Location, location, location. That’s the common phrase for success in the real estate market, and it’s no different when these properties are listed in an alternative virtual reality, called a metaverse.
With Calgary’s downtown office vacancy rate stuck in the 25 per cent range, many real estate experts have suggested converting empty space in the Central Business District into residential use as one solution for the market.
But landlords and property owners haven’t been stampeding to actually follow through on that strategy. RENX has learned only five buildings during the past two years have been converted from office to rental in inner-city neighbourhoods such as Southwood, Beltline, South Calgary, Eau Claire and Tuxedo Park.
And, there are no further conversions planned, at least for the short term.
“We don’t have any in the queue right now, nothing in the queue at this moment,” said Sonya Sharp, the City of Calgary’s team lead, business and local economy, in an interview with RENX. “These (five buildings) are the ones that have been completed.”
According to commercial real estate firm CBRE, the downtown Calgary office market has an inventory of 42.3 million square feet across a total of 148 buildings.
That means about 10 million square feet of vacant space. So why haven’t there been more conversions?
At the recent Calgary Real Estate Forum, a session highlighted the challenges landlords face in repurposing those offices to residential uses – Giving Older Assets A New Life: A Look at Repurposing Existing Properties & Sites.
Six buildings in the downtown core are more than 75 per cent vacant, while three buildings are empty said Greg Kwong, CBRE‘s executive vice-president and regional managing director in Alberta.
“People from the city and other people want to say ‘what are the solutions to getting our vacancy down, let’s repurpose half of downtown Calgary.’ It’s really just not possible given the current vacancy right now,” said Kwong.
In the suburban office market, 11 buildings are greater than 75 per cent vacant and nine buildings are 100 per cent vacant. There are 366 buildings in the suburban Calgary office market with a total of 25.8 million square feet.
“Even if we took (the completely vacant buildings) and converted them to condos – took them out of the office market – we still would have a very high vacancy rate,” Kwong added.
Also during the forum, Marco Civitarese, Calgary’s chief building official and manager, said the age and classification of a building is important in how it could be repurposed.
On June 13, 2017 Calgary council approved an initiative called the Centre City Enterprise Area. The directive made a number of amendments to a land use bylaw, removing significant barriers to save businesses thousands of dollars if they choose to open or relocate into the Central Business District.
The initiative was developed in collaboration with Calgary Economic Development, city administration, BILD Calgary, NAIOP, local business improvement areas, community associations and small businesses.
“The strategy behind it is really to increase vibrancy in the downtown. Gain some activation to residential living and repurposing buildings that are facing the crunch of vacancies right now,” said Civitarese.
During the real estate forum, Brian Rowland, associate with Zeidler Architecture, said architects can face design challenges in these conversion projects. These include existing layouts, windows that don’t open, and how exteriors are designed to suit the original purpose of the building.
“Usually they don’t include a bunch of vents. So they’re not anticipating 12 or 14 kitchens, and bathrooms, and washer/dryers on every floor,” he said.
Then there are surprises that are not anticipated in the architectural drawings.
“You start cutting into these buildings and finding these surprises you have to deal with as you go through. So it does create a new challenge,” Rowland explained. “The idea is just that we can take something that’s existing and repurpose it and really make it into something that’s contributing again to someone’s portfolio of holdings.”
Ken Toews, senior vice president of development for Calgary’s Strategic Group, which has been busy converting office space to residential use in both Calgary and Edmonton, said it has been involved in six conversions.
He said while conversions are important to add residential space in downtown Calgary, for property owners they can take a non-performing or low-performing asset and convert it to a much more attractive asset.
“Why can’t we do more of these? Well, there’s a whole bunch of challenges that come when you’re repurposing a building. The first challenge is that the residential floor plate is almost always different than what you have for an office floor plate. So you have to really work with it to make it work,” said Toews. “And most buildings, it won’t.”
Even with the success of its conversions however, several weeks after the forum Strategic Group announced it was putting 56 of its Alberta properties under creditor protection.
