B.C. Apartment Building Sales Soar
B.C. rental apartment building sales are soaring as private investors take advantage of low-cost financing, according to commercial real estate broker Avison Young’s latest B.C. multi-family investment report.
Multi-family investment volume reached $377 million in 2011, a 43-per-cent increase over 2010, and the number of transactions increased to 35 from 20, Avison Young said.
Rental apartment buildings are popular because they are regarded as the safest of all commercial real estate asset classes, Avison Young principal Rob Greer said.
“They are low risk, well located buildings with vacancy rates typically under one per cent and they have steady cash flow compared with industrial, office or retail.”
In the last 12-24 months, 30 per cent of buyers have been Chinese immigrants to Vancouver, Greer said.
“They have the single-family home and are now looking for other investment opportunities and are really interested in multi-family apartment buildings because of the safety and the low interest rates and the low cost of debt,” he said.
Demand is strong throughout the Lower Mainland and on Vancouver Island, but supply is short, Greer said.
“These assets have always been tightly held and they are mostly private families, and why they don’t want to sell the assets is because, typically, [of the] high capital gains tax to be paid,” Greer said.
“Until we see that legislation change, we’re not going to see many of these assets come on to the market.
“Kitsilano, the West End, south Granville are all areas where all the new deals are being completed this year. We’re seeing record low cap rates.
“People are more willing to sell because pricing has never been so high,” Greer said.
“The cap rates for these really sought-after areas hover between 2.5 to 3.5 per cent.
“The buyers are looking at these assets hoping to achieve rental increases and they have very cheap debt that helps them justify these extra low cap rates.”