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Commercial real estate market proving robust in Vancouver

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While Metro Vancouver’s residential sector struggles, its commercial real estate market is holding firm, with vacancy rates extremely low, according to a monthly analysis by commercial market intelligence company CoStar Group.

The group analyzed the office, industrial and residential sectors and offered some forecasts on each market.

Office space

With minimum wages rising and unemployment low, office-based employment is expected to grow by 9.3 per cent in 2019, putting additional strain on the already overstretched office market in Metro Vancouver, according to CoStar.

The report said, “The Metro Vancouver office market continues to show signs of strength as the vacancy rate has continued to decline from 4.0 per cent at the beginning of 2019 to 3.0 per cent to close out the month of July. Strong net absorption levels of 2.5 million square feet over the past year have contributed to this decline, along with the lack of new office space coming to market as of late… Developers are actively working to alleviate this shortage as there are now 26 office projects totalling 4.9 million square feet currently under construction. With that being said, much of this new stock will not be delivered to the market until late 2021 and 2022. Additionally, many of the new flagship office projects that will be coming to market are heavily pre-leased, thus leaving prospective tenants with little options if they did not secure space well in advance.”

Any new buildings that are coming on stream are being snapped up in pre-leasing – but this does offer an opportunity to other office tenants struggling to find space.

Jamil Jamani, senior market analyst at CoStar, told Glacier Media, “Office tenants are continuing to demand higher quality spaces and this has resulted in many new buildings coming to market to be heavily pre-leased. As many of these larger tenants move into their new higher quality spaces, there will likely be a upswing in vacancy in older buildings. This would be the optimal time for firms to secure larger space in the downtown core.”

The report added that the high demand in office space has pushed lease rates up. “While Metro Vancouver waits for new supply to hit the market, average net asking rents have continued to increase, up 2.5 per cent year-over-year, to $24.04 per square foot in July 2019.”

Jamani added, “Although the office market is strong, we don’t expect rents to grow as aggressively as they have, due to new supply coming to market within the next two years. Rent growth will likely return to more normal levels of two to four per cent per year.”

Industrial market

Space is even tighter in Metro Vancouver’s industrial market, said CoStar.

The report said, “The industrial vacancy declined… to 1.6 per cent at the end of July 2019. Net absorptions levels have also increased over the past year reaching a whopping 5.8 million SF. In particular, the region faces extreme shortages of specialized industrial space as the vacancy rate in this segment is at a mere 0.7 per cent.”

Jamani told Glacier Media, “We have started to see strata industrial units continue to play a greater role in the Lower Mainland, especially with rents growing at such a rapid rate over the past three years. Many industrial tenants are now starting to consider ownership as a viable option to control rent increases and avoid the possibility of eviction due to redevelopment.”

According to the report, “The extremely tight market has caused net average asking rents to increase by 12.7 per cent year-over-year to $12.17 per square foot.”

Retail sector

Despite the strong showings of the office and industrial market, CoStar describes the retail sector as the “true gem” of Metro Vancouver’s commercial real estate.

The report said, “Metro Vancouver’s true gem of the commercial real estate market belongs to the retail sector, as the overall vacancy rate has declined … to a record low of 1.3 per cent at the end of July 2019. The surge of demand has been the result of international and luxury brands continuing to increase their presence in Metro Vancouver, and as a result, net absorption topped 2.1 million square feet.”

It added, “Average net asking rental rates [for retail space] have been on an upward trend, growing by 13 per cent year-over-year to $34.44 per square foot. Retailers will now have to make more efficient use of spaces to overcome rising rental costs and continued upward pressure on wages.”

Jamani said, “Many small businesses have continued to face pressure due to rising property taxes as many of their leases are on a triple net basis, and as a result we continue to see many businesses that have been around for years close their doors. This combined with many older retail units being replaced with multi-family developments has also depleted older retail stock and have forced retailers to transition to newer but smaller units.”

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B.C. residential real estate Five things to know

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Almost 73 per cent of detached homes sold in Vancouver in the first nine months of 2019 went for below assessed value, while Kitimat and the Kootenays are booming

Province wide real estate figures released this week by Landcor Data Corporation compared all residential sales for the first nine months of 2019 with the same period last year.

