Canadian commercial investment to intensify this year

A report from Avison Young Canada Inc. earlier this month indicated that as of 2018, commercial property investment nationwide exceeded the previous high of $36 billion in the year before that to reach a new record – and this momentum is expected to last for much of 2019.

This is due to a 40-year low in unemployment rates along with sustained commercial scarcity in markets nationwide.

“We continue to feel very positive about opportunities in the real estate environment for the year ahead,” Avison Young Canada CEO Mark Rose said earlier this week, as quoted by Bloomberg.

“More capital is available to move into real estate debt and equity than at any other time. The next wave of investment is not a matter of if or when -- it’s just a matter of price.”

Office vacancy rates declined in nearly every market nationwide, bringing the overall average down to 11% by the end of 2018.

Office construction nearly doubled last year to more than 22 million square feet. A large portion of this new supply is predicted to be in the suburbs, taking into account rate hikes and extreme space constraints in downtown areas.

Industrial vacancies fell to a historic low of 2.9% near the end of 2018, with vacancy levels in Toronto (1.3%) and Vancouver (1.5%) among the lowest in the continent. Construction was also at more than 20 million sq. ft. in 2018, far outstripping 2017’s 14 million sq. ft.

by Ephraim Vecina | 23 Jan 2019 | canadianrealestatemagazine.ca

Foreign investors flocking to Vancouver's industrial segment

Amid intensified construction activity, Vancouver’s industrial real estate market is steadily magnetizing foreign investors, a trend that might pose a major challenge for the domestic buyer segment.

Numbers from Colliers International indicated that nearly 4.9 million square feet of industrial space was under development across Metro Vancouver as of the end of 2018. Almost half (45%) of this activity is in Surrey, Richmond, and Delta.

According to Avison Young, Burnaby and Coquitlam were the region’s stand-outs, with transactions involving industrial property in these locales being rapidly snapped up in a frenzy of “insatiable” demand.

“While Burnaby and Coquitlam remain highly sought after by owner-occupiers, tenants and investors, sales and leasing activity will likely slow in 2019 due to a lack of such opportunities in those markets,” Avison Young stated, as quoted by Business in Vancouver.

“With very limited new supply in the development pipeline and ongoing strong demand, vacancy in both markets – already at or near record lows – is expected to remain extraordinarily tight for the next 18 months,” the brokerage added.

This is also expected to feed into a virtuous cycle of rising rates and strong cash flow for owners, with net lease rates in Burnaby and Coquitlam hovering between $7.95 and $18 per square foot, Avison Young reported.

“We’re seeing offshore money, for the first time, coming into industrial because they understand and can see the quality of the investment,” Todd Yuen of the Beedie Development Group said. “The rents have finally caught up to the point where we can start to push the development cycle a little bit.”

by Ephraim Vecina19 Feb 2019  | CanadianRealestatemagazine.ca

Market rental tower going up on Robson Street

Vancouver mayor welcomes pet-friendly West End highrise, citing need for market rental buildings

To emphasize that the new highrise being built at 1500 Robson St. will be pet friendly, two dogs — Hazel and Trink — made an appearance at the Feb. 20 ground breaking. They're pictured with (left to right) Mayor Kennedy Stewart, as well as Ralf Dost, Steve Marino and Jeff Fleming from GWL Realty Advisors.

It’s unusual to see a pair of dogs — in this case Hazel and Trink — at a press conference packed with developers, real estate types and politicians. But not when you’re trying to underscore the fact a new development will be pet friendly in a city where it's notoriously difficult to find an apartment that accepts animals.

That was the case Feb. 20 at a ground breaking for a 21-storey market rental building going up at 1500 Robson St. in Vancouver’s West End.

The pooches got a front-row seat to hear speakers, including Mayor Kennedy Stewart, praise the tower, which will produce 128 rental units, a third of which (42 units) will be two- and three-bedroom family-sized apartments ranging from 753 to 978 square feet.

London Life Insurance Company is the owner of the project, which is being developed by GWL Realty Advisors and designed by IBI Group

The tower is being built on Robson at Nicola Street and is expected to be completed in 2021. | Rendering IBI Group

The tower is being built on Robson at Nicola Street and is expected to be completed in 2021. | Rendering IBI Group

It’s one of the first rental towers to be built along Robson in decades, “in a city that’s in need of rental housing and in a neighbourhood of luxury condominiums,” according to GWL Realty, and the first rental project on Robson to be approved under the city’s West End Community Plan, which was adopted in 2014.

