Transactions ebbed in the second quarter of 2022, but multifamily sales volume in the Greater Toronto Area is only slightly behind last year’s pace due to a 16.5 per cent year-over-year increase in the average price per suite. Colliers Canada’s newly released GTA multifamily market report puts that average at $358,390, along with an average cap rate of 3.13 per cent.
Spring saw a total of 1,721 units trade in 19 deals for an overall sales volume of $647.7 million. That’s down from Q1 when 34 transactions encompassing 2,138 units totalled $794.4 million is sales value. Much of 2021’s activity — representing nearly $3.3 billion in sales value as vendors offloaded 10,305 units — occurred in the third and fourth quarters. Sales volume for the first half of 2022 is just 1.3 per cent short of the June 30, 2021 tally.
Deal-making appeared to pick up later in quarter with three notable transactions occurring after the May long weekend. That includes Starlight Investment’s late June purchase of 105 Isabella Street and 100 Gloucester Street in midtown Toronto, acquiring 432 units for roughly $137 million or $317,419 per unit.
Q-Residential pumped up its portfolio in Scarborough with: the $165 million, two-building acquisition of 215 and 225 Markham Road, adding 423 units at $390,071 per unit; and the $48-million purchase of 20 Greencrest Circuit, with 136 units at $353,676 per unit. Outside Toronto, the quarter’s biggest deal was Realstar’s $112.5 million acquisition of 20 North Shore Boulevard W. in Burlington, equating to $511,364 per unit.
Across the GTA, the average cap rate has compressed 9 basis points (bps) since Q2 2021. In tandem with a rising 10-year bond yield, there is now just a 2 bps spread between cap rates and bond yield — a significant narrowing since 2020 when the spread stretched to 259 bps.
Even so, Colliers analysts point to strong multifamily fundamentals with continued robust immigration levels, projected rent growth, expectations for debt stabilization and a potential slowdown in new purpose-built rental construction. “In general, investors are recognizing attractive risk-adjusted yields in multifamily that may be difficult to achieve elsewhere,” they conclude.
Currently, there are more than 20,150 purpose-built rental units under construction in the GTA and nearly 103,000 proposed or in the development pipeline. That’s an upward trend on both counts since Q1 when 19,540 units were under construction and 98,660 were at the proposal stage. More than 7,070 new units are slated for completion this year, while about 6,770 are scheduled to come onto the market for the first time in 2023.
