Take a drive around the business parks and retail-office areas of St. John’s metro and you’ll spot quite a few for lease and for sale signs.
Charlie Oliver, CEO and owner of commercial real estate company Martek, has been in the game for almost 40 years and knows from experience the business goes through waves of change.
“What am I about the market? I am right now contemplatively positive. We’re at the cusp of another positive infusion of demand in the marketplace, but it will not happen like that,” he says, clapping his hands on the last word.
During an interview with The Telegram in his office on the eighth floor of Atlantic Place in downtown St. John’s, he emphasizes that he sees this as a gradual movement within the market.
“It won’t be instantaneous, but over the next couple of years, we should see a steady, growing demand, which should bring back a bit more stability in the downtown and in Stavanger and Galway.”
Charlie Oliver is the CEO for Martek, a St. John’s-based real estate management company. – Andrew Robinson
Connections
There are a number of intertwined webs connecting these commercial destinations. The Stavanger Drive area will get a boost in the near future once employees at ExxonMobil Canada move into a new building on Hebron Way, vacating their offices at Cabot Place in downtown St. John’s.
Meanwhile, DewCor’s Galway development — a venture by former premier Danny Williams — got a big boost last year when Costco left Stavanger Drive and opened a new, larger store in Galway.
“Real estate tends to move in cycles,” Oliver said. “We see a downtown office market five or seven years ago booming and full. Here we are today, it’s probably on the bottom end of the cycle with some significant vacancies, but poised in another year or so to come back. We see the tertiary markets out in Stavanger Drive and out in Kelsey Dive — both those have grown exponentially in the past five years. They may now become a little more static, filled while the other office spaces in the city get back-filled.”
Rob Coleman has worked in commercial real estate for about 15 years and is vice-president of the St. John’s office for CBRE, the largest commercial brokerage firm in the world. He knows there’s lots of uncertainty about the overall economic climate in Newfoundland and Labrador, but like Oliver, he sees moving pieces pointing to general confidence when it comes to the St. John’s metro area.
“We talk about Costco committing to a really significant capital expansion in St. John’s in partnership with (DewCor owner and president) Williams and Plaza REIT. And then you look at Exxon opting to move forward with that expansion of premises and long-term commitment to the east end of St. John’s,” Coleman said.
“I think, really, on two separate segments of the commercial market, two of the biggest players in the world committing to Newfoundland and St. John’s, that should show us that there’s a lot of chatter and noise in the market in terms of confidence in the local economy. But really the underlying current is that there’s still a lot of strength and legs in what’s happening here.”
Rob Coleman is the vice-president and broker of record for CBRE in Newfoundland and Labrador. – Andrew Robinson
Safe bet
Coleman considers it a safe bet to suggest there will be lots of further commercial development activity in Galway, noting, too, that Plaza REIT, a company responsible for most of the box stores in St. John’s metro, is a strong developer.,
“They know that business extremely well and just have a demonstrated track record of results,” he said. “They don’t just go into things, and I’ve not seen any type of failure on Plaza’s side.”
Oliver considers Costco the anchor tenant for Galway.
“That’s highly positive in that you have a massive, recognized brand that draws a lot of customers,” he explained. “And by having customers in one area, it facilitates a spinoff of businesses around it that those same customers can avail of.”
Costco’s former home in the east end remains empty, as does a neighbouring property that used to be a Target department store. The nearby RONA on Torbay Road is also closed, as are a number of box stores in the area.
Oliver suggests creativity will be required to bring new life to the larger buildings. Meanwhile, he points out that the loss of Costco has resulted in opportunities for businesses still operating in that area, such as Dominion, Walmart and the Coleman’s Grocery Store on Newfoundland Drive.
The Stavanger Drive area is close to a number of newer residential subdivisions and, in addition to retail stores, it has amenities such as doctors, dentists and gyms.
“People who work in office buildings like to have those amenities,” Coleman said. “I think Stavanger Drive, (with) Exxon putting a flag there for the foreseeable future, now we’ll see other service firms who will likely supplement their current office facilities with a smaller (office) or another office around Exxon that will add to the growing office development in that area.”
CBRE is currently the listing company for the former Costco, Target and RONA properties, and Coleman said at least two of those are close to having new tenants.
Vacancies
Zack Howard is an agent with Royal LePage specializing in commercial real estate and financing. – Contributed
On the ExxonMobil move, Coleman is aware of activity to fill that vacancy once the company leaves Cabot Place later this year. He also credits management at Atlantic Place in downtown St. John’s for finding new tenants consistently. From his vantage point, there remains a lot of interest in that area of the city.
“We’re looking at maybe 40,000-50,000 square feet, just on (CBRE) business, of new entrants into the market that want to be downtown. That’s a significant piece of that challenge,” Coleman said.
