Deep-pocket institutional investors continued to pile into the Metro Vancouver commercial real estate market this spring, as witnessed by the purchase last week of a Gastown office building and the acquisition of a number of new multi-family rental buildings by Toronto-based real estate investment trusts (REITs).
Now industrial real estate is in the cross hairs.
On May 25, KingSett Capital – one of Canada’s largest private equity real estate investment firm with $13 billion in assets under management – announced it has partnered with PC Urban Properties of Vancouver on a deal to buy a 9.7-acre industrial site in Richmond.
A plan to redevelop the site will be released this fall.
“Investors are drawn to Vancouver in a big way and we’re seeing a growing number of institutional investors partnering with local operators in Vancouver,” says CBRE Vancouver managing director Jason Kiselbach. “They’re looking at our fundamental lease rates and growth and buying as much as they can in office, industrial and multi-family [assets].”
CBRE is projecting that institutional investors, including Blackstone, Crestpoint and KingSett, will increasingly partner with local firms to gain a foothold in the market.
U.S. real estate behemoth Blackstone bought the Bentall Centre in downtown Vancouver with Hudson-Pacific in a deal reportedly worth more than $1 billion as Vancouver biggest real estate deal of 2019.
Toronto-based Starlight Investments has bought two multi-family rental properties in Vancouver for $43.5 million, and Canadian Apartment Properties REIT paid $147 million for three new rental apartment buildings in Langley last year.
Crestpoint Real Estate Investments Ltd. acquired a portfolio of 12 office and industrial buildings in Metro Vancouver in partnership with Canada’s Public Sector Pension Investment Board, which has $168 billion in net assets, in 2018.
This May Allied Properties REIT paid an estimated $225 million to buy a 115-year old office building on Water Street in Vancouver.
While the sale price of the recent Richmond deal was not announced, it is the largest transaction in the history of PC Urban, according to Brent Sawchyn, CEO of PC Urban Properties.
The properties, at 13511 Crestwood Place, 13520 Crestwood Place, 3671 Viking Way and 3691 Viking Way in Richmond, have a total BC Assessment 2020 value of $50.7 million.
“Working with PC Urban Properties allows us to leverage local-area knowledge, and they have a strong track record for redeveloping industrial assets across Western Canada,” noted Andrew Kirkham, vice-president, Western Canada, for KingSett Capital.
The properties, all fully leased, are located in Crestwood, the largest industrial sub-market in Richmond, where the vacancy rate is 1 per cent.
Viking Way Business Centre is 100 per cent leased to light industrial businesses in biotech, electronics, aerospace, building products distribution, media, technology, textile and service businesses.
Market rents have grown 40 per cent in North Richmond over the last two years, with multiple offers being seen for most available spaces put up for sale, according to CBRE.
“Institutional investors continue to be bullish and we anticipate large purchases in 2020,” Kiselbach said, noting that he expects the next industrial target will be distribution space, due to the increase in e-commerce demand.