Greater Golden Horseshoe commercial real estate market update – Q1 2023

Amidst rising inflation and interest rates, the Greater Golden Horseshoe (GGH) market experienced a 23% decrease in investment dollar volume. However, a record-breaking investment in the industrial sector of $873 million in dollar volume marked a 101% increase from Q1 2022. Additionally, as we entered continue in the post-pandemic era, recovering tourism in Hamilton and Niagara Regions contributed to an increased investment dollar volume of $23 million in the hotel sector in Q1 2023, a 71% increase from the previous year. The unprecedented positive momentum of these sectors will encourage economic recovery in the market.

Figure 1 – Other Greater Golden Horseshoe property transactions – All sectors by year

While the industrial sector has always remained a favourable asset in the market, Q1 2023 reported an extraordinary demand for industrial assets that had not been observed in the last decade. The Waterloo Region and Wellington County reported the highest industrial investment by dollar volume at $222 million and $404 million, a 38% and 738% increase, respectively. This activity has mainly been driven by private investors purchasing multi-tenant and single-tenant industrial assets with a few large-scale transactions by the federal government investing in the energy sector.

The Hamilton and Niagara Regions are popular tourist destinations boasting scenic conservation areas, an expansive wine industry and the world-famous Niagara Falls. The pandemic negatively impacted the tourism industry and, subsequently, the hotel sector. However, in the post-pandemic era, Niagara and Hamilton Regions showed remarkable recovery, reporting $10.8 million and $10.2 million in dollar volume, respectively, in Q1 2023. This is the first investment activity in Hamilton’s hotel sector since Q1 2021 and a 47% increase from Q1 2022 in Niagara Region.

Furthermore, the pandemic motivated many living in the Greater Toronto Area (GTA) who were challenged with the affordability of the GTA and placed a higher value on a balanced work and home life to move to the outer areas of the GGH. This shift in where people live, work, and play has contributed to the continued investment in apartment, retail and land (residential and ICI) sectors, predominately in Hamilton, Simcoe County, Waterloo Region and Niagara Region.

Notable Q1 2023 transactions

The following are notable transactions for the Q1 2023 GGH commercial real estate market update.

982 Rest Acres Road & 986-1036 Powerline Road, Brant – ICI Land

With a selling price of $190 million, this 350-acre land acquisition by Orlando Corporation represents the largest GGH transaction in the quarter. This sizeable transaction in terms of land size and dollar volume comes just a year after a group led by Panattoni Development Company Canada acquired 423 acres of land for $290 million, just a few kilometres away from this site. Prior to the date of sale, a rezoning and draft plan of subdivision applications were approved by the County of Brant Planning Department pertaining to one of the parcels involved in the transaction. The applications proposed that the land be zoned for light, heavy, and prestige industrial uses, including limited service commercial and related uses. No development applications were submitted for the remaining parcels at the time of sale.

1270 Fischer-Hallman Road, Kitchener - Retail

This neighbourhood shopping centre, anchored by Food Basics, was purchased by Strathallen Capital for $18,750,000, representing a price per square foot of $240. The property sat on a 7.9 acre site located on the southern perimeter of Kitchener and was nearing the final stages of construction at the time of sale. The vendor and developer of this asset, ONE Properties, originally assembled the lands comprising 17.2 acres in 2016 for a total consideration of $14,900,000 or $868,805 per acre.

295 Dale Crescent, Waterloo – Apartment

With a purchase price of $19,850,000, this seven-storey apartment building was the second-largest multi-family transaction seen in the quarter. The building sits on just over 2.6 acres and consists of 101 units. This deal represents the first tri-city (Kitchener, Waterloo & Cambridge) acquisition in 2023 for Starlight Investments. Still, this region has been a preferred market with over half a billion dollars in acquisitions since 2017.

571 Bayfield Street, Barrie – Industrial

HCHG Developments Inc. purchased this 39,203 square-foot flex industrial building for a total consideration of $8,400,000, representing a price per square foot of $214. This comes only a few years after the property sold in 2020 for $3,750,000. With a coverage ratio of just 19%, the property will offer the new owners future expansion or development potential.

Figure 2 – Other Greater Golden Horseshoe property transactions by asset class – Q1 2022 vs. Q1 2023

The outlook for the Greater Golden Horseshoe market continues to be positive with the recovery of its tourism industry and as investors continue to have a favourable view of the industrial sector. This market is instrumental to Ontario’s manufacturing, agricultural and technology sectors. While land prices have increased due to limited supply, investors recognize that the migration and fostering of skilled workers to encourage economic activity in the market would lead to future growth in all sectors.

In our data, the Greater Golden Horseshoe (GGH) includes all parts of the GGH outside of the Greater Toronto Area. Read our Toronto CRE market update, for what is happening in the GTA.