vancouv

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

CMHC releases Sept. housing starts data

The annual pace of Canadian housing starts fell to their lowest level in nearly two years in September.

Canada Mortgage and Housing Corp. says the seasonally adjusted annual rate came in at 188,683 units last month, down from 198,843 in August.

Thomson Reuters Eikon says economists had expected an annual rate of 210,000 for September.

September marks the third straight monthly decline.

The slowdown in the pace of housing starts comes amid rising interest rates from the Bank of Canada, and more restrictive mortgage rules.

``The September housing starts report fits with the relative calm and return to normality in sales, market balance and price growth that we are seeing across most of the country this year, in particular Toronto, following speculative excesses in Southern Ontario earlier last year and a moderate correction in response to policy measures earlier this year,'' wrote Sal Guatieri, a senior economist with BMO Capital Markets, in a note.

``Demand continues to be supported by the fastest population growth in 27 years and new millennial-led households. A calmer housing market is just what the doctor ordered, and won't discourage the Bank of Canada from raising rates on Oct. 24.''

CMHC says the pace of urban starts fell by 5.9 per cent to 175,653 units. The slowdown was dragged down by an 8.9 per cent drop to 122,656 units in urban multiple-unit projects such as condos, apartments and townhouses. Single-detached urban starts increased by two per cent to 52,997.

Rural starts were estimated at a seasonally adjusted annual rate of 13,030 units, while the six-month moving average of the monthly seasonally adjusted annual rates was 207,768 for September, down from 213,966 in August.

British Columbia led the declines with a drop of 43.3 per cent due to stiffer mortgage rules and growing lack of affordability, particularly in the Greater Vancouver area. Alberta also saw a drop of 34.8 per cent, amid a weakening in the oil-producing economies.

Meanwhile, Ontario housing starts increased 21.3 per cent, led by Toronto condos and Quebec was up 15.4 per cent.

 

The Canadian Press

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 Industrial Land Rarer, More Expensive

Vancouver continued to move toward a post-industrial future as 2016 industrial building sales declined even while hitting a monetary record, according to a new Avison Young report.

The Winter 2017 Vancouver Industrial Report found Vancouver industrial building sales hit $192M in 2016 — the highest dollar volume on record for the city. Yet that value was based on 43 sales, which was the lowest number of deals completed since 2009.

Industrial sales in 2017 through Sept. 30 have totaled 35 deals valued at $88.5M, the vast majority of which comprise the sale of cheaper, smaller strata units, which share common space.  “While land prices seem to be starting to stabilize at new highs, rental rates and building pricing are expected to continue to strengthen,” Avison Young Vancouver Vice President Kevin Kassautzki said in a news release. “Vacancy will remain tight with limited relief expected through new construction, as most new projects are likely to feature strata units, which are usually needed to make the pro forma work with these new high land costs in the market,” he said.

The report said Vancouver’s lack of industrial space — it had a vacancy rate of 1.6% in Q3 — has been hurt even more by amended industrial zoning bylaws and community plans. These have triggered the acquisition of industrial properties by investors and developers with an eye to redevelopment. “It is becoming increasingly difficult to distinguish whether a property was acquired for its value as an industrial building or as land for redevelopment,” notes the report, which expects strata unit sales will lead to an increase in the number of industrial deals in Vancouver in 2017 and 2018. 

And just who is buying industrial land is also changing in Vancouver.  “While owner-occupiers have traditionally played an active role in Vancouver’s industrial market, the purchaser profile of freestanding industrial buildings has shifted in the past 18 months to include many more investors and developers,” Avison Young principal Russ Bougie said.  “Owner-occupiers are now largely relegated to acquiring strata units (or relocating to another market or shutting down their business entirely) as rapidly rising prices for freestanding industrial assets have priced many business owners out of the market,” he said.
 

 

December 20, 2017 Ian Johnston, Bisnow Toronto

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