The assets are primarily office buildings in Calgary. The challenging real estate market and continued uncertainty in the economy were cited as the reasons for the move.
Under Calgary’s Centre City Enterprise Area plan, businesses no longer require a development permit for changes of use, exterior alterations and small additions in the Beltline or Downtown for a three-year period (ending July 1, 2020).
Sharp said the Centre City Enterprise Area is a mapped out area of the downtown and into a small area of the Beltline to reduce retail and office vacancies in the core.
The city also wanted to make it easier to allow pop-up and interim uses in vacant office spaces.
“Pop-up uses are uses in approved buildings and no approvals are required. So a retail store can go in and out as long as they aren’t breaking any code rules,” said Sharp. “An interim use is up to six months and we’ve waived the development permit, and we’ve waived the business licence, and they would only be required to get a building permit if the building had been vacant more than six months or they’re doing any changes inside the building that will be required to get a building permit.
“We focused on the city wide for that because we have vacancies all over the city. We wanted to animate city spaces citywide. We wanted to provide opportunities for businesses to try out their product without having to go through all the city permits. It was an opportunity to reduce barriers and costs of starting a business in Calgary.”
Location, location, location. That’s the common phrase for success in the real estate market, and it’s no different when these properties are listed in an alternative virtual reality, called a metaverse.
The metaverse is a growing topic in tech and some crypto circles, describing a virtual reality space into which users can log in and interact with one another using avatars to represent their real selves. It has been growing particularly in the gaming space with titles like Fortnite, Animal Crossing: New Horizons, Roblox, and many others fostering a metaverse community for players. Social media websites such as Facebook are also pushing into the space with Horizon Worlds and is planning to hire 10,000 people in the European Union over the next five years to help build their vision of a metaverse.
It’s no coincidence that this concept has sci-fi vibes to it, the term “metaverse” was originally coined in science fiction writer Neal Stephenson’s book “Snow Crash” in 1992 to describe a virtual world that people would plug into using their own virtual avatars. Online games like Second Life, which launched in 2003, were a pioneers for metaverse economies, allowing users to trade goods and services using their in-game Linden dollars — including virtual real estate.
It is also taking off among the decentralized finance crowd with platforms like Decentraland, an online metaverse space that calls itself the first fully decentralized virtual world owned by its users where they create, explore and trade virtual goods using smart contracts on the Decentraland marketplace. Along with virtual clothes and accessories you can purchase using the platform’s native MANA crypto, you can also secure virtual land parcels and estates.
These virtual properties could be vacant parcels for creators to build on, or structures that reflect real-life properties and completely original creations. They are represented by co-ordinates on the metaverse platform where users can meet up using their avatars to socialize and decorate their own spaces with collectibles.
The possibilities are endless
Monetizing this space is starting to give rise to metaverse real estate companies, the first being Metaverse Property. Being a nascent industry, the company works to secure a wealth of land assets in the virtual real estate space. It focuses on buying and selling, managing business properties, offering rentals in the metaverse, virtual land development, as well as consultation and marketing. Metaverse Property currently operates on platforms including Decentraland, The Sanbox, Somnium Space, Cryptovoxels, and Upland.
Beyond being virtual landlords and developers, Metaverse Property also says it is creating what it’s calling the first “metaverse real estate investment trust (REIT)”, which will trade through a non-fungible token (NFT) that is backed by the company’s virtual land portfolio.
With a bullish bet on metaverse real estate, crypto and decentralized financial services company Tokens.com Corp purchased a 50 per cent stake in Metaverse Group this week valued at about $1.7 million, reportedly a record equity investment in a metaverse real estate company.
Andrew Kiguel, the chief executive officer at Tokens.com, explained that the company’s goal is to secure as many virtual real estate land parcels as possible to rent them out to clients.
On platforms like Decentraland, which has seen more than $50 million in virtual sales for goods like real estate, clothes, accessories, usernames and avatars, an outlying parcel in an area less travelled could run a user around $5,000 MANA, or roughly over $4,600 Canadian dollars as of mid-October. These prices can jump up quickly in larger built-out properties in popular zones, with the highest-selling virtual plot of land recorded on the platform being a $1.3 million MANA property in June, equal to about US$900,000 at the time.
