An attempt to sell of a pair of office towers in downtown Vancouver is being carefully watched by the commercial real estate world, and not just because Amazon.com Inc. is one of the primary tenants.
Real eState
Why the real estate industry is closely watching the sale of two Vancouver office towers
Ray Wong, vice-president of data solutions at Altus Group, a provider of asset and fund intelligence for commercial real estate, said the sale and rumoured price tag are attracting a lot of attention because the prime office complex is on the block as the broader office market across the country struggles in the face of rising interest rates and persistently higher vacancies due to remote work.
“That’s going to be the real test of where the office values are,” said Wong. “It is a brand-new building, right downtown, close to all the amenities, great tenant — so it’s going to be interesting to see what type of sale price that building goes for.”
Sales of premium office buildings have been scarce of late, especially since the U.S. banking crisis brought deeper scrutiny of the commercial real estate sector earlier this year. Publicly traded office holding have already seen their values plunge on speculation that sector is in trouble, but private and institutional investors have yet to take the same writedowns, in part because of a dearth of comparable sales from which valuations can be derived.
The private market is still behind in appropriately valuing office buildings today
Carl Gomez
REITs tend to hold lower quality office buildings in Canada than pension funds, said Carl Gomez, chief economist at commercial real estate analytics company CoStar, but there is nevertheless “a big disconnect” between public and private valuations for the assets when it comes to assessing both the impact of remote work and higher debt servicing costs driven by interest rate hikes.
“I would expect that as sellers they want a fulsome price, but … there are few barometers of what the valuation should be and what potential buyer expectations are for this type of product these days,” he said.
“I think the private market is still behind in appropriately valuing office buildings today.”
Gomez told the Financial Post in April that he is expecting a reckoning in private market valuations since remote work has proved to be a lasting trend rather than a short-term pandemic-driven event, a view he still holds.
But he noted that Canada’s large pension plans are well capitalized, so they have the wherewithal to be patient and flexible when it comes to managing their large real estate portfolios, even if they would like to reduce their exposures to underperforming segments of the market including office towers and retail complexes.
Better to sell your best in this environment than sell your worst and face added scrutiny
Carl Gomez
He said it is noteworthy that Oxford and CPPIB selected the fully leased and upgraded Amazon-occupied tower in what could be a pivotal transaction, Gomez said, adding that Vancouver is a city “where office market performance, while weaker, has been better than the rest of the country.”
“Better to sell your best in this environment than sell your worst and face added scrutiny,” he said.
The societal shift to hybrid and remote work has put hundreds of billions of dollars at stake, according to a July 13 report by international consultant McKinsey Global Institute.
In major cities around the world, office attendance has stabilized at 30 per cent below pre-pandemic levels, and is unlikely to return for decades, the report said, adding that “falling demand will drive down value.”
“The impact on value could be even stronger if rising interest rates compound it,” the McKinsey report said.
The impact on value could be even stronger if rising interest rates compound it
McKinsey Global Institute report
Global real estate advisor Avison Young in a spring report said that while vacancies in downtown Vancouver had climbed above 10 per cent for the first time since 2004, some newer office towers whose higher floors featured perks such as mountain views and private terraces had higher occupancy due to a “flight-to-quality” trend.
However, if the trends in private office transactions follow public market revaluations of office real estate, transaction prices will start to reflect an increase in a closely watched industry metric called the cap rate. Prices for commercial real estate come down as the cap rate, which reflects financing costs and rents coming from occupancy, goes up.
Recent transactions in the U.S., where market fundamentals including for lenders are arguable worse, the cap rate has risen to eight per cent, he said. In a scenario where a seller hopes to get $350 million for an office complex based on past assumptions of a cap rate of four per cent, but the market assesses the cap rate at eight per cent, the drop in value is about 50 per cent, putting the sale price at $175 million.
“This is just an example of how things work since its theoretical,” he said, adding that cap rates may not be revealed in every deal because buyers and sellers may not want to publicly reveal the building’s net operating income based on rents and costs, which is part of that calculation.
“Either way, the market will then take an educated guess as to what the cap rate for the deal would be given the price of the transaction and what they think NOI (net operating income) is,” Gomez said.
“That’s why this trade will have all eyes on it.”
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MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
The Canadian Press. All rights reserved.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
The Canadian Press. All rights reserved.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
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