It breaks down sales numbers, sale prices, sales volumes and what percentage of sales were above or below the assessed value — a gold mine of information for any homeowner.

Here are five interesting things to know:


1. Let’s start with Vancouver

Most of the horror stories around money being lost in residential real estate are based on sales of high-end detached homes in the province’s largest city.

Using detached homes as a bellwether, Landcor data shows that the value of a detached home in the city fell 11.3 per cent for the first nine months of this year compared to last, with the median price now being $1.825 million.

There were 1,172 detached homes sold from the start of January to the end of September this year, compared to 1,448 for the same period in 2018. The value of those sales fell from $3.8 billion to $2.76 billion. Almost 73 per cent of detached homes sold in Vancouver in the first nine months of 2019 went for below assessed value.

Condo owners in Vancouver saw a 3.3 per cent rise in the median price on 30 per cent fewer sales.


Latest data shows the average value of a detached home in Vancouver fell 11.3 per cent in the first nine months of 2019 compared to the same period in 2018.

Francis Georgian /

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2. LNG boom in Kitimat leads to huge jump in home values

There’s an energy boom underway in northwest B.C., driven by a $40-billion LNG project in Kitimat. There are already 1,000 workers setting up the construction site at the mouth of Douglas Channel, with 7,500 workers expected from 2022 to 2024. That creates a big need for housing and its shows in the data.

In Kitimat, the price of a detached home jumped almost 50 per cent in the first nine months of the year compared to the same period in 2018. While the number of detached home sales actually fell from 99 to 91, the value of those sales soared from $28.1 million to $38.7 million, and only two homes sold for less than assessed value.

Nearby Terrace saw a 21 per cent increase in the value of a detached home to an average of $385,000.


The average price of a detached home in Kitimat has soared 50 per cent.

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3. How are things in Surrey?

While owners of detached homes in Surrey fared better than in Vancouver, condo owners fared worse. There were 2,201 detached homes sales in the first nine months of 2019, a 22 per cent drop on the same period of 2018. Sales volumes were $2.7 billion for the same period compared to $3.6 billion. Interestingly, that shows that the total sales volumes in Surrey and Vancouver for detached homes are about the same.

The median price of a detached home fell three per cent to $1.038 million, while the median price of a condo was down 9.3 per cent to $365,700. Just over 50 per cent of detached homes sold in Surrey for the first nine months of 2019 went for below the assessed value.


The average price of a detached home in Surrey has fallen three per cent.

Keith Henderson /

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4. The beautiful Kootenays are doing OK

A common refrain in Vancouver is “I’d love to live in Nelson.” It’s the Jewel of the Kootenays, rural with city touches, a world-class ski hill nearby and a reputation for cool known around the world.

The Landcor data shows several Kootenay towns doing well on the real estate front. In Nelson, the median price of a detached home rose 11.4 per cent to $440,000 — and despite the average assessed value of a detached home rising 16 per cent from 2018 to June 30, 2019, over 65 per cent of the homes sold in the first nine months of 2019 went for over assessed.

Salmo and Slocan saw a 27 per cent jump in detached home values, while Creston went up 10 per cent and Castlegar 11 per cent.


Newly relocated employees of Traction on Demand enjoy some down time in the mountains outside Nelson, B.C. Where the Vancouver-headquartered company has opened a branch office as part of its strategy to recruit and retain new talent by going to places employees want to live.

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5. Victoria not so hot, but Langford is

Victoria has seen detached home values fall, though not as much as Vancouver. A detached home is now worth $790,000 on average, which is 4.8 per cent less than in 2018. Volumes are down slightly, with 171 sales in the first nine months of this year; almost 80 per cent of those sales were below the assessed value.

But west of Victoria, in Langford, detached home values soared 12 per cent in the same period, while detached homes in the Gulf Islands rose 19 per cent in average value.


B.C. Parliament Buildings in Victoria.

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The Canadian Real Estate Industry Just Jumped The Biggest sales In October over 10 Years

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Canadian real estate markets are on fire. Canadian Real Estate Association (CREA) data shows sales across the country jumped in October. The rise was actually so large, last month was the biggest for the industry in over a decade. This is the opposite of what the government wants to see ahead of rolling out new demand stimulus.