Skeptics might find it bizarre to spend any amount of money on a property that they themselves cannot live in, though Kiguel told the Financial Post that there are valid uses for these virtual properties.
“Really, it’s the foot traffic,” Kiguel said. “So, you might want to build a house to invite friends over, you can decorate the walls with your NFTs, it’s a way of socializing…. COVID drove a lot of this: when the world shut down, people turned to their computers as a means of interacting with people, and so the foot traffic in the metaverse continues to grow at a very high rate.”
Kiguel added that celebrities like Snoop Dogg are getting into the metaverse as well. In late September, Snoop Dogg partnered with The Sandbox to reconstruct his real-life mansion on the platform’s NFT metaverse. Paris Hilton signed a partnership with Decentraland as one of the headline celebrities being featured on the platform’s first-ever Metaverse Festival slated for October 21 to the 24th. Hilton will be using a Genies avatar, which are animated avatars that can speak using the celebrity’s voice.
With this growing adoption and promotion among brands and celebrities, Kiguel expects that more users will flock to the metaverse space.
“The possibilities are endless. There’s museums and galleries, if you want to go in and see some of the most expensive NFTs sold in the world … you can go to Decentraland,” Kiguel said. “So, the possibilities are really endless, here’s all the different things you could do to attract people here.”
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The Manitoba real estate market started to cool off in September, but the province is still expected to smash 2020’s record year.
There were 1,575 residential properties that were sold last month for total sales of $506.4 million. This is down 12.9% and 9.3%, respectively, from September 2020’s record numbers, but Stewart Elston, president of the Manitoba Real Estate Association said these sales still out-paced September 2019 by 15%.
He said the pandemic push for home offices and bigger yards has died down some but is still a factor. There is, however, an even bigger motivation for homebuyers.
“The pandemic is still playing into it a little bit but by and large it’s interest rates, low-interest rates are still driving the market,” said Elston.
He noted there are consumer protections in place to protect homebuyers in case the low-interest rates shoot up, specifically the stress test required for mortgages.
The sector is still in good shape to improve on the high-water mark set last year for sales, fuelled by a red-hot spring. So far in 2021, there have been 16,013 residential properties sold, up 23.7% over last year and approaching the year-end record of 16,789 sales. The sector has already surpassed total dollars from 2020 with $5.28 billion in total dollars, up 35.3% over the first nine months of 2020, when the year-end total was $5.1 billion.
There have been 20,362 new listings through September, up 0.3%, and the average sale price of $329,998 is up 9.4%.
Elston said the big shift has come in the sale of condos — which includes apartment and townhouse-style dwellings. While single-home sales are still up 21%, condo sales are up 49% as people look for more affordable options.
The average two-bedroom condo is selling for about $200,000, and one-bedroom condos are even cheaper.
“For a number of years the Winnipeg condo market was a little on the saturated side, listings took longer for a home to sell,” he said. “Now what we’re finding, we’re not getting a lot of bidding wars on condos or multiple offers, but they’re selling faster and they’re selling for closer to list price. There isn’t the excess of inventory on condos now there either.”
The market slowdown is good news for first-time buyers. As the sector cools the prices will also start to calm down as well.
“I think that’s a good thing and I think that should give any first-time buyer there’s hope of getting into something,” said Elston, who also recommended expanding their neighbourhood search and to consider condos as an affordable alternative.
When it comes to housing in Vancouver, many believe that affordability has long left the building.
So if that’s the case, why even bother talking about it?
As realtor Adam Major explains in a phone interview with the Straight, it’s because people require homes, no matter what.
“Individuals need to look at what is affordable for them and decide what they want to do,” Major said.
They can either buy or rent, and that’s entirely up to them.
“It’s okay to be a renter,” noted Major, who is a managing broker with Holywell Properties.