Ralf Dost, president of GWL Realty Advisors’ real estate portfolio, said it’s important to create more purpose-built rental apartments given Vancouver’s tight vacancy rate and the fact much of the existing stock is dated and in need of upgrades.

“We also know how challenging it is to make financial sense of multi-residential developments, especially in this West End neighbourhood, so all of these factors make the launch of this project today that much more gratifying,” he said.

Stewart agreed that increasing the supply of secured market rental apartments “is more important than ever” when more than 50 per cent of residents are renters and vacancy rates are at an all-time low.

“It’s the kind of ground-breaking we all like to come to because it is helping us with our key problem of [increasing] market rentals. We need all kinds of rentals in the city — we need affordable rentals, but market rentals are also a key part of fixing our supply problem,” he said, while adding that residents have also been pushing for the construction of units big enough for families.

“Increasing the supply as well as diversity of rental housing in our city will benefit all Vancouverites, especially young families. I used to rent right across the street so I know how vibrant this neighbourhood is, and bringing 128 more families in here is just going to really help the local merchants.”

The highrise, located at the corner of Robson and Nicola streets, is expected to be completed in 2021. It will feature “substantial” bicycle storage and maintenance facilities, as well as indoor and outdoor amenities, including fitness, yoga and lounge rooms, a rooftop patio and a common area for tenants on the penthouse floor.

It’s replacing a low-rise commercial building that used to face Robson, which featured a few residential units, as well as a residential building behind it that was mostly rented to international students. The 12 tenants who lived in the two buildings were relocated elsewhere with some assistance. GWL Realty Advisors provided tenants with the equivalent of two or more months’ rent based on length of tenancy, and support with moving expenses.

It’s too early to say what rents will be in the new building, but they will be at market rates.

The average rent for a bachelor suite in the West End was $1,254 in 2018, according to CMHC data, while a one-bedroom was $1,566, a two-bedroom was $2,330 and a three-bedroom was $3,368 — tough rates for the average Vancouverite to afford.

Stewart told the Courier the city is focused on ensuring both market and affordable rental units are created.

“We need rental for all income levels. I’m a renter. My wife and I are renters, and we can afford to live in market rental housing, and that’s what we live in. There’s lots of employment in this city that’s coming in where you have folks that have a higher income level that need this kind of housing too,” he said. “[While] our focus is going to be on making sure we maximize the number of the non-market housing units that we have built, we also have to encourage this kind of build... That’s why I’m here at this announcement today. [It's] because this kind of housing is also needed.”

When asked what he would say to West End residents who’ve complained the community plan bumped up land values so high that it’s pushing people out of the neighbourhood due to redevelopment, Kennedy said: “The West End area plan is full of protections for folks living there now and into the future, so we just have to make sure we get the balance right. It is these developers and these construction companies that are building all the housing in the city. We are living in a market economy. However, we have to do everything we can to incentivise non-market housing development and get the federal and provincial governments back into the housing game so they can help us provide much more affordable units. But the focus is on rentals of all levels here at the city.”


The 21-storey tower at 1500 Robson St. will feature 128 market rental units. Rendering IBI Group

The 21-storey tower at 1500 Robson St. will feature 128 market rental units. Rendering IBI Group

Naoibh O’Connor Vancouver CourierFebruary 20, 2019 | westerninvestor.com

Foreign buyers find purchase in region’s industrial strength

High demand in the market means local buyers now face competition from beyond Canada

Industrial interest

Demand for industrial space in Metro Vancouver continues to outstrip supply, leaving investors and tenants alike scrambling for opportunities. The strength of the market means local buyers now face competition from beyond Canada.

Just how strong is the market? Avison Young recently described appetite for industrial space in Burnaby and Coquitlam last year as “insatiable.” Demand, as well as supply constraints, position 2019 to be a year of disappointment for those seeking to buy or lease space.

