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"A Perfect Storm": Why BC Industrial Real Estate Is Migrating To Alberta – Storeys

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The grass isn’t always greener on the other side, but for British Columbia businesses seeking industrial real estate, there are strong signs that Alberta just might be a better place to set up shop.

A confluence of factors have made it clear that those requiring large amounts of industrial space in British Columbia are going to have a challenging time, while making the other side of the provincial border increasingly appealing.

In interviews with STOREYS, three experts on the industrial real estate market — from Vancouver, Calgary, and Edmonton — detailed these factors, how they’ve coalesced at the right time, and the Albertan advantages businesses seek to benefit from.

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British Columbia

In a national Q3 report on the industrial and office market published this week, Colliers said Vancouver became “the first market in the history of our tracking” to exceed an average asking net rent per sq. ft of over $20, at $20.44.

Part of the reason for that high price is location, but another factor is just simple supply and demand.

“The supply of land suited for industrial development is low,” Susan Thompson, Associate Director of Research at Colliers, told STOREYS.

Additionally, vacancy in the industrial market in BC is also low. In Q3, the total industrial vacancy rate was just 0.2%, according the Colliers report. That was actually a small increase from Q2, when the vacancy rate was a record-low 0.1%, but Colliers points out that the small increase was due to absorption catching up and not new supply added. What happens when supply is low and demand stays strong? High prices.

Industrial facilities such as distribution centres or warehouses have traditionally been a single floor, whether it’s because of too much weight on an upper floor potentially causing problems, or decreased efficiency with multiple floors. However, Vancouver is so “tight”, says Thompson, that companies hoping to stay in the market are now thinking about “stacked” (multi-floor) industrial space.

One such example Thompson points to is none other than Amazon, who took over a 707,056 sq. ft, two-storey space on 8351 Fraser Reach Court in Burnaby — near Queensborough — in August. Thompson believes that once there are more success stories with stacked industrial space, the idea will start taking off. It’s something that has already occurred in the residential real estate market in Metro Vancouver, where the land shortage and housing crisis has resulted in increased density — building more space vertically, rather than horizontally.

8351 Fraser Reach Court, Riverbend Business Park.
8351 Fraser Reach Court, Riverbend Business Park. (Oxford Properties)

Alberta: The Land of Industrial Abundance?

Meanwhile, these issues don’t really register in Alberta. Not only does the province have an abundance of land, it’s also significantly cheaper. David St. Cyr, Principal for Industrial in Edmonton at Avison Young, told STOREYS that an acre in British Columbia that could cost anywhere between $4M an $5M would be closer to $400,000 in Alberta.

And while the supply in British Columbia is getting plugged up, supply of industrial space in Alberta is trending the other direction.

According to Avison Young’s Q2 industrial market report, Calgary alone has seen $792M in investment sales in the industrial market halfway through 2022, which is up 32% from the same point in 2021. Furthermore, “the development pipeline is expected to deliver an unprecedented number of new builds. With 8.7M sq. ft under construction and in the pipeline, the 2022 industrial development frenzy will continue well into 2023.”

And if the abundance of supply and cheaper costs aren’t appealing enough, Alberta will often also have less red-tape when it comes to things like permitting. (A Greater Vancouver Board of Trade survey published earlier this month found that permitting and red-tape reduction was the top issue for businesses.)

There’s more “working with businesses” and “cooperation between municipalities” and “less red-tape”, St. Cyr says. His colleague, Tyler Wellwood, Principal for Industrial in Calgary at Avison Young, told STOREYS that there’s also a stronger focus on approvals of permits, which take “significantly less time” than in British Columbia. Faster permitting times means construction can begin sooner, which translates to less wasted costs and less risk for businesses.

Thompson, the expert from Colliers, recognizes this too, saying that jurisdictions in Alberta are often willing to expedite the permitting process. “Companies want their needs met quickly, not years and years later,” she said. “If they can’t get their needs met, they need to consider their options.”

