Greater Toronto Area non-arm’s length commercial real estate sale completions spiked in the weeks before a federal capital gains tax increase kicked in, says a leading market analyst.

From May 1 to June 30, GTA non-arm’s length deals more approximately tripled. Ray Wong, vice-president of data solutions and client delivery for Altus Group, said he suspects that the capital gains tax increase may have caused the boom.

“It is a sizable leap compared to last year,” said Wong in an interview with Connect.

On June 25, two-thirds of a property-sale profit exceeding $250,000 became taxable. Previously, half of a $250,000-plus gain was taxable.

It’s not possible to say for certain what caused the spike, because property owners are always looking for ways to maximize their portfolio values; however, something definitely triggered it, said Wong.

“I wish I could be a little bit more specific and just pinpoint and just tell you [the cause] exactly,” said Wong. “But again, the motivation for some of the sales is a little deeper than just looking at the data itself.”

From May 1 to June 30, a total of 47 non-arm’s length deals worth $270 million were completed in the GTA, according to Altus figures.

The flurry of non-arm’s length transaction closures contradicted an overall GTA trend. All completed GTA transaction types (not just arm’s length deals) for May 1 to June 30 dropped 17.8% to $3.7 billion from $4.5 billion during the same period in 2023.

By comparison, a modest 16 non-arm’s length deals worth $77 million were completed from May 1 to June 30, 2023.

Non-arm’s length transactions involve entities that are related to each other.

Since only one deal in the 2024 period involved land, it is unlikely that purchasers acquired the properties for development purposes, said Wong.

But as has been the case in all transaction types, industrial and multi-family properties were in the most demand in the non-arm’s length transactions.

“So, I’m not really sure what that says, other than that it’s consistent with the trends in the market for industrial being the most dominant product of transactions,” said Wong.

In deals covering all transaction types between May 1 and June 30, 2024, the GTA saw $1.4 billion worth of completed industrial asset sales. Meanwhile, $807 million worth of residential deals closed, according to the Altus figures.