vanci

New small-space flex offices push $1,000 a square foot

Metro’s high-tech sector driving demand for new office-industrial strata projects

New light industrial/office strata projects springing up from Mount Pleasant to East Vancouver may have tapped into a profitable path, despite per-square-foot prices ranging from $800 to $1,000.

The most recent manifestations include a four-storey project on Yukon Street at West 6th Avenue – formerly the 3 Vets outdoor store – by Chard Development, which bought the site last year for $20.4 million.

Now under development, the 49,000-square-foot Yukon project will feature a high-ceiling ground floor for light industrial, with bay access for trucks, capped by three floors of stylish office space.

Chard recognized a demand for smaller office sizes from the area’s tech, finance and retail services industries. As a result, Yukon will feature smaller unit sizes (1,000 to 5,000 square feet) to adapt to this new Vancouver real estate reality, according to Byron Chard, Chard’s principal and CFO.

A similar Chard project at 34 West 7th Avenue sold out all 48,000 square feet while still under construction.

Nothing has pre-sold yet at the Yukon, where strata space starts at $1,000 per square foot.

The building will include a freight elevator, bike lockers, showers and 83 parking stalls, and it could prove popular, according to the type of high-tech tenant Chard is targeting. Completion is expected in 2020.

“I can definitely see the demand,” said Dogu Taskiran, a partner and founder at Stambol Studios, a virtual-reality startup that concentrates on the real estate market.

Taskiran said the Mount Pleasant location and ample parking would be among the draws.

Stambol is currently splitting 2,000 square feet of space in False Creek Flats, where the total monthly rent is $3,000, which Taskiran described as “a very good deal, very cheap.”

Chard noted that a startup could buy office or industrial space at Yukon and lease out part of it until it expands, but he expects most of the buyers will be sole owner-occupiers.

“Our goal is to make the space as flexible as possible,” he said.

Alliance Partners is trying the same concept in East Vancouver with a five-storey, 55,000-square-foot light industrial/office strata project on Clark Drive at Adanac Street.

Kevin Kassautzki, vice-president at Avison Young, which is handling sales of the project, expects per-square-foot prices to be in the $700 range for industrial space and $800 for offices.

“I think this area is on its way to becoming the next Mount Pleasant,” Kassautzki said.

There is an appetite for buying strata office space from larger players in the tech community, Taskiran said, but he added that Stambol and other startups often prefer to lease. A common theme, he said, is to stay out of the downtown, where higher lease rates and a lack of parking are considered obstacles.

Frank O’Brien | Western Investor
November 21, 2018

Commercial sales volumes down – except in multi-family market

Multi-family assets continue to be crowd favourite among investors, while sales in office and industrial properties slow due to limited supply

 

Sales volumes in nearly every commercial real estate sectors have declined in the second quarter of 2018 – though not for a lack of demand, according to a new report. 

The growing disconnect between supply and demand in Canadian real estate has lead to a decrease in sales velocity and an acceleration of lease rates, according to research by the Morguard Corporation

"A drop in transaction volume in the second quarter is very much a function of low product availability rather than a drop in demand," said Keith Reading, director of research at Morguard. "With quality office and industrial space at a premium, apartments are a crowd favourite as investors search for yield."

Office sales have dropped nearly 50 per cent across Canada year-over-year, while industrial volume has plunged 17.8 per cent. Meanwhile, multi-family sales increased 17.5 per cent.

Average sale prices for multi-family properties also increased year-over-year, from $8.5 million in the first half of 2017 to $13 million during the same period of 2018. 

Morguard expects investor sentiment in residential rental properties to remain strong into next term. 

 


 

 Tanya Commisso | Western Investor | July 18, 2018

Vancouver usurped as 'Canada's craziest property market'

Benchmark property prices in Whistler, the ski town two hours north, have now surpassed those in the Pacific Coast city. Businesses are buying million-dollar properties to house employees as living costs drive out workers. The cost of visiting has also spiraled, with overnight rates during the winter peak topping anywhere else in the nation.

Phil Bonham, a 31-year-old ski patroller, has been living out of a 1984 Dodge camper van for four years, unable to afford the surging cost of housing.