A 58,516 sq. ft industrial space on 8489 40 Street SE in Calgary currently leasing. (Glenmore Junction / Avison Young)

Migration

The Province of Alberta launched a new witty advertising campaign last month called “Alberta Is Calling,” which highlighted many of the challenges residents of British Columbia and Ontario are facing — and how they’re of significantly less concern in wild rose country — in an attempt to lure talent. “Find things you’d never expect. Like a centrally located house you can afford,” one of the campaign’s slogans reads. “Bigger paycheques. Smaller rent cheques,” says another.

When asked whether housing affordability has any connection to the growing appeal of the Alberta industrial market, both Wellwood and St. Cyr said that it’s definitely an added bonus, for both the workforce and employers who worry about labour shortages — another issue in British Columbia.

“These factors are all coming together,” St. Cyr says. Those that “can’t grow in tighter markets, can’t activate next phase of growth in their current markets are looking to Alberta”, Calgary’s Wellwood adds.

And it’s pretty much across the board, when it comes to companies. Wellwood says that there are some small differences between the composition of the markets in Alberta, with Edmonton seeing a little more from the raw material market and manufacturing, while Calgary has seen more when it comes to distribution and logistics. St. Cyr agrees, saying that while the cities are distinct, the costs are very similar and it often just comes down to preference.

It’s not so much that companies desire to leave British Columbia, but more so that they’re shifting the weights towards Alberta more. St. Cyr says that British Columbia is increasingly losing out on deals to Alberta for large distribution centres. One example he points to is Lowe’s, the home improvement retailer, which signed on in late-2021 to lease a 1.2M-sq.-ft facility in the High Plains Industrial Park in Balzac, Alberta. Another is De Havilland, the aircraft manufacturer, who announced a new manufacturing facility in Alberta just last week.

St. Cyr also points out other additional benefits of Alberta, such as the significant amounts of cargo space between Alberta’s two international airports and Edmonton’s rail connection to the Port of Prince Rupert in British Columbia, the closest North American port to Asia, meaning businesses can still access the advantages of British Columbia without having to deal with the exorbitant prices.

In their report, Avison Young notes that despite the rising interest rates and steeper construction costs, “Calgary’s position as a viable alternative to larger and more congested industrial markets continues to solidify. The market’s relative affordability, even in the face of elevated costs, will still play into its favor.”

It’s a “perfect storm of conditions,” Thompson says.

In other words, Alberta is calling, and those in the industrial real estate market are answering.

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Blockchain Technology in Real Estate: 4 Ways it’s Supporting The Industry

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Blockchain application has now reached a pinnacle point, as industries, including the likes of banking, financial services, governance, insurance, media, and supply chain management, among others, now realize the capabilities blockchain holds.

The now widespread adoption of blockchain applications in some of the world’s most lucrative industries comes as no ordinary occurrence.

The inception of blockchain mostly took off in late 2008 or early 2009 after it was created by a person – or group – using the pseudonym Satoshi Nakamoto. Although this may be the case, the blockchain we know today came a long time before Nakamoto and Bitcoin.

In 1982, David Chaum, a then-doctoral candidate at the University of California at Berkeley, outlined what came to be known as a blockchain database in his dissertation “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups.”

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Whether you support team Nakamoto or team Chaum, the use and application of blockchain technology has found itself in a profound position within the last few years, seeing mass adoption among businesses and, more recently, consumers.

Yet, while blockchain can now be found in everything from retail, telecommunications, mining, and manufacturing, the next phase of its development within the greater global economy has been its introduction into the real estate and property management industry.

Blockchain in real estate

For several decades, real estate and property management have been operating on a tediously outdated system that required an endless list of intermediaries, costing buyers, sellers, and investors a pretty penny to finalize their transactions.

In a recently published MSCI Report, the professionally managed global real estate investment market was estimated at more than $11.4 trillion in 2021, up from the reported $10.5 trillion in 2020.

You’d think an industry of this size, which constitutes a sizable portion of the global economic asset and transaction activity, would have seen a faster transition toward blockchain technology.

Though the adoption thereof has been marginally slow, recent developments have revealed some promising and practical solutions that could help revolutionize how the real estate industry can offer buyers, sellers, and stakeholders better accessibility and transparency.