“While Burnaby and Coquitlam remain highly sought after by owner-occupiers, tenants and investors, sales and leasing activity will likely slow in 2019 due to a lack of such opportunities in those markets,” the brokerage reported. “With very limited new supply in the development pipeline and ongoing strong demand, vacancy in both markets – already at or near record lows – is expected to remain extraordinarily tight for the next 18 months.”

The situation is forcing many tenants or owner-occupiers looking to expand to seek cheaper space elsewhere, such as Pitt Meadows, to defer expansion or to close altogether.

Moreover, investors who buy now likely won’t see an immediate return on their investment, Avison Young says.

However, rising rates mean good cash flow for established owners, and that’s where foreign buyers are taking note. Net lease rates in Burnaby and Coquitlam are running between $7.95 and $18 a square foot, Avison Young reports.

“We’re seeing offshore money, for the first time, coming into industrial because they understand and can see the quality of the investment,” Todd Yuen, president, industrial, at Beedie, told the Urban Development Institute last month. “The rents have finally caught up to the point where we can start to push the development cycle a little bit.”

Unfortunately, a shortage of development opportunities means push may come to shove, or shutdown.

Colliers International reports nearly 4.9 million square feet of industrial space was under construction across Metro Vancouver at the end of 2018, with 45 per cent of the activity being in Surrey, Richmond and Delta. But of the 15 submarkets surveyed, five have no activity whatsoever. Underscoring the dearth is the fact that the situation is unchanged from six months earlier. The five quiet markets are Coquitlam, New Westminster, North Vancouver, Port Moody and Tsawwassen First Nation.

Foreign involvement

The latest property transfer data set from the province indicates that the proportion of foreign involvement in B.C. real estate deals dropped in 2018.

Foreign buyers accounted for just 2.4 per cent of all residential transactions last year, down from 3 per cent in 2017. Similarly, foreign involvement in commercial transactions fell to 5.9 per cent from 6.3 per cent.

But bearing out rising interest in commercial deals, the count of commercial transactions with foreign involvement rose from 114 in 2017 to 355 last year.

Who pays cash?

Canada is among the top countries in the world when it comes to cashless transactions. The latest report from Payments Canada, released in December, noted that cash was used for 29.8 per cent of the 21.9 billion payments consumers and businesses made in 2017. However, those transactions accounted for just 1.2 per cent of the value of those payments. The average cash payment in 2017 was just $17.53.

These facts make one wonder just how many transactions will be affected by Vancouver council’s recent move to ban cash for payments in excess of $10,000. The city acknowledged when it announced the new policy that just 0.6 per cent of the $2 billion it receives each year arrives as cold, hard cash.

The ban was designed to fight money laundering, in which real estate has long been implicated through tales of cash-filled suitcases from Asia and under-the-table payments to contractors. Now, we can add property tax payments to the list.

City staff report that of the 19 cash payments in excess of $10,000 last year, 16 were for property taxes.


Peter Mitham Business in Vancouver | February 14, 2019 | westerninvestors.com

  

Housing-related ‘brain drain’ from Metro Vancouver is a myth, says analyst

Concerns that the high cost of housing is driving Metro Vancouver’s young professionals into a mass exodus to find more affordable homes in less expensive regions are unfounded, according to one data analyst.

Jens von Bergmann, founder of Vancouver-based analytics firm MountainMath, crunched census data between 2006 and 2016 and found more young professionals – defined as those with at least a bachelor’s degree – arriving in the Vancouver Census Metroplitan Area (CMA) than leaving it.

Von Bergmann broke down the numbers of people with bachelor’s degrees and those without in each of the 2006, 2011 and 2016 census reports, within three age groups. He found that in the Vancouver CMA, all but one of those cohorts increased in number during that time – and population growth was highest among young people with bachelor’s degrees (see chart below). The only cohort to slightly decrease in population in the Vancouver CMA during that decade was those aged 50-59 without bachelor’s degrees.

“Young people with university degrees continued to arrive in greater numbers than they left well through their thirties and on into their forties,” wrote von Bergmann in his blog.

von-bergmann-mountainmath-net-migration-education-level.jpg

Census data on net migration in four Canadian metropolitan areas by education level, between 2006 and 2016. Source: doodles.mountainmath.ca

Von Bergmann said there is no need to worry about a ‘brain drain’ in growing cities like Vancouver, and we don’t need to worry about professionals leaving.

