Today, the Morgan Crossing mixed-use, pedestrian-friendly complex is a destination where brand-name retailers clamour for storefronts, more than 1,000 residents have moved into condominiums and businesses are buying office space at $350 per square foot.
The Shops at Morgan Crossing, totalling 500,000 square feet of stores, is 95 per cent leased and features such urban touchstones as a gourmet cooking school, Wi-Fi latte bars and high-profile fashion retailers.
Urban environment consultant and planner Michael Geller, who worked with Grosvenor on the smaller-scale but similarly themed High Street at South Pointe Exchange development in South Surrey, said such projects speak to how the area has changed from a place where the major attraction was affordable housing.
"Larco has recognized that many of the attributes of South Surrey are similar to the attributes of West Vancouver," Geller said.
$1M house prices
Housing prices are reflective of the comparison. The average price of a detached house in South Surrey-White Rock is $1.05 million, compared with $619,000 in the rest of the Fraser Valley. A typical condo apartment in the south sells for $359,000, while it goes for $186,000 in Central Surrey.
The comparison with Central Surrey is telling. Central is where the new RCMP headquarters, a new city hall and library and the tallest condo towers between Vancouver and Calgary are being built, yet this year it trails South Surrey in both overall permits and new-home construction.
Since 2009, 2,837 new homes have been built or started in South Surrey, compared with 1,582 in Central Surrey in the same period. And, for the first eight months of this year, total building permits in the south reached $31.7 million, compared with $10.5 million in the Central/Whalley area.
"Centre ice"
Centre ice for South Surrey development is the intersection of 24th Avenue and 160th Street. It is the location for Grandview Corners, the RioCan Real Estate Investment Trust retail development that houses both big-box and specialty merchants in a 514,000-square-foot complex very close to Morgan Crossing. It is rumoured that U.S. retail giant Target is eyeing Grandview Corners, as is Costco.
The centre ice nexus is more than retail. It is also the site of the largest office strata project in Metro Vancouver and where a two-building office complex is now attempting to pre-lease space. The Morgan Gateway Business Park is an ambitious project by city-affiliated Surrey Development Corp. and a private developer, KNV Accountants. Plans call for a 110,000-square-foot office park in two phases near Highway 99 in South Surrey.
"We haven't got any pre-leases signed yet," said Andrew Laurie, senior associate, office leasing, with Cushman & Wakefield Ltd. Laurie said lease rates for the LEED-standard complex will be in the $20-to-$24-per-square-foot range, with tax and operating costs adding another $10 per square foot.
Office glut warning
There are some doubts about the office market in South Surrey. Avison Young notes that mid-year vacancy rates hit a six-year high of 9.2 per cent. With about 300,000 square feet of new space planned, there are concerns that some projects may be shelved. Laurie is not among them. "We have been told that [Morgan Gateway] is going ahead, regardless," he said.
Laurie said there are no plans to offer strata sales at Morgan Gateway, despite a strong precedent in the area.
The 150,000-square-foot Grosvenor Business Centre near Morgan Crossing - the largest office strata project in the Lower Mainland - has nearly sold out at around $350 per square foot.
"We had 30 per cent of the tower sold before it even broke ground," said Gord MacPherson of Re/Max Commercial Advantage. The "synergy" of the retail and residential mix at Morgan Crossing helped to draw office buyers that include doctors and other professionals, he added.
Surrey's southern hot zone has also lured big-name residential developers, such as Adera Group, which is currently selling its Breeze townhomes next to Morgan Crossing. In all, 18 new residential projects are now marketing in the area.
"Our walking score [a Google formula that tracks how pedestrian-friendly an area is] is 80 out of a possible 100, which is amazing for a suburban neighbourhood. It is like Yaletown, but with golf and beaches," said Adera president Norm Coutie.
The rush of new condos, however, may be outstripping demand. A tour of show homes and sales offices in the area showed that buyer incentives are now common. An example: the Niche project by Woodbridge Homes that was offering $10,000 in free upgrades on its $359,000 townhomes.
The Achilles heel to South Surrey's growth is transportation. The real need is for faster links to Surrey's existing SkyTrain network, locals suggest.
Industrial
South Surrey is home to one of the last remaining large parcels of industrial land in Metro Vancouver and the Campbell Heights Business Park is now expanding. Phase 2 serviced sites are expected to sell for an average of $885,000 per acre, after Phase 1 sold right out, noted Randy Heed of Colliers International.
"Yes, we have deals in place for Phase 2," Heed said, noting there is demand from both manufacturers and distribution warehouse clients.
"Campbell Heights continues to be a hive of activity for the entire Metro Vancouver region," said Avison Young, commenting on the success of speculative industrial projects that characterized the completion of the first phase. In one defining transaction, a developer purchased 97,730 square feet of big-bay warehouse space from Beedie Group and immediately leased it up.
This fall, ConWest Group of Companies will begin building 150,000 square feet of new space at Campbell Heights to complete Phase 1 development.
from Western Investor November 2012
