The sale of a pair of office towers in downtown Vancouver, British Columbia, for an estimated $300 million to a German investment firm signals the start of a new wave of office investment in the country marked by the return of international investors to one of its largest cities, brokers connected with the deal said.
Frankfurt-based Deka Immobilien this month acquired 402 Dunsmuir St., a nine-floor building fully occupied by Amazon, and the 22-floor 401 W. Georgia St. from Oxford Properties and the Canada Pension Plan Investment Board in one of the country’s largest office deals of the past two years.
The transaction highlights the resilience of the Vancouver office market and “marks the beginning of the next cycle of office investment in Canada,” CBRE Canada President and CEO Jon Ramscar said in a statement.
The deal for 401 W. Georgia and 402 Dunsmuir, encompassing a combined 415,000 square feet, also marks a return of international investors to Canada's largest West Coast city, added Tony Quattrin, who co-directed CBRE's Vancouver national investment team that brokered the deal.
“This was definitely a landmark transaction conducted in one of the most uncertain economic environments in recent history,” Quattrin said. “We generated considerable interest from dozens of groups, including several international capital groups."
Oxford, the real estate investment arm of the Ontario Municipal Employees Retirement System, and the Canada Pension Plan put the properties on the market last summer, and Bloomberg reported an agreement to sell the buildings for about $300 million in February. The deal closed this month after the seller finished a global marketing campaign and bidding process, CoStar data shows.
Amazon Web Services almost fully occupies 402 Dunsmuir, and 401 W. Georgia is occupied by Aon Canada, Unbounce Marketing Solutions, Richards Buell Sutton, and BuildDirect.com Technologies.
While the estimated $300 million sale price “points to a value reduction for quality office stock downtown" overall, pricing still remains close to pre-pandemic levels, said Paul Richter, CoStar's director of market analytics for Western Canada.
Richter said that Downtown Vancouver’s office market is in a relatively healthy balance despite an increase in the district’s vacancy rate to 10% from 2% in 2019.
“I would expect that this most recent transaction will embolden other office owners to test their properties on the open market,” he added.
The deal further indicates interest from foreign investors in Canadian markets after Singapore Investment Corp., better known as GIC, teamed with Dream a year ago to acquire a $5.9 billion nationwide industrial portfolio, Richter said.
“The country is stable from a political and geopolitical standpoint and the Canadian dollar is weak, allowing Canadian assets to be acquired at a discount by foreign buyers,” Richter said. “I believe foreign investors will continue to look to Canadian markets for top-quality assets over the next 12 to 24 months.”