“Due to better pay, professionals are better equipped to deal with a tight housing market than most others,” he said.

If we want to prevent more displacement, he said, we should focus on those actually at risk: the poor and working class.

“More housing can lead to a more equitable city with room for people who aren’t well-paid professionals or independently wealthy,” he said.

“That suggests both building more and promoting a lot more non-market and rental housing.”

Glacier Media Real Estate

By Joannah Connolly, Glacier Media Real Estate | February 2019,biv.com  

Proposed 54-storey ‘Granville Gateway’ tower under review

Urban Design Panel meets next week to assess proposed 601 Beach Crescent development at the north end of Granville Street Bridge

The Urban Design Panel meets February 20 to assess Pinnacle International’s proposal to build a 54-storey mixed-use tower at 601 Beach Crescent at the north end of Granville Street Bridge.

Designed by GBL Architects, the building, which is being considered under the City of Vancouver’s Higher Building Policy, includes 303 market residential units and 152 social housing units.

It would sit opposite Westbank’s 49-storey Vancouver House “twisty” tower, which is under construction, to create what’s been called the “Granville Gateway” leading in and out of downtown Vancouver.

City council adopted the higher building policy — a set of guidelines to be used in conjunction with other policies for reviewing buildings seeking significant increases over existing height limits — in 1997.

The policy has been amended several times, including in 2011 when the “Granville Gateway” sites were added after a public consultation process.

Pinnacle’s rezoning application proposes a height increase on the site from 17 to 54 storeys under this policy.

At its meeting next Wednesday, the Urban Design Panel, which advises city staff and council on rezoning and development proposals, will review the project based on the Higher Building Policy, as well as the Beach Neighbourhood CD-1 Guidelines, the False Creek North Official Development Plan, the city’s green building policy for rezonings and view cone protection guidelines.

All proposals that meet the criteria for higher buildings undergo an “enhanced review” by the UDP, which is supplemented by the addition of two local architects and two international design experts, according to the City of Vancouver.

The two additional local architects are Karen Marler of HCMA Architecture + Design and Peter Cardew of Peter Cardew Architects. The two international architects are Laura Jimenez of Adrian Smith + Gordon Gil Architecture and Robin Williams of Morphosis Architects.

The panel’s purpose is to provide urban design commentary and recommendations for city staff and the applicant to consider for further development of the proposed design. 

After the UDP review, next steps for the rezoning application include interdepartmental reviews by city staff. Council will then consider it at an upcoming public hearing. A date will be set in the future. The public can also submit comments to the city about the rezoning application.

The project has already attracted opposition. Members of a group called Vancouver Beach District showed up at an open house last November to raise objections about rezoning the site from 17 to 54 storeys. They cited concerns including it being too high, the lack of existing infrastructure in the neighbourhood to handle increased density, the potential for traffic problems and a lack of consultation.

Copyright © Western Investor | Naoibh O’Connor Vancouver Courier | February 14, 2019

Toronto is a top commercial investment destination right now

Intensified demand brought about by an influx of tech companies has pushed Toronto’s office market towards becoming one of Canada’s premier investment destinations, according to a CBRE Group report.

The vacancy rate of the office sector fell to 2.7% during the fourth quarter of 2018, leading to commercial rental rates reaching an average of $35.37 per square foot.

This far outstripped Montreal’s figures, which posted a median rental rate of $22.76/sf on a 9.4% vacancy rate during the same quarter. And Vancouver, while having a higher average at $37.20/sf, did not command the level of Toronto’s demand, with a 3.8% vacancy.

Even intensified development offered only the most minimal of respites for the overheated market. As of the end of 2018, approximately 14.2 million square feet of new commercial space was under construction nationwide, with most of this situated in Toronto, Vancouver, and Montreal.

This was the strongest development activity since the first quarter of 2016, the CBRE noted.

CBRE added that despite the 7.3 million sf of space still under development in Toronto, “chronic shortage” will continue to characterize the market for the foreseeable future.

For perspective, this greatly exceeds Vancouver’s 2.86 million sf and Montreal’s 954,510 sf. This also continues the running theme of demand consistently outpacing supply nationwide, as the overall Canadian office vacancy rate fell to 11.9% in Q4 2018.