Now for those looking to buy, there are neighbourhoods in and around Vancouver that may be considered as pockets of affordability.
The Straight asked Major to identify some of these areas because of his access to granular data.
In addition to his title of managing broker, he is also the cofounder and CEO of Holywell Properties’ real-estate information site, Zealty.ca.
To digress a bit, Zealty started in 2006 as a virtual map of homes for sale on the Sunshine Coast, where the brokerage is based.
Major’s colleague, Gary Little, wrote the computer program. Little is also a realtor and he previously worked in Silicon Valley. He cofounded Zealty with Major, and serves as its chief technology officer.
The map has since grown into a rich online resource, which includes listings and sold properties, as well as fine-grained data like price per square foot, days on the market, and so on.
Zealty uses data from the real estate boards of Greater Vancouver, Fraser Valley, and the Chilliwack district. The site is updated several times a day.
To zero in on these pockets of housing affordability, Major used median price or the middle point for prices as main parameter.
“Median price gives you the broadest sense of what’s happening in that neighbourhood and what can you buy in that neighbourhood,” he explained in the phone interview.
He also separated detached homes from condos or apartments, because if one combines these two types of properties, this will make a big difference in overall median price.
For the search, Major looked at all sales from January to September 2021.
And so, the area with the lowest median price is where buyers may want to look into, if affordability is what they are after.
For the West Side of Vancouver, Major said that the most affordable neighbourhood for condos or apartments is Marpole. It has a median price of $653,000 as of September 2021.
Major suggested that the best value for money is Downtown and the West End because of their location. The median apartment prices are $690,000 and $692,750, respectively.
However, he observed that condo units in these two places are generally smaller, which does not work for families.
For detached homes, the cheapest neighbourhood in the West Side of Vancouver is also Marpole, where the median price is $2,445,000.
On the East Side of Vancouver, apartments or condos are most affordable in Hastings-Sunrise, with a median price of $521,500.
Major noted that neighbourhoods in East Vancouver like Victoria, Killarney, Grandview, Fraserview, and Collingwood have apartments averaging less than $600,000.
“Main Street is now $885,000—thank the hipsters,” Major said.
For detached homes in East Vancouver, Collingwood is the most affordable place, with a median price of $1,570,000.
“Strathcona, which used to be an island of affordability, has gone full gentrification and is now almost $2 million for a detached home,” Major noted.
Past Boundary Road and into Burnaby, the Zealty CEO noted that the best deal for apartments is in the Cariboo neighbourhood near the Lougheed Town Centre. The median price is $425,000.
One can also look along East Hastings Street in the Capitol Hill area, where the median price is $512,000 as of September 2021.
“A lot of the new buildings near Brentwood and Metrotown have the effect of pushing up the median price in those neighbourhoods,” Major noted.
In Brentwood, the median price for condos is $717,000. In Metrotown, it’s $673,400.
For detached homes in Burnaby, Major said that the most affordable neighbourhood is Greentree Village near BCIT. The median price is $1,398,900.
Farther east, Major described New Westminster as a “good place to find an affordable home”.
“It is a smaller municipality, but there are several neighbourhoods where the median price is around $450,000,” he noted.
The cheapest apartments can be found in the city’s West End neighbourhood, where the median price is $380,000.
Meanwhile, New Westminster’s Uptown is the best for detached homes. The median price is $1,105,000.
The Straight also asked for Zealty data about the North Shore, which is North Vancouver, District of North Vancouver, and West Vancouver.
Major noted that the best deal for apartments or condos is in the Cedardale area of West Vancouver. The median price is $572,500.
“For detached, nothing on the North Shore is cheap, but West Lynn is likely the best bang for your buck,” the Holywell Properties executive noted.
The median price in West Lynn is $1,695,000, or $135,000 cheaper than neighbouring Lynn Valley. “And you can still ride your bike to Fromme,” Major said, referring to one of the North Shore mountains and a popular destination for hiking and biking.
Richmond lies to the south of Vancouver.