Styrofoam cutouts are wedged into his windows to keep out the chill during cold snaps, when temperatures can plummet to minus 25 degrees Celsius (-15 Fahrenheit). He doesn’t bother with the propane-fired refrigerator in the tiny kitchen between the driver’s seat and bed -- nothing thaws anyway in winter, and he eats fruits and vegetables immediately before they freeze.

The small wood-burning stove in the back corner is the “hippie killer,” a reference to stoves like this that have been known to asphyxiate people in their sleep as they try to stay warm. The winter before last, he found himself lying under the van during a snow storm rebuilding pieces of the engine -- “a bit of a low point,” as he describes it. But that’s what a take-home wage of about C$2,800 ($2,180) a month after taxes buys in Whistler.

“I only expected to do it for a season,” Bonham said in an interview in a parking lot near the ski slopes, where he identified at least seven other vehicles being used as full-time residences. “Without getting a second job or a girlfriend, there’s no way I could afford a room to myself. And I make a decent wage in comparison to many other jobs in Whistler.”

Vancouver has made global headlines in recent years, consistently ranking among the top 10 major cities worldwide most at risk of a housing bubble. Last year, Toronto took the top spot giving Canada the ignominious distinction of being the only country with two cities to make the cut in UBS Group AG’s annual list. Yet price price gains in Whistler have outpaced both cities.

“We think housing is the single most important issue we are facing as a community,” Marc Riddell, a spokesman for Whistler Blackcomb, owned by Vail Resorts Inc. and the area’s biggest employer, said in an email.

With a permanent population of fewer than 12,000 residents, there are more than 1,300 applicants on wait lists to either rent or buy homes at below-market rates in a residents-only pool managed by the Whistler Housing Authority. The agency aims to provide housing for at least 75 percent of the town’s employees -- a target that “will be very challenging to continue to meet,” according to a December assessment.

Four-Season Destination

It’s the dark underbelly of Whistler’s soaring popularity. Its transition from a skiing mecca into a four-season destination for golfers, hikers and bikers means the pressure for accommodation from seasonal workers and tourists no longer eases when the snow melts. “We’re as busy now in the summer as in the winter,” said Mark Lamming, owner of Purebread, a bakery with two locations in Whistler.

Mayor Nancy Wilhelm-Morden has a task force dedicated solely to resident housing that’s sought to explain the massive run up. Young families have migrated in to fill year-round jobs, but there aren’t enough homes to accommodate them. Suites that once housed local tenants are being replaced by lavish, sparsely used vacation chalets. Online home-share websites have made it easier for owners to illegally rent properties intended for residents to higher-paying tourists.

Restrictive Zoning

Much of the supply-side woes are also self-imposed. Canada’s first resort municipality, Whistler was purpose-built in the 1980s in the image of a pedestrian-free Swiss alpine village, and restrictive zoning and land-use rules to prevent over-development also choke supply. Meanwhile, a byzantine web of rules dictate how residences can be used in the broader community.

In October, the benchmark price of a townhouse in Whistler surpassed C$1 million for the first time. Vancouver is a steal in comparison -- only C$835,000. A detached house in Whistler is now C$1.67 million, 4 percent costlier than in Vancouver.

The rental market is more mind-boggling. One recent listing sought two female tenants for a single room in a shared house: the price was C$780 -- each -- to share a double bed. Many renters spend more than 50 percent of their income on housing. Mayor Wilhelm-Morden, incensed by landlords raking in cash from illegal short-term rentals, has imposed a C$1,000-a-day fine for violators, saying Whistler won’t tolerate “employees shoved out the back door” to make way for tourists.

‘Absolute Gong Show’

“It’s an absolute gong show,” said Russell Kling, a former hedge fund manager turned developer, whose Pangea Pod Hotel is set to open this summer aimed at delivering more affordable tourist accommodation. Whistler was the most expensive place in Canada to spend New Year’s Eve -- C$745 for a double room compared to C$414 in second-place Quebec City.

“People told us, ‘Your biggest issue will be accommodation -- if your staff can’t find accommodation, it doesn’t matter how much you pay them,’” recounts Kling, whose co-founder is his wife, Jelena. “So we took that risk off the table and purchased a home.”

