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Will 2019 big B.C. commercial real estate deals be topped

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B.C. commercial real estate deals

The sale of the Bentall office portfolio in downtown Vancouver, announced March 27, could drive commercial real estate velocity in B.C. to near or above the record level of 2018. The sale price of the four-tower landmark office complex in downtown has Vancouver has not been released but is expected to be near the $1.06 billion paid for the site three years ago.

Business in Vancouver’s Biggest Real Estate Deals of 2018 chronicles a year that rang in $6.5 billion in 202 commercial and industrial sector transactions across the province, according to commercial agency Avison Young. This was down from the unprecedented volume of $7.5 billion in 2017, when 232 properties sold.

Avison Young noted that a widening bid-ask gap was already becoming apparent in the last half of 2018 as both investors and lenders began to “recalibrate investment objectives.”

This could be related to rising interest rates and a near collapse of Metro residential sales, since many large land deals last year hinged on the potential for lucrative, high-density residential development. “A substantial decline in the number of deals completed is forecast for the first half of 2019,” according to Avison Young’s Year-End 2018 BC Real Estate Investment Review.

The report suggest prices will remain high for prime office, retail and industrial assets, but buyers and lenders will be costing out the yields “with less emphasis on the speculative aspects” of redevelopment.

At least seven of 2018’s biggest deals were based on residential development speculation. These include:

• U.K.-based Harlow Holdings Ltd.’s $164.7 million purchase of a one-third-acre multi-family site in Vancouver’s West End;

• two “strata windups” in Vancouver with a total value of $324 million; and

• the sale of a parking lot on Seymour Street in downtown Vancouver to mixed-use residential developer Reliance Properties Ltd. for $131.3 million.

Industrial transactions, which accounted for 40 per cent of 2018’s big deals, were worth almost $1.2 billion, just down from the peak of 2017.

In 2018, Metro Vancouver residential land sales hit $627 million, which would be an all-time high were it not for the spike during 2016 and 2017 when sales crested the $1.1 billon mark for the first time.

The downward shift began in 2018’s last half, as an avalanche of government policies, interest rate hikes and a subsequent 40 per cent plunge in housing sales hammered developer and consumer confidence, said Casey Weeks, senior vice-president of investment at Colliers International.

Weeks added that the mortgage stress test and other regulations have also slashed the pre-sales that condo developers depend on for financing.

He forecasts that some planned condo projects from smaller developers won’t proceed, which in turn could affect speculative sales of potential development sites this year.

The average cost for every buildable square foot for a residential development in Vancouver is now between $450 and $550. Vancouver has by far the highest combined per-buildable-square-foot costs and construction costs in Canada, according to Altus Group’s 2019 Construction Cost Guide.

Sales of all types of land, including commercial holding property and residential land assemblies, started slowing late in 2018, reported the Real Estate Board of Greater Vancouver. Tracking transactions through B.C.’s land titles, the board found that land sales in the third quarter of 2018 had fallen 34.8 per cent from the same period a year earlier and the value of total land sales had dropped by nearly 15%, to $2 billion.

BIV lists the $248.7 billion transaction of an industrial portfolio by the Vancouver Fraser Port Authority as the biggest industrial deal last year.

Much of the industrial action, however, is in speculative warehouse and distribution tied to the retail sector, including the 1.1-million-square-foot Xchange business park in Abbotsford by Hungerford Group and QuadReal Property Group, developed on speculation and proposed for completion late next year.

But a “major deceleration of retail sales growth” from nine per cent in 2017 to two per cent last year is among the reasons the B.C. Real Estate Association (BCREA) cites for an expected “flattening” of commercial and industrial real estate investments in 2019.

The BCREA also points to a fourth-quarter drop in manufacturing shipments and employment as red flags for industrial real estate. The association’s much-watched Commercial Leading Indicator index saw its first drop in nine years as 2018 ended, down one point from a year earlier.

The Bentall Centre office and retail portfolio has been purchased by Hudson Pacific Properties Inc. (NYSE) in a joint venture with an affiliate of Blackstone Property Partners. Hudson Pacific will own 20 per cent of the joint venture and serve as the operating partner responsible for day-to-day operations and development. Blackstone will own 80 per cent and serve as the managing partner.

The 1.45-million-square-foot transaction is expected to close in the second quarter of this year. CBRE in Vancouver was the broker agent on the transaction, which is rumoured to have topped $1 billion.

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Peer-to-peer online real estate platform launched

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A Calgary entrepreneur has launched an innovative real estate company offering made-in-Alberta technology for homebuyers and sellers in Calgary and Edmonton.

Bōde is an online peer-to-peer platform directly connecting buyers and sellers so they can work out a deal on their own time and on their own terms, without a real estate agent, thus saving consumers money.

“There is a lot of supply in the Alberta market right now and people are motivated to keep as much of their home value as possible,“ said Robert Price, CEO of Bōde. “So, the timing is ideal because the cost savings are dramatic, and the result is that homes sell faster, buyers pay less and sellers make more.

“It’s creating a direct relationship in a similar way that Autotrader or Airbnb or Amazon or eBay or a number of other very successful software services have to establish a more efficient and more customer-centric experience and eliminate the need for agents to middleman the process.”