Canadian Real Estate Sales Rise Over 12%

The headline number used by the industry is seasonally adjusted, which downplayed growth. There was 42,970 seasonally adjusted sales in October, flat from a month before. Unadjusted however, sales reached 44,499 in October, up 12.9% from the same month last year. FYI seasonally adjusted numbers are compared using consecutive periods. Unadjusted numbers are compared on a year-over-year basis.

Canadian Real Estate Sales

The unadjusted sales for all home types, as reported through the Canadian MLS.

Source: CREA, Better Dwelling.

The growth rate is very high, and this is also a new record. The 12-month growth is the highest for October since 2011. The number of sales reported for the month is also the highest since 2007. Some of this is delayed demand from last year’s weak numbers, but it’s still a very large month.

Canadian Real Estate Sales Change

The annual percent chage of unadjusted sales for all home types, as reported through the Canadian MLS.

Source: CREA, Better Dwelling.

British Columbia’s Largest Markets Lead In Growth

The largest growth was in last year’s biggest losers – Vancouver and Fraser Valley. Vancouver reported 2,892 sales in October, up 45% from the same month last year – the biggest jump in the country. Fraser Valley, the neighboring board, followed with 1,500 sales, up 36% from last year. In a distant third was Ottawa at 707 sales, up 25.4% from last year. Both BC markets were near multi-year lows last year, so the jump was a little expected.

Canadian Real Estate Sales By Market

Canadian real estate sales in markets with more than 450 sales in the month.

Source: CREA, Better Dwelling.

Biggest Losses Were In… Wait, There Was None

That’s right kiddos, not one major market showed a loss from last year. Kitchener-Waterloo showed the smallest gain at 502 sales in October, up 2.7% from last year. London follows with 924 sales, up 2.8% from last year. Victoria came in third with 586 sales, up 5.4% from last year.

Canadian Real Estate Sales Change By Market

The percent change in Canadian real estate sales, in markets with more than 450 sales in the month.

Source: CREA, Better Dwelling.

All of Canada’s largest real estate markets pumped out massive gains. Curiously, the rise in sales is not isolated to “hot regions,” it’s a broad market gain. This implies a more macro change to buyer pressure.

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Real estate developers are slow to make buildings 5G-enabled

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Super fast 5G cellular networks are hot as major wireless carriers from Verizon to AT&T deploy the service, but it’s unclear if the infrastructure is in place for in-home 5G to replace current cable-based broadband.

The 5G-enabled future seems kind of distant. Real estate developers would need to put fiber-optic cables in homes and office buildings, since 5G doesn’t pass through walls, windows, or people. And most developers are not constructing projects or retrofitting existing properties that would allow 5G to be delivered to homes because it’s simply too expensive to implement.

“Not many developers that we speak to are taking 5G into account when constructing new ground-up developments,” said Chen Konfino, founder of Younity, a Tel Aviv-based company that installs internet infrastructure in multifamily buildings.

<p class=”canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm” type=”text” content=”Fiber-optic cables, which run through the walls and the floors of buildings, are required to receive 5G signals indoors, according to Dan Littman, principal of technology, media and telecommunications at&nbsp;Deloitte Consulting LLP. And only some developers like The Related Companies are willing to pay for the infrastructure. Related’s massive Hudson Yards 28-acre mixed-use development in New York City is wired for 5G.” data-reactid=”18″>Fiber-optic cables, which run through the walls and the floors of buildings, are required to receive 5G signals indoors, according to Dan Littman, principal of technology, media and telecommunications at Deloitte Consulting LLP. And only some developers like The Related Companies are willing to pay for the infrastructure. Related’s massive Hudson Yards 28-acre mixed-use development in New York City is wired for 5G.

Shot of a young businessman looking bored while working at his desk during late night at work

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Most builders just opt for traditional internet solutions because it’s affordable. Between conduits, splices, cables, and installation, 5G capability can be a five- or six-figure investment. Source: Getty Creative.

Installation is too pricey” data-reactid=”39″>Installation is too pricey

Most builders just opt for traditional internet solutions because it’s affordable. Between conduits, splices, cables, and installation, 5G capability can be a five- or six-figure investment.

