Property investors still see Vancouver as low-risk, high-reward market

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Rates are expected to remain stable entering Q3, according to Avison Young.

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. 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 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. 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.

 

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