Price said the  listing service is aimed at a large and growing market of digital consumers who are already comfortable making large purchases online.

Robert Price
CEO of Bōde

“The buyer can save money on an offer. The seller can price more competitively and still make the same amount or more. And the home sells faster. So we really see it as a competitive advantage versus the vast majority of the market that’s still doing it with the traditional four per cent commission structure. We’re at one per cent so 75 per cent cheaper,” he said.

“We’ve built what we’re calling the Bōdiverse, which is a marketplace of experts who are offering services that you need to be successful in the process. Lawyers, inspectors, appraisers, stagers, all those competencies that you need. You’re able to transact with them knowing their pricing.”

The real estate platform charges a flat one per cent fee once a property sells.

The process begins by a seller listing a property on the website, which takes about 15 minutes. Once it’s listed, the company will directly market that listing through other channels, including Realtor.ca, Zillow and 30 other websites, including Facebook Marketplace and Kijiji.

The system includes ways to make offers on properties and sign contracts, with a checklist to close with lawyers and transfer of fees.

Price said a model has been created that doesn’t require any human intervention from the start to the finish, just people’s interaction with the platform.

“We believe that homeowners are the true experts on their homes. Once people are armed with robust information and the tools to simplify the process, they are fully willing and capable to take the reins on real estate transactions,” said Price.

“We love Alberta and our family has been proud to be leaders in the pursuit of a diversified economy that does not simply rely on energy tax revenue. We have the experience that tells us when you create the right customer-centric answer, it becomes exportable. We want to prove that it works here and take it across Canada and beyond.”

Price said the company is planning to expand across the province in the coming weeks and upon that success, expand across Canada and internationally.

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Blackstone raises $20.5 billion for largest ever real estate fund

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U.S. private equity firm Blackstone Group Inc said on Wednesday it has raised the largest ever real estate fund, amassing $20.5 billion to be invested in property assets around the world.

Large buyout firms such as Blackstone have been attracting a lot of capital from investors seeking higher returns not available in public markets.

The capital ready to be deployed has swollen to over $2 trillion, according to data provider Prequin, driving up asset prices and deal making activity.

Blackstone said in a statement the fund, named Blackstone Real Estate Partners IX (BREP IX), has already made its first investment: the purchase of U.S. industrial warehouse properties from Singapore-based logistics provider GLP for $18.7 billion.

The deal, in which BREP IX co-invested with other Blackstone funds, was announced in June and is expected to close in coming weeks, the company said.

Blackstone is the world’s largest alternative asset manager and one of the biggest property investors, with $154 billion in real estate assets under management. (Reporting by Chibuike Oguh; Editing by Sandra Maler)

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Real estate lessons to live by Pattie Lovett-Reid

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Real estate lessons

Disclaimer: I’m not a real estate expert but I am a real estate junkie.

I’ve often thought about the many ways there are to make money – and there are many. Throughout the years, we have created side hustles, worked hard at our jobs, built an investment portfolio and we have bought and sold a lot of real estate.

We love real estate, and over the past 25 years, we have bought and sold six principle residents and six recreational properties. The majority of our housing transactions made money, and we broke even on a couple. There have also been lessons learned along the way.

Here are a few.

1. Listen to the experts. They are qualified in their field so believe them when they say location sells. Try not to be the most expensive house on the street and don’t let your emotions drive your buying or selling decisions.

2. Don’t fall in love with your assets, or in this case, your home. Sometimes you need to make tough decisions financially and that may mean selling the family home. Your assets will never love you back but your family will.

3. When selling, don’t be greedy. If your home isn’t selling, it is priced too high. Listen to what prospective buyers are silently telling you as they move on and check out the next listing.

4. Get your home ready to sell as soon as you move in. Life has a funny way of throwing you a curve ball when you least expect it. Curb appeal matters but the inside likely matters more. This is where you live. Keep it neutral and up to date. Look at your home as a prospective buyer would.  Small changes can yield big financial results.

5. Avoid concentration risk. Don’t put all your money in the real estate basket.

6. Take the time to save up the down payment. Consider all-in and all-out costs such as insurance, appraisals, real estate, moving, land transfer costs and the dreaded unknown repairs. There will always be something that requires your financial attention.

7. Don’t buy beyond your means. I’ve been there and it isn’t fun. No one wants to be 100 per cent house poor. You aren’t expected to be flush with cash when you are new homeowner but you also don’t want to live life worrying about the next mortgage payment each month.

8. Buy low and sell high. Even if you love real estate you are always scouting out new opportunities, this investment mantra still must hold true.

9. Focus on your stage of life. Do you really want to be building your dream home for your family as your children head off to university or are beginning to build their own lives under their own roof? Just because you want your family there doesn’t mean they will be. Buy for reality not dreams.

10. Put in offers earlier in the week. You are more likely to have less competition and more likely to get a deal if you do. Everyone is out   looking on the weekends. Don’t follow the herd mentality.

11. Take advantage of the capital gains exemption on your principle residence. This is one of the best tax-savings opportunities to create wealth I know.

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