From 2003 to 2017, the median budget for a fiber-optic cable installation project, ranging from .6 to 10 miles of cable, was $66,940, according to a U.S. Department of Transportation&nbsp;survey&nbsp;of 150 fiber optic installations. Konfino said he recently completed two fiber-optic cable installations in 30- to 40-foot buildings for about $100,000 each.” data-reactid=”41″>From 2003 to 2017, the median budget for a fiber-optic cable installation project, ranging from .6 to 10 miles of cable, was $66,940, according to a U.S. Department of Transportation survey of 150 fiber optic installations. Konfino said he recently completed two fiber-optic cable installations in 30- to 40-foot buildings for about $100,000 each.

Even retrofitting existing buildings is a pricey endeavor. It costs about 30% more than a regular renovation, taking into account demolition, renovation, and improved telecommunication closets, said Konfino. And the costs skyrocket when a building is more than a mile away from the closest fiber-optic internet line, according to a&nbsp;post&nbsp;by Atlantech, a Maryland-based fiber optics and telecommunications company.” data-reactid=”42″>Even retrofitting existing buildings is a pricey endeavor. It costs about 30% more than a regular renovation, taking into account demolition, renovation, and improved telecommunication closets, said Konfino. And the costs skyrocket when a building is more than a mile away from the closest fiber-optic internet line, according to a post by Atlantech, a Maryland-based fiber optics and telecommunications company.

Large scale development projects are underway on the far west side of Manhattan near 34th Street and the Hudson River. This high angle view above Ninth Avenue looks south toward Manhattan West and Hudson Yards, two of the large development projects. Seen in the background are the Hudson River and Jersey City. Also seen in the foreground are access roads to the Lincoln Tunnel.Large scale development projects are underway on the far west side of Manhattan near 34th Street and the Hudson River. This high angle view above Ninth Avenue looks south toward Manhattan West and Hudson Yards, two of the large development projects. Seen in the background are the Hudson River and Jersey City. Also seen in the foreground are access roads to the Lincoln Tunnel.

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Large scale development projects are underway on the far west side of Manhattan near 34th Street and the Hudson River. This high angle view above Ninth Avenue looks south toward Manhattan West and Hudson Yards, two of the large development projects. Source: Getty Creative.

The return on investment” data-reactid The return on investment

As one of the few developers making 5G-enabled properties like Boston’s Lovejoy Wharf luxury condominiums and New York City’s Equinox Hotel, Related said the high costs are worth the investment.

“Expense is always a factor. We would never mindlessly invest in infrastructure that we didn’t think would be foundationally important,” said Scott Evans, chief digital officer of Related. Fiber-optic cables will only become increasingly necessary as the infrastructure behind future innovations, added Kenneth Finnegan, chief technology officer of Related.

Fiber broadband cuts down on long-term maintenance costs for building owners. It also allows owners to charge more rent and increases the value of properties. According to&nbsp;Connected Real Estate Magazine, owners can increase rent by an average of 8% and property values are boosted by an average of 2.8%, if the properties are 5G-enabled.&nbsp;” data-reactid=”66″>Fiber broadband cuts down on long-term maintenance costs for building owners. It also allows owners to charge more rent and increases the value of properties. According to Connected Real Estate Magazine, owners can increase rent by an average of 8% and property values are boosted by an average of 2.8%, if the properties are 5G-enabled.

“I think there’s going to be a price concern for landlords and property owners, but I think there will be a demand for this infrastructure,” said Mike Baumstein, deputy head of Barings’ Private Equity and Real Assets team, an investment firm that recently bought Gigasphere, a fiber-optic telecommunications company serving the multifamily and commercial real estate industries. “Eventually, they [building owners] will have to make an investment to keep their properties updated and competitive.”

But smaller developers still say the cost is too high. Josh Schuster at New York-based Silverback Development uses traditional methods like routers and cell phone repeaters that allow only 4G into buildings, according Schuster.

“There is a cost-benefit analysis. Right now, there are inexpensive ways to include technology in design and construction,” he said. “We definitely incorporate that.”

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