Zack Howard, an agent specializing in commercial real estate for Royal LePage who also has lots of experience in commercial lending, sees a noticeable trend when it comes to redeveloping older properties in St. John’s metro. Last year, Genoa Design International took a building in Donovans Industrial Park in Mount Pearl that had been vacant for a couple of years and found a way to repurpose it for the company’s use.
“They’re one of the fastest-growing companies in Newfoundland and Labrador,” Howard said.
Howard said the former RONA location on O’Leary Avenue will be repurposed for combined retail and office space.
Financially, he says it can be more advantageous to look at redeveloping an existing property, as new construction projects can prove to be cost-prohibitive.
“It’s tough to get your bank onside to do a new development based on construction costs and land costs. The more appealing investment from a landlord-development standpoint is probably to buy an older, vacant, non-essential-use building and repurpose it … than you would a new construction.”
New life in the square
KMK Properties Inc. received city approval last year for a six-storey mixed-use building on the site of the old Dominion grocery store in Churchill Square. Martek leases retail and office space in the nearby Terrace on the Square property, which includes a Shoppers Drug Mart. While he has not received any notice, Oliver expects Shoppers will move into the street-level space at the new building. With new apartments included in the mixed-use development, Oliver believes this will revitalize Churchill Square. He’s already looking at potential tenants to back-fill the Shoppers space.
Sonoco Group’s Parkhotel planned for the parking garage attached to Atlantic Place is another redevelopment venture Oliver views as a positive step in St. John’s.
Recent condominium developments like the Star of the Sea Residences and MIX Apartments on Duckworth Street can bring more residential activity to the downtown area, and with that a need for new retail services.
Martek’s office is located in Atlantic Place and handles leasing arrangements for other spaces in the building. Oliver said the Business Development Bank of Canada is going to move from the main level to a higher floor. Martek is looking at possibly attracting an urban grocer to take over that space, with the potential to add a small-scale food hall. The food court as it has existed in the past at Atlantic Place will be abandoned — Oliver said Martek has deliberately avoided re-leasing kiosks, though it intends to keep Jumping Bean Coffee. The plan now is to repurpose that area for co-sharing workspaces.
ExxonMobil Canada employees will move into this new building on Hebron Way in the east end of St. John’s later this year. – Joe Gibbons
Oil sector
Optimism about the future of oil and gas in the province suggests there will be further need for office space and residential units, which in turn could lead to further demand for retail services. Coleman acknowledges the sector is “out of favour” at a moment in time when so many people are thinking long and hard about climate change, but he does not consider himself alone in believing oil and gas is part of the global energy solution.
“Exxon certainly doesn’t see oil going away anytime soon, nor do the other producers,” he said, pointing to the level of interest in bidding for offshore exploration rights in Newfoundland and Labrador.
On the industrial side of the commercial real estate market, Coleman sees businesses serving the oil and gas sector as the prime movers for that market.
“These are buildings with 40- and 50-foot ceilings that are engineered to hold 50-ton cranes that can pick up these pieces of equipment that are going offshore in an extremely rugged environment. In a lot of cases, they’re designed and engineered specifically for Newfoundland, and they’re stacked and tested inside these buildings before they go offshore.”
As Equinor Canada moves along with efforts to eventually develop its Bay du Nord field, Coleman anticipates there will be further investment in local facilities, creating a need for new buildings.
“Those are not the types of buildings that are sitting vacant. All of those buildings are occupied today, and there’s a pent-up demand for those types of facilities. I think we’ll continue to see that grow.”
Recession potential
Though he does not feel there’s likely to be another big boom for St. John’s tied to the oil and gas sector, Oliver reckons it will have a positive impact on the commercial real estate market for office and industrial spaces. For the latter, he expects Galway and Kenmount Terrace will attract most of the new construction.
“If you had talked to me this time last year, I probably would have had a little more negative perspective of the market than I do as we sit here today,” he said. “In six months’ time, assuming the Bay du Nord project proceeds and assuming the contracts are awarded to the locals in the level that we hope they will be, then we’ll see a take-up in a significant portion — and not all, by any means — of some of the downtown vacancies.”
In the short term, Howard sees potential for a global recession in light of the coronavirus, and said this could negatively affect the oil and gas sector. However, like Coleman and Oliver, he believes the industry has a strong future in Newfoundland and Labrador.
“Long-term though, I think our opportunities are strong here because our fields are 30-plus-years of useful life fields,” Howard said. “The government is a friendly jurisdiction to do business with as opposed to some jurisdictions.”
