening remarks, the two high dollar sales pertained to automobile dealerships. The first one that we review is located at 3080 and 3120 Dufferin Street, just north of Lawrence Avenue. The property was purchased by the tenant, Yorkdale Toyota from a numbered company for $30 million. The site measures 3.167 acres and is improved with a 26,600 square foot dealership. The site also included a Harvey’s fast-food restaurant measuring 3,200 square feet where, if you act now, you can pick up a Signature Poutine for only $4.99! An interesting note on this transaction – the vendor acquired these holdings in 2018 for a total price of just $9,750,000. The occupants at the time of this sale were the same as those found in the 2020 sale.
We turn to our first retail centre sale in this section where we review 4820–4830 Sheppard Avenue East. The site is improved with a 19,797 square foot development, transacted between two private investors. The selling price was $12,569,600 or $635 per square foot. The net income was reported as $497,000, offering a return of 3.9%. This sale was part of a portfolio of two properties with the purchaser acquiring the neighbouring property at 4800-4810 Sheppard Avenue East for $26,710,000 from the vendor. This is a 62,534 square foot industrial building that we will discuss further in our next section.
Here we go again, the next sale pertains to, yup, another car dealership. This one is also located in Mississauga but is an investment sale. The vendor was Cloverbrae Investments Limited who sold their holding occupied by Erinwood Ford to Morguard Investments Limited. The dealership is located at 2395 Motorway Boulevard and is improved with a 45,391 square foot building. The selling price was $12 million or $264 per square foot. Erinwood Ford was paying an annual rent of $480,000 at the time of sale, resulting in a 4% cap rate going in.
We have one more $12 million sale and it’s a user acquisition. Empire Communities sold to Kingsway College School twenty-one condominium units measuring 28,300 square feet for a value of $424 per square foot. The property is located at 2181 Lake Shore Boulevard West near Park Lawn Road.
Our last high dollar sale is NOT an auto dealership. This time we see another Yorkville neighbourhood sale with Scollard Investments Inc. selling 91-93 Scollard St. to The Brand Factory — a three-storey plus basement holding for $10.5 million or $686 per square foot. The building measures 15,311 square feet and was vacant at the time of sale. The property was listed in May for $11 million and sold and closed in 60 days with strong market interest during the marketing period.
This writer gasped when he wrote about the Cumberland Avenue sale at $3,125 per square foot. Well, there were quite a few sales worth noting that exceeded $1,000 per square foot that we’ll examine in this space. Firstly, at 13 St. Clair Avenue West, GTL 13 Properties Corp. acquired from Minic Investments Limited their 3,600 square foot building for $8 million or $2,222 per square foot. The building is fully occupied by Pizzaiolo.
Moving south, two private investors transacted the sale of 654 Yonge Street for $6,700,000. The building measures 3,550 square feet, resulting in a value of $1,887 per square foot. The building was partially occupied by the Shoe Market.
North of Yonge and Eglinton, KPMR Investments Inc. acquired 2485 Yonge Street for $2.8 million from a private owner. The building measures 1,700 square feet providing a value of $1,647 per square foot. The vendor provided a leaseback for a period of two years, offering a 2.8% cap rate to the purchaser. This property is part of an assembly being undertaken by the purchaser which would have influenced the selling price in the transaction.
Lastly, we look at 442 Queen Street West, a popular area in the city with its eclectic mix of national and local tenants. The building was sold by a private investor for $2.8 million to another private buyer. The building measures 2,072 square feet on two floors, indicating a value of $1,351 per square foot. As we have noted in a number of instances, the property was only on the market a short time, in this case 30 days. It had been listed at $2,990,000. The commercial space was vacant at the time of sale.
Similar to the second quarter, we up the ante by almost 20 this quarter to 50 highrise sales transactions, in other words, back to normal volumes, at least for now.
The value of the transactions also has a very similar tone to activity prior to COVID, noting five sales in excess of $25 million within the 18 sales in excess of $10 million.
Turning to the top high dollar sale, the location of this transaction was not in the usual neighbourhoods of King West or Yorkville. The property in question is 3450 Dufferin St., across from Yorkdale mall. This 5.09-acre site was improved with a hotel that was owned by Easton’s Group of Hotels Inc. The purchaser was a team which includes Timbercreek, Fitrovia Real Estate and AimCo. The selling price was $86.5 million or $95 per square foot buildable. The proposed development was approved at the time of sale and permits 909,174 square feet of development with 1,044 residential units, 255 hotel suites and 3,681 square feet of retail space.
Cityzen Group acquired from Home Depot, 324 Cherry St. and 429 Lake Shore Blvd. E. for $83,181,320 for 13.766 acres of land. At the time of sale, an application to develop 2,517,033 square feet of space was planned in a mixed-use project of residential and commercial uses to be located within seven blocks. If approved, the selling price equates to $33 per development will see 58,491 square feet constructed in a 13-storey, 34-unit building. Based upon the selling price, the property achieved a rather healthy value of $325 per square foot.
Madison Group purchased 114 Church St. for $18,659,136, receiving 0.227 acres of land for their effort. The vendor was Emeth Holdings Limited and Har-Ru Holdings Limited. This property gets added into the assembly undertaken by Madison Group in this area as they previously purchased 114 Church St. and 59 Richmond St. E. in April. The combined area of the assembly is 0.442 acres and they have invested $46,909,136 to date. Madison has applied to construct a 402,414-square-foot building on site measuring 45 storeys and housing 479 proposed units. If approved, the site has a value of $117 per square foot buildable.
Toronto Community Housing closed another deal with Daniels Corporation in the Gerrard Street East and Parliament Street area this quarter. The site measures 2.039 acres and sold for $17,751,910. At the time of sale, no application for redevelopment had been tendered.
As part of a receivership sale, the Ontario Superior Court of Justice sold 189 Dundas St. W. in Mississauga to Augend 189 Dundas West Village Properties for $16,675,000 for 3.486 acres of land. There has been no application for development as of this writing.
Freed Developments sold 71 Talara Dr. near Bayview and Highway 401 to Tribute Communities for $15,700,000. The site measures 0.733 acres. There was no development application tendered prior to or after the sale.
Emblem Developments purchased 244 King St. E. to add to their assembly in the area for $15,041,502 for 0.119 acres. The vendor was a private, numbered company who purchased the property in 2019 for only $4.4 million. Emblem also acquired two other properties this quarter located at 248-250 King St. E. and 246 King St. E. The combined area of the assembled properties equals 0.169 acres and they have invested $22,192,953 so far. No applications have been submitted for redevelopment.
Closing remarks
Let’s hope we don’t lose the momentum that the market has shown this quarter. Yes, buyers are waiting with bated breath for the fall but that will likely coincide with lenders heading for the exits. Having worked through the 1990s recession you should be careful what you wish for, it’s not pretty.