Increased transaction security

Real estate transactions are known to be painstakingly slow, requiring deep pockets and a slew of resources to help finalize the deal. Blockchain-based property platforms can help to simplify the entire process, from searching for a property to eliminating any fraudulent activities that may jeopardize the transaction.

With blockchain, real estate companies and investment firms can seamlessly scan documents for any inaccuracies within an application. Historical data can be traced and used upon current application to help determine whether any information has been falsified or inaccurately presented.

It’s estimated that in the second half of 2021, around 1 out of 120 mortgage applications contained fraud. Allowing for data and transaction details to be stored on a digital ledger, real estate agencies, and stakeholders will be able to remove the risk factor, creating safer, easier, and more affordable methods.

The use of smart contracts

As part of creating a safe and transparent environment for all stakeholders throughout the transaction process, blockchain enables realtors, buyers, and sellers to utilize smart contracts to help speed up the selling or buying process.

Having smart contacts eliminates intermediaries, helping to save both time and money. With smart contracts, blockchain technology will be able to automate real estate transactions, title searches, and escrow services. Additionally, buyers and investors will be able to review historical data related to the property, such as previous owners, tenants, and the physical changes that have been made on the property.

Companies that manage rental properties will also be able to back-check tenant information such as financial statements, work history, and previous lease contracts to ensure applicants comply with outlined requirements.

Smart contracts are a simplified way to keep important information in one secure digital ledger, only allowing stakeholders access to the data and making it easier for involved parties to finalize real estate transactions.

Tokenizing property and real estate

A key element of blockchain technology is the digitization of securities, in this case often referred to as tokenization. With this, certain real-world assets and securities can be tokenized into a digital format, which can then be distributed to investors and transferred to certain counterparties.

Allowing for the tokenization of property and real estate, the industry is not only allowing it to become more democratized and accessible to a larger pool of interested buyers but also making digital assets more customized to meet investor and stakeholder needs.

Having real estate become tokenized makes it easier to spread the assets across several pools of investors while at the same time tapping into secondary market opportunities. What this means is that issuance can be completed faster, helping to speed up the exchange process and administering financial components such as payouts or dividends to involved stakeholders.

Increases real estate liquidity

The current market turbulence, which is mostly fueled by inflationary listing prices and soaring interest rates, means that there are not always buyers or sellers available in the market.

Though many people tend to sell liquidity to the bank in times of economic uncertainty, the use of blockchain could mean that individuals could sell off a percentage of their home’s equity in the form of tokens. We’ve previously discussed the tokenization of real estate, and in this case, it provides an alternative investment opportunity between a pool of investors.

Already we see how blockchain is making real-world real estate more digital and tokenized due to the introduction of Web 3.0 capabilities. Recently, a home in Columbia, South Carolina, was sold for $175,000 to a real estate investor via a non-fungible token (NFT) through a subsidiary Roofstock Chain.

The sale marked the first NFT-based residential home sale in the U.S., which required several layers of blockchain players to reach completion.

This is a simple example of how real estate, whether it’s commercial or residential, can be digitized and more streamlined to help increase its equity value and attract a larger pool of investors.

Final thoughts

Blockchain technology proves to be a diverse, versatile, and multi-layered addition to the real estate industry that could potentially improve the security, transparency, and accessibility of real estate to a larger pool of investors, buyers, and sellers.

Although there is still a lot of development required for more practical and logical integration within the greater real estate industry, it’s already proven to become a successful addition to a global industry that sees trillions of dollars in annual asset transactions being moved across the world.

On a smaller scale, realtors and real estate companies could implement alternative practices that help to provide more steadfast solutions. This would not only improve the transaction process but allow for a safer and streamlined industry, making real estate a democratized asset on a global scale.

Featured Image Credit: Photo by Karolina Grabowska; Pexels; Thank you!