In the United States, Howard expects the shale oil and gas industry will experience hardships, as it has been reliant on low capital costs for fields with short lifespans. As capital investment becomes harder to come by over the next 12 months, Howard speculates more attention will be paid to long-term opportunities like those available in Newfoundland and Labrador.
Both of the main candidates in British Columbia‘s election campaign pushed their own plans to solve parts of the housing crisis.
B.C. Conservative Leader John Rustad told a news conference in Surrey that his government would end the multi-year permit delays and would get homes built at the speed and scale needed to address the housing crisis.
NDP Leader David Eby went to Cumberland on Vancouver Island to promote his party’s plan to fast-track factory-built homes.
Eby said pre-built homes would cut waste, reduce emissions, and advances in the industry mean the homes are “beautiful and high-quality.”
He said the process was “more like Lego” than normal construction.
“The idea is pretty straightforward. In a controlled factory environment, you can build faster, you can build with less waste and the homes that are built are more consistent and more efficient and it’s cheaper.”
Rustad said the Conservative Party of B.C. would redesign the approval process for home building, setting a six-month limit for rezoning and development permit and three months for a building permit.
“This means that we will significantly be able to improve the time frame it takes to actually get construction happening in this province, and we’ll be working with city halls across the province to be able to meet these timelines,” Rustad said.
If a clear yes or no isn’t issued by a city within that limit, the province would issue the permit, said a B.C. Conservative news release announcing the platform.
Rustad said the party would remove NDP taxes on housing, support transit-oriented communities, reform development cost charges and make taxes fair for homeowners.
“We have so much regulation that has been put in place associated with housing that it makes it really difficult for anybody to be able to actually get through and build things, not to mention the cost,” he said. “So we’ll amend the Local Government Act to prevent any home killing red tape that has been introduced by this government.”
The party’s statement also outlined their zoning plan, adding that it would work with BC Assessment “to make sure that current homeowners don’t get hit with higher tax bills based on future potential.”
The party statement said, if elected, a Conservative government would build new towns, saying B.C. is blessed with an abundance of land, but the NDP refuses to use it to end the housing shortage.
“We will identify land outside the Agricultural Land Reserve that has the potential to support beautiful new communities.”
A statement issued by the NDP on Friday said it would work with industry, municipalities and First Nations to create a provincewide framework for prefabricated homes so builders know what’s required in every community.
It said there would be a pre-approved set of designs to reduce the permitting process, and it would work to develop skills training needed to support prefabricated home construction.
The statement said Scandinavian countries had embraced factory-built homes, which “offer an alternative to the much slower, more costly process of building on-site.”
“By growing B.C.’s own factory-built home construction industry, everyone from multi-generational families to municipalities will be able to quickly build single homes, duplexes and triplexes on land they already own,” Eby said.
The party said legislation passed by the NDP government last year was a “game changer” for the factory-built home construction industry in the province, where there are currently 10 certified manufacturing plants.
Muchalat Construction Ltd. is one of them, and owner Tania Formosa said pre-approved structures speed up the building process considerably.
She said her company’s projects currently take 12 to 13 months to complete, from startup design to getting the house on site.
“If everything was in place and fast-tracked at the beginning and we were able to just fly along, it would probably take three months off the full schedule,” she said.
She said a main issue for modular manufacturers is that work gets stalled if they run into roadblocks with jurisdictions or BC Housing in the approval process.
“There’s no option for the manufacturer to start another project,” she said. “Having our products approved prior to the process would be amazing.”
She acknowledged the potential drawback of pre-approved designs creating a cookie-cutter look for some neighbourhoods.
“Unfortunately (what) happens in your jurisdiction, in your city, is it ends up looking a lot the same, but what are your priorities?”
This report by The Canadian Press was first published Sept. 27, 2024.
The Canada Mortgage and Housing Corp. says construction of new homes in Canada’s six largest cities rose four per cent year-over-year during the first half of 2024, but housing starts were still not enough to meet growing demand.
The agency says growth in housing starts was driven by significant gains in Calgary, Edmonton and Montreal.
A total of 68,639 units began construction, the second strongest figure since 1990, however the rate of housing starts per capita meant activity was around the historical average and not enough “to reduce the existing supply gap and improve affordability for Canadians.”
The report says new home construction trends varied significantly across the markets studied, as Toronto, Vancouver and Ottawa saw declines ranging from 10 to 20 per cent from the same period last year.
Apartment starts in the six regions increased slightly, driven by construction of new units for rent, as nearly half of the apartments started in the first half of 2024 were purpose-built rentals.
But condominium apartment starts fell in the first six months of the year in most cities, a trend which the agency predicts will continue amid soft demand as developers struggle to reach minimum pre-construction sales required.
This report by The Canadian Press was first published Sept. 26, 2024.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
