Multi-family as an asset class proved its resilience during the COVID-19 pandemic when, despite a turbulent beginning to 2020, it roared back to life and set a record in Greater Vancouver and Victoria.
A report from CBRE says there were 185 transactions in the two metropolitan areas worth $3 billion, which breaks down at 7,309 units that averaged $407,000. Despite rising vacancies during Q2-2020, the second half was defined by rapid recovery in the multi-family sector, paving the way for last year’s record activity. CBRE anticipates another strong year in 2022 because immigration has resumed — the 411,000 newcomers expected this year will be a record — and students are once again flocking back to urban cores to resume in-class learning.
Rent Freezes Led to Multi-Family Sell-Off
The government’s imposition of rent freezes was a major factor in last year’s record activity, CBRE noted, as were escalating operating costs and potential capital gains tax increases. Owners decided to take advantage of the market’s record pricing and divest these assets, including the Legacy Apartment Portfolio, which was the largest multi-family sale in the history of British Columbia.
There were 24 transactions in downtown/west end Vancouver worth $767,796,500, and the 1,446 units sold averaged $530,980 a piece with an average cap rate of 2.6%. Conversely, in 2020, there were only seven transactions worth $130,640,000, and the 271 units sold averaged $482,066.
In Westside Vancouver, there were 52 transactions totalling $622,349,000, and the 1,356 units sold averaged $458,959 with a 2.8% cap rate. In 2020, there were only 15 transactions worth $276,553,888, and the 509 units sold averaged $543,328.
The city’s eastside recorded 20 transactions worth $203,772,000, which averaged $397,992 per unit and a 3.3% cap rate. In all, Greater Vancouver accounted for $2.21 billion of the sales activity in 2021. Conversely, in 2020, there were 14 transactions totalling $200,598,000, and the 442 units sold averaged $453,842.
Greater Victoria recorded 47 transactions in 2021, which totalled $756,635,373. The 2,451 units sold averaged $309,000. In 2020, there were only 16 transactions worth $245,640,990, and the 838 units sold averaged $293,000.
One of the drivers behind the multi-family sector in both metropolitan regions is institutional money, the CBRE report noted. REITS, some from as far as Ontario, were bullish on the asset class even as vacancies were rising through the early part of last year. Forty percent of 2021’s sales volume belonged to private investors, while private institutions and public comprised the remaining 60%. Among the most popular neighbourhoods in Vancouver are the West End, South Granville, West Point Grey, Kitsilano, and Marpole.