In Richmond’s Granville neighbourhood, Major said that the median price for an apartment is a “surprisingly affordable” $280,000.
“Pro tip: if you buy an apartment on the second floor or above, you don’t have to worry about global warming,” Major joked.
For detached homes, the most affordable neighbourhood in Richmond is East Cambie. The median price is $1,543,500 in this area.
Coquitlam, Port Coquitlam and Port Moody make up the Tri-Cities.
“For apartments, Central Coquitlam, along Austin Avenue, is the best deal,” Major said. The median price is $402,500.
For detached homes, Major noted that the neighbourhood of Meadowbrook is cheaper than the median price for the rest of Coquitlam.
“Just up the Lougheed Highway, to the right of the old Riverview Hospital, the median detached price in Meadowbrook is $1,030,000,” he said. The realtor explained that it is significantly below the overall median price for Coquitlam of $1,535,000.
Going to Surrey and Delta, Major stated that Annieville could be the best place to look for an apartment or condo. The median price is $405,000.
“Older neighbourhoods, which were known for cheaper housing, like Whalley, have seen so much development that they have actually pushed the median price up,” he noted.
In Surrey’s Whalley area, the median price is $428,000.
For detached, the neighbourhood to go to is Bridgeview, which is near the Patullo Bridge. The median price is $1,050,000.
“There are some very expensive neighbourhoods in White Rock and South Surrey, where the median price is well over $2 million,” Major noted.
To the east in the Langley area, the Zealty executive noted that the median price in the city of Langley for an apartment is $433,000.
For detached homes, Major said that nothing is under $1 million. The city of Langley and Aldergrove offer the most affordable, with a median price of $1,160,000 and $1,021,750, respectively.
For homebuyers who do not mind driving a lot if they work in or near Vancouver, Major said Chilliwack offers the “cheapest housing in the Lower Mainland”.
The median price for an apartment in downtown Chilliwack is $265,000.
For detached homes, $825,000 is the median price in all of Chilliwack.
“To get below $800,000, you have to go all the way to Hope, where the median price is $623,750,” Major said.
Now for the big picture, the Zealty cofounder shares a basic formula on how home prices increase as one gets closer to Vancouver from the suburbs.
“There is about a 20 percent increase in median detached prices as you drive along the Trans-Canada Highway, and go from town to town,” Major said.
Let’s start from Chilliwack, where the overall median price for a single-family home is $825,000.
Major pointed out that the price increases by 20 percent in Abbotsford ($1,092,000), then another 20 percent in Langley ($1,395,000), and only slightly in Surrey ($1.4 million).
By the time one gets to Burnaby, it’s $1,765,000.
When a homebuyer reaches Main Street in Vancouver, the median price is $2,150,000. In Shaughnessy, the median price hits $5,850,000.
Major noted that things level off a bit as one heads further west. Median prices of detached homes in Kerrisdale and Kitsilano are $3,105,000 and $2,816,500, respectively.
The same thing happens with apartments or condos. However, Major stated that the rate of increase is lower at 15 percent as homebuyers drive from town to town.
To illustrate, Major noted that one can start with the median price for an apartment in Chilliwack at $299,950, and then get to $750,000 when one arrives on the West Side of Vancouver.
Again speaking about the big picture, Major noted that the median price of a detached home for all of Greater Vancouver, Fraser Valley, and Chilliwack is $1.5 million.
For apartments or condos, it’s $590,000.
And for all types of houses in these three real-estate markets, including townhomes, the median price as of September 2021 is $851,000.
In the phone interview, Major told the Straight that there are several reasons why homes have become very expensive.
“The causes for the affordability crisis are many, but I think these can be boiled down to a collective failure at all levels of government for the last couple of decades,” he said.
There’s one prospect that frightens Major, who has been with Holywell Properties since 2006.
“All markets, whether they be housing, the stock market, et cetera, eventually revert back to the mean, and often overcorrect in the opposite direction,” he said.
Major continued: “The housing bubble in Vancouver has gotten so big and gone on for so long, it’s scary to think what a correction could look like.”
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