Jacob WolinskyJacob Wolinsky

Jacob Wolinsky

CEO of Valuewalk

I am the founder and CEO of ValueWalk a popular investing site. Before working at ValueWalk full time, I was as a stock analyst first at a micro-cap focused private equity firm. After that, I worked as a stock analyst at a small and mid cap focused research shop. Following that, I worked in business development for hedge funds.
Despite having an investing background, I am fascinated by tech and am currently working on a few tech related apps. Stay tuned for some news on that!
I live with my wife and four kids in Passaic New Jersey.

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Inside Neymar’s International Real Estate Portfolio

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Currently participating at the 2022 World Cup in Qatar, Brazilian soccer player Neymar da Silva Santos Júnior (more widely known simply as Neymar) has made a prodigious name for himself as one of the best footballers in the world. It shouldn’t come as a surprise, then, that this year Forbes placed him in the number four spot on their annual ranking of the world’s highest-paid athletes—his estimated $95 million earnings in 2022 put him behind only Portuguese soccer star Cristiano Ronaldo, legendary basketball player Lebron James, and his Paris Saint-Germain teammate Lionel Messi, who took the number one spot. Neymar—who plays as a forward for Paris Saint-Germain and Brazil’s national team and formerly played for Brazilian football club Santos—has naturally racked up an extremely expensive roster of luxury properties. Below, we look at some of his most prolific real estate dealings.

2013

In 2013, Neymar signed with Barcelona’s football club and reportedly began paying around $18,000 per month to rent a contemporary-style mansion nestled on a 10,764-square-foot lot in the quiet and upscale neighborhood of Pedralbes, where Shakira and her ex, Neymar’s former Barça teammate Gerard Piqué, also called home. Just a short distance away from the Barcelona arena Spotify Camp Nou, the modern five-bedroom and five-bathroom structure had a landscaped garden decorated with sculptures, a large pool, and 5,382 square feet of living space across three floors with coastline and city views. The owner of the property, a businessman with ties to the Barcelona football club’s board of directors, offered to rent the home to Neymar after the athlete initially struggled to find a satisfactory permanent home in the area and needed to begin training and playing with his new team. During his stay there, the soccer player had access to a top-floor bedroom suite with panoramic views. Other highlights of the luxe property included an extra large dining area and an underground eight-car garage.

2016

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Neymar found a Barcelona home to call his own in 2016 when he paid $5.2 million for a 7,879-square-foot mansion in the Castelldefels neighborhood, where Messi also resided. The contemporary-style three-bedroom house sat alongside a 10,764-square-foot garden and a swimming pool, situated on a hill with picturesque views of the Mediterranean Sea. The home, which also featured a gym and two living rooms, formerly belonged to fellow Brazilian soccer player Ronaldinho.

That summer, Neymar also caught some media attention when he posted Instagram pictures of him hanging out with Justin Bieber and other friends at an $8,496-a-night Airbnb mansion modeled after an 18th-century Versailles château. The palatial seven-bedroom and 12-bathroom dwelling sprawled 22,000 square feet and was decked out with crystal chandeliers and intricate millwork. Highlights included a grand staircase, a private movie theater with leather recliners and wood-paneled walls, a wine cellar, a gym, multiple tennis courts, a swimming pool, and a spa, all located on a five-acre lot.

That same year, the athlete also paid $8.5 million for a house in Mangaratiba, Rio de Janeiro—the same area of the seaside city where the Sylvester Stallone movie The Expendables was shot. Neymar spent the early days of the pandemic quarantining at the home with a group of friends. Set on a two-and-a-half-acre lot, the deluxe six-bedroom property is certainly a great home to be stuck in: It has an open-plan living and dining area that seats up to 14 people for dinner, a sauna, a massage room, a 3,000-bottle wine cellar, a gym, a billiards table, and even an underground disco club that the party-loving footballer later built while stuck at home due to an ankle injury. The contemporary home has sleekly decorated interiors, with an eye-catching floating staircase in the living room and a modern kitchen with a breakfast bar. Outside, numerous patios for lounging and alfresco dining, a swimming pool, an oceanside jacuzzi, a tennis court, a beach volleyball court, a helipad, and a jetty where Neymar docks his 15-foot yacht are found. It seems that the athlete still maintains this home.

