Multi-family residential property prices in B.C. strengthened in 2012 as rental returns for owners reached 20-year lows, according to Avison Young’s spring 2013 B.C. multi-family investment report, which was released April 17.
Returns for owners are known as the capitalization (cap) rate, which is the ratio between a property’s net operating income and its original price. For example, a $1 million property that generates $100,000 annually after expenses would give the owner a 10% cap rate.
A dwindling supply of multi-family product in primary markets pushed many purchasers – private investors, REITs and institutional buyers – to secondary markets in search of acquisitions and yield, the report noted.
Owners of other real-estate classes told Business in Vancouver that they are diversifying to expose themselves more to multi-family properties.
“Residential is very strong,” said Zack Bhatia, vice-president at Mayfair Properties Ltd. “You haven’t seen cap rates this low in 20 years. You’re buying buildings now at sub-4% cap rates. That’s a very low cap rate showing just how strong residential multifamily properties are right now.”
Mayfair’s largest division is its Mayfair Hotels and Resorts, which owns 12 B.C. hotels including seven in downtown Vancouver.
The company expects to finalize a deal to buy two Vancouver residential towers in the coming days.
Last year it developed a small residential building in North Vancouver and bought four residential towers in Burnaby that have a total of 518 units. The company also recently built a mini-storage building and it owns a small office building.
Retirement Concepts, which largely owns B.C. seniors’ residences and hotels, has also recently started investing in multi-family and office properties in the U.S. and Toronto, CEO Azim Jamal told BIV April 17.
