Commercial real estate in Metro Vancouver experienced a period of adjustment similar to that seen in the residential market this past year, according to a CBRE Vancouver Market Outlook, and that is resulting in a mixed outlook for the near term going into 2023.
While there is some uncertainty going into the next year, the underlying fundamentals of the Vancouver market that have created resilience in the past still exist, said the outlook.
Strong performance is expected in the industrial sector of commercial real estate, according to Jason Kiselbach, senior vice-president and managing director with CBRE. He cited shifts in manufacturing, with the sector starting to see more activity in North America.
“There is a lot of inventory still being ordered and going through warehouses as supply chains correct. With port activity continuing, I think industrial is still going to be one of the stronger asset classes,” he said.
Though available land has been a challenge for Vancouver, he said people have been finding ways to unlock development sites and redevelop functionally obsolete properties.
“We’ve seen a few sales like that for future redevelopment in the core markets, but it’s definitely a limiting factor for us,” he said.
Increases in interest rates have softened demand for industrial strata preseales, according to the report. It is predicted that this will influence land prices which have increased alongside industrial strata over the last several years.
The industrial asset class will continue to see low supply in 2023, according to the outlook.
“Based on our mid-case absorption scenario which assumes absorption of two-thirds of the remaining supply that is not pre-committed, we expect vacancy to be at or below 1% in 2023,” the outlook said.
Office real estate saw a notable year in 2022, as more companies looked to move back to in-person work, creating a demand that halted during the pandemic, according to Kiselbach.
“Looking back at this year, there was a ton of activity, especially the first half of the year in office. The asset class is going through a bit of a period of adjustment, and it’s playing out over a longer period of time than we thought it would,” he said.
In 2023, it is expected that office real estate will remain somewhat strong as more companies adjust to hybrid or in-person work models. As those decisions are made, adjustments will have to be made to current ways office space is utilized, which will lead to some transaction activity, according to Kiselbach.
The retail asset performed better than expected in 2022, Kiselbach said.
“It feels like retail had gone through its evolution a few years ago, and was a more stable asset class this year. There’s a critical shortage of retail space as well. If we go into a recessionary period, which most people are predicting, consumer staples or discretionaries, like grocery stores, pharmacies, dentists, doctors, those will all perform pretty well. It’s a good asset class in a bit of a tougher economic backdrop,” he said.
Due to issues with supply chain and e-commerce, Kiselbach noted that there has been a resurgence in in-person shopping, driving demand for retail space.
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Montreal home sales down 36% from January 2022: Quebec real estate association
MONTREAL — The Quebec Professional Association of Real Estate Brokers says Montreal’s January home sales fell to a level not seen since 2009 as the market slowdown continued.
The association says last month’s sales totalled 1,791, down 36 per cent from 2,816 in January 2022.
Charles Brant, the association’s market analysis director, says these numbers mean activity is approaching a historic low for the month of January and come as rising interest rates are weighing on homebuyers.
He says first-time homebuyers in particular are taking a cautious wait-and-see attitude despite recent drops in prices.
The median price of a single-family home edged down seven per cent to $500,000 year over year, while condos dipped three per cent to $370,000 and plexes dropped six per cent to $675,000.
As median prices fell so did new listings, which hit 4,598 compared with 4,808 a year ago.
This report by The Canadian Press was first published Feb. 7, 2023.
The Canadian Press
B.C. residential real estate investors unfairly ‘painted as speculators’: BCREA
Statistics Canada released data last week revealing 23.3 per cent of B.C. homeowners are also investors in the market. The Vancouver census metropolitan area (CMA) had an overall investment rate in condominiums and houses of 21.3 per cent.
“Investors often get kind of painted as speculators who are out to buy up housing and do nothing with it, or flippers or any other kind of pejorative terms that we add to investors. But what this data shows, and what’s good to understand, is that they’ve really invested a lot in a primary rental in Canada,” said Brendon Ogmundson. “A lot of the rental units that are being provided are smaller investors who own one unit and are renting it out.”
Statistics Canada defines an investor as an “owner who owns at least one residential property that is not used as their primary place of residence.”
In B.C., 73 per cent of properties with multiple dwellings were owner-occupied investment properties. Investor-occupants are more common in the province, making up 9.6 per cent of owners.
This is due to a higher proportion of properties with multiple residential units – 11.7 per cent – such as laneway units or basement suites, according Statistics Canada. The national statistics agency said these types of units are more likely to be owner-occupied.
“So many owners in B.C. have chosen to also be landlords by renting out their basement suites or laneway houses and it’s way, way different than any other province in this dataset,” Ogmundson said.
Statistics Canada data breaking down homeowners by investor-type.
The region of Greater Vancouver A or Electoral Area A, which includes the University Endowment Lands, Barnston Island, Howe Sound communities, Indian Arm and Pitt Lake communities, had a higher proportion of houses and condominium apartments used as an investment at 42.1 per cent compared with the rest of the region.
The City of Vancouver had a lower proportion at 32.5 per cent.
This difference is attributed to students attending the University of British Columbia, who are more likely to be renters or live in a second property owned by a family member, according to Statistics Canada.
The proportion of condominium apartments owned for investment purposes by non-resident investors was the highest in B.C. among the provinces – seven per cent.
The rate of condominium apartments used as investment was lower in the Vancouver CMA (34 per cent) than the rest of the province.
Across B.C., non-residents and out-of-province investors owned 43,890 houses used as an investment. This number was typically higher in areas near the Alberta border.
Out-of-province investors owned 1.6 per cent of homes in B.C., while in-province investors accounted for 9.8 per cent of all investors.
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