A real estate conference aimed at explaining Metro Vancouver’s runaway commercial strata market concluded that prices defy logic but will likely keep increasing.
“Strata office prices are disconnected from lease rates,” Matthew MacLean, senior vice-president at Cushman Wakefield, said March 1 at the Urban Development Institute meeting in Vancouver.
Office strata prices two years ago in Metro Vancouver averaged $222 per square foot. Today they range as high as $950 per square foot in Mount Pleasant and north of $350 per square foot in Burnaby and Richmond, but lease rates have not risen in step, the conference was told.
A new downtown office building, Waterfront Centre on Cordova Street, recently pre-sold strata space at a record-snapping $2,000 per square foot.
MacLean explained that office lease rates are around $25 per square foot in Mount Pleasant, even lower in the suburbs and rarely higher than $45 per square foot for prime space downtown.
In Burnaby’s Metrotown, Sun Towers, the first commercial strata project in Metro Vancouver by a China-backed developer, is selling 100,000 square feet of commercial space, with retail from $2,600 per square foot and office space from $1,300 per square foot. All 285 residential condos in the mixed-use Sun Towers complex sold out at prices from $488,000 to more than $1.1 million per suite.
Ninety per cent of all the buyers were of Chinese descent, said Cam Good, president of Key Marketing.
Investors, he suggested, are often “second-generation” Canadians, often representing family businesses, who are buying for future appreciation, not for income.
“They buy for the lift and that is all they care about,” he said. “It is strictly a capital gain.”
Commercial real estate is attractive to offshore real estate investors, suggested MacLean, because, unlike residential, there is no 20 per cent foreign-buyer tax.
“There has been a massive shift to strata commercial,” MacLean told the conference.
Buyers apparently believe that buying office, industrial or retail space will remain a good investment, said Hong Kong-born Cecilia Tse following the conference.
“With commercial real estate investments, property owners have an opportunity to build their financial capital,” said Tse, senior vice-president, Asia Pacific, at Colliers International. “Observing Vancouver’s record-setting low vacancy rates, market trends indicate it is advantageous for long-term investors to purchase commercial office properties. Trends indicate prices will continue to rise as upward pressure is put on rental rates due to an increased volume of businesses seeking office space in the city.”