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Exploring How to Help Homebuyers Compete with Real Estate Investors

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In the summer of 2021, Lauren Brunner and her colleagues at the Port of Greater Cincinnati Redevelopment Authority came across an article in The Wall Street Journal that talked about the influx of out-of-town investors to Ohio’s real estate market. The article startled Brunner and her team, and they quickly did some digging. The Port, as it is called, discovered that 4,100 homes in the county were owned by just five landlords.

“We were, like, hair on fire–we had no idea this was an issue,” said Brunner, CEO and president of The Port, at a panel hosted by the Department of Housing and Urban Development’s Office of Policy Development and Research this week.

These out-of-state investment firms were making it harder for local residents to buy homes, especially low- and middle-income buyers. With sky-high mortgage rates and a tight supply, it’s already been a tough year for new homebuyers across the country. Now communities are mobilizing to make it more difficult for investors to rent out the properties they purchase.

In Cincinnati, The Port was able to acquire nearly 200 properties that it is now working to sell to the tenants at an affordable price. This is just one approach governments are using to combat the issue. Panelists at the HUD event say there are several strategies governments can try to prevent investors from dominating the market.

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A complex issue like this warrants a multifaceted approach, and one place to start is before investors even bid on a property, according to Laurie Goodman, an Urban Institute Fellow for the Housing Policy Finance Center.

“Rather than saying, ‘Bad investor, you shouldn’t be buying these properties, you should be leaving them for homeowners,’ we should be looking to improve the financing process so individuals can compete with institutional investors,” she said at the HUD panel.

When it comes to financing a property, according to Goodman, investors have several advantages that make it difficult for owner-occupants to compete with them.

For starters, most of the homes real estate investors purchase require renovations. From the get-go, many of those properties are out of reach for typical homeowners because taking out home improvement loans is much more difficult for homebuyers. While investors have teams of experts that can anticipate how much renovations will cost and use that information to inform their bids, most homeowners “have no idea” how much renovations cost, and therefore shy away from bidding at all, Goodman said. And because investors typically own hundreds or thousands of properties, they often work with vendors at discounted rates because of the scale.

Meanwhile, nearly 40% of homebuyers or potential homebuyers are denied renovation loans, Goodman noted. “Is it any wonder that a homeowner would prefer to sell to an all-cash bidder than someone who needs a mortgage and has a 39% denial rate in order to get renovation financing?”

In addition to rethinking how homebuyers can finance property purchases, governments need to have good tenant organizing policies, said Elin Zurbrigg, deputy director of Mi Casa, Inc., a housing advocacy group.

She pointed to Washington D.C.’s Tenant Opportunity to Purchase Act. If a building is up for sale, TOPA gives tenants the first opportunity to collectively purchase the property. Under the policy, thousands of people – including low-income families – have been able to purchase homes in one of the country’s fastest gentrifying cities, Zurbrigg said.

“Through purchasing their buildings directly or becoming a co-op or condominium owner, it’s a model that’s inclusive of everyone because you don’t need to obtain a mortgage by yourself. You don’t have to qualify individually,” Zurbrigg said.

She encouraged local leaders to work closely with tenant organizations and “channel the power of residents who want to remain in their homes in their neighborhoods.”

Bianca Motley Broom, Mayor of College Park, Georgia, also noted the importance of community engagement.

College Park has about 14,000 residents, 75% of which are renters. The city wants to provide more homeownership opportunities for its residents and was working with a developer to create 200 homes. But when the developer decided to rent those homes instead of sell them, residents spoke out. The city listened and stopped the project, Motley Broom said.

“What we’re trying to do … is let people know, this isn’t just about your house. This is about our entire community and the future of that community and also the future of individual families and their ability to generate wealth to pass on to the next generation.”

“It’s not the job of a market you know, to watch out for society – it’s the job of a market to be efficient and make money,” The Port’s Brunner said. “It’s our job, all the rest of our jobs, to follow behind the market and determine whether what the market is doing comports with our values. And if it doesn’t, we have to fight back.”

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