The seven-bedroom residence cost “close to a couple million dollars” and will house the hotel’s general manager and a handful of key employees. The Klings even looked at buying a second staff property. “But so much of this stuff now -- forget about buying, I wouldn’t want to put my worst enemy there,” he said.

They’re not alone. Scandinave Spa, a 20,000-square-foot thermal bath facility, built five housing units on site when it opened in 2010, bought an additional staff property in nearby Cheakamus, and helps arrange rentals for employees. Vail houses 31 percent of its workforce and is considering investing in developments for employee accommodation.

Read more about local reaction to Vail’s takeover of Whistler’s ski resort

One in three businesses were unable to find enough staff last year, according to the housing authority. The town council has committed to adding 1,000 new resident beds by 2023 though one local developer says that’s less than half what’s needed. It’s loosening zoning rules to allow some neighborhoods to densify and releasing part of its land to build more affordable housing. It plans to require commercial and tourist developers to either construct affordable employee housing as part of their projects or pay cash-in-lieu.

For some it’s too late. Cathy Zeglinski, a family doctor, closed her Whistler practice last September, saying the young residents who once comprised the backbone of her clinic can no longer afford to live in Whistler.

“We’re earning Canadian dollars, but the people coming in aren’t tied to the local economy -- we can’t compete,” she said. “Whistler was once a very special place but with real estate prices stratospheric, there’s no place left for locals.”

 

Copyright Bloomberg News

 

by Bloomberg30 Apr 2018 | by Natalie Obiko Pearson - www.canadianrealestatemagazine.ca

New mortgage rules will drive investments in private lending

MICs and other private lenders currently account for 10% of all new residential mortgages in Ontario. This number will surely increase in the short-term as buyers look for alternative lenders not governed by OSFI. For savvy real estate entrepreneurs, investing in private mortgage vehicles in the coming years will provide stability and robust yield amidst this backdrop of rising rates and tightening regulations.

Real estate investors woke up to an entirely new lending landscape on January 1st. Now, they must meet stricter guidelines to qualify for lending as part of a new policy instituted by the Office of the Superintendent of Financial Institutions (OSFI).

The result is that all mortgage applicants must prove they can still afford payments at a higher interest rate -- the greater of either 2% above the qualifying rate or the five-year Bank of Canada benchmark rate (currently 4.99%).

As you are likely aware, this stress test was already in place for low-ratio mortgages, but now extends to all loans governed by OSFI regulations. Credit unions and private lending entities are not subject to OSFI regulations, but more on that later.

The Bank of Canada has said that these new regulations will affect about $15-billion in borrowing, primarily in the hot Toronto and Vancouver markets. This change holds important implications for first-time homebuyers in these markets, but what does it mean for investors like yourself?

But that’s not all

The above regulation changes are not the only game in town, we are also in a rising interest rate environment with further increases projected.

Indeed, CMHC predicts that the posted 5-year mortgage rate will fluctuate between 4.9%-5.7% throughout 2018, and rise to a range of 5.2%-6.2% in 2019. This is a big deal!

A search for yield amidst change

According to the Bank of Canada, the new rules will disqualify about 1 in 10 borrowers, and in places like Toronto and Vancouver, this ratio rises to 1 in 8. This will drive borrowers to other lending options such as private lending and mortgage investment corporations (MICs). This reality present a great opportunity for investors looking for yield in the coming years.

Bank of Canada Governor Stephen Poloz believes that “people might also look for a lender that is not bound by these new mortgage rules so they can avoid facing the stress test.” This is where private lending comes in.

Bryan Jaskolka, Vice President at Canadian Mortgages Inc., notes that this environment will drive potential buyers to creative financing options. “Instead of settling for cheaper homes, holding off on home-ownership, or being forced into unfavourable lending terms, many home-buyers will move to creative financing options like private lending and MICs.” Indeed, RBC Capital Markets concurs, stating recently that it believes that its borrowers who don’t meet the new rules will turn to private lenders and MICs.


by Contributor09 Feb 2018 | Canadian Real Estate Wealth