This week’s top stories focus on the Metro Vancouver housing market, where prices continue their descent as inventory peaks and sales remain slow. Meanwhile, industrial property sales, prices and demand remain sky high in the region. In our list of top investment towns, we suggest towns outside Vancouver and the capital region to place your bets on.
Here is Western Investor’s pick of the top commercial real estate stories published this week.
Prices for Metro Vancouver homes are starting to decline in the wake of sluggish sales and plenty of residences up for sale, according to the Real Estate Board of Greater Vancouver.
“Home prices have edged down between 3% and 5%, depending on housing type, in our region since June,” said REBGV president Phil Moore. “This is providing a little relief for those looking to buy compared to the all-time highs we’ve experienced over the last year.”
Declining home prices come as a result of sales in October being 26.8% below the 10-year October-sales average.
Only 1,966 homes sold in the region in October 2018. That is a 34.9% decrease from the 3,022 sales recorded in October 2017.
There are now 12,984 homes listed for sale on the Multiple Listings Service (MLS) system in Metro Vancouver – a 42.1% increase compared to October 2017, when 9,137 homes were on the market.
“The supply of homes for sale today is beginning to return to levels that we haven’t seen in our market in about four years,” Moore said.
“For home buyers, this means you have more selection to choose from. For sellers, it means your home may face more competition, from other listings, in the marketplace.”
The benchmark price for all homes in Metro Vancouver is $1,062,100. That price is up 1%, compared to a year ago, but down 3.3% compared to three months ago.
The benchmark price for detached properties is $1,524,000. This represents a 5.1% drop compared with a year ago and a 3.9% dip compared with a few months ago.
The benchmark price for an apartment is $683,500 – up 5.8% compared with a year ago but down 3.1% compared with a few months ago.
The benchmark price for an attached home is $829,200 – up 4.4% compared with a year ago but down 2.8% compared with a few months ago.
Housing prices are continuing to creep down – in some categories.
Home sales across the region took a drubbing in October, plummeting 34.9% compared with the same month a year ago.
The Real Estate Board of Greater Vancouver (REBGV) reported November 2 the region tallied 1,966 sales last month.
Not only is that down from October 2017’s 3,022 sales, but it’s a 23.3% drop from September when 1,595 home sales were recorded.
The benchmark price for a single-family detached home in Vancouver’s West Side came in at $3,267,800 in October, up 0.4% from September.
In east Vancouver, the benchmark price fell 1.5% to land at $1,480,700.
The benchmark price for all housing types across the region fell 0.8% to $995,500 between September and August.
Meanwhile, a steady supply of homes hit the market last month.
The REBGV reported 12,984 homes were up for sale — up 42.1% from a year earlier.
Sales are cresting over $120 million per month as developers battle for space.
Jack’s New and Used Building Materials has been the go-to place for bargain-hunting builders and renovators for 60 years, but with industrial land prices soaring, the family-owned business is fire-selling its stock and closing its doors.
Its 2.5-acre site on Still Creek Avenue in Burnaby sold in the third quarter for $13 million. In late October, prices for the remaining inventory at Jack’s were slashed by 70 per cent after inking the land sale with Standard Land Holdings Ltd., the real estate arm of Standard Building Supplies Ltd., which leases space near the Jack’s site.
Jack’s was far from the highest price paid for an industrial site in Metro Vancouver, where existing buildings are selling for an average of $325 per square foot. In the third quarter, an investor group known as 616247 BC Ltd. paid $15.9 million for a 53,000-square foot (1.2-acre) industrial site on Vanguard Road in Richmond. Weeks earlier, South Street Holdings Inc. and its partners paid $23 million for a vacant warehouse on 1.86 acres on No. 5 Road in Richmond.
All told, in the six months ending October 1, industrial property sales across Metro Vancouver hit $747 million, according to a survey by Lee & Associates, a Vancouver commercial realtor, but this is expected to increase by a further $347 million as a number of deals in progress close. According to the report, industrial land is selling or an averaging of more than $5 million an acre.
These aren’t peak prices, suggests Chris MacIntyre, a veteran industrial agent with Lee & Associates.
“There is no supply of industrial land in Metro Vancouver. We are facing a crisis in industrial space in relation to the demand, ” MacIntyre said.
Investors are taking note. As Lee & Associates vice-president of research Ryan Walmsley noted, a slowdown in the housing market has meant, “residential investors are moving into the industrial sector, increasing demand and sustaining market prices.” The returns can be spectacular. MacIntyre points to a 2.3-acre industrial property in Burnaby that sold in 2017 for $6.4 million and was flipped a year later for $12.8 million.
It is not for lack of trying to meet demand: in the third quarter, 1.5 million square feet of new industrial space came to the market, but 1.4 million square feet was either sold or leased. The new supply led to the first increase in industrial vacancy rates in two years, rising to a still-tight 1.46 per cent in the third quarter from 1.4 per cent three months earlier.
But Metro Vancouver still has the second-lowest industrial vacancy in Canada and one of the lowest in North America.
Site of Canada’s biggest private investment and one of Alberta’s fastest-growing towns share in the Western Investor annual spotlight on the best places to buy real estate.
Western Investor’s No. 1 pick of western Canadian cities for real estate investors is the northwest British Columbia centre that is ground zero for the biggest private investment in Canadian history. In October, LNG Canada confirmed it would proceed with the $40 billion liquefied natural gas (LNG) terminus and pipeline network that will change Kitimat forever.
It will also likely change the fortunes of those real estate investors quick enough to get into town. Despite work camps springing up to house the estimated 6,000 construction workers, the real estate play in Kitimat is residential rentals. A lot of management types, consultants, government officials and other professionals will be seeking two-to-three-year rentals in Kitimat, figures Jason Pender of JV Development Group. His company is in a joint venture rushing to complete a 27-acre project with 94 townhomes, more than 30 detached-house lots and a 12-acre modular home site.
Kitimat is also on the radar of international investors.
Royal Dutch Shell PLC is the lead partner in LNG Canada, with a 40 per cent stake. The project is rounded out by Petronas, of Malaysia, which holds 25 per cent, PetroChina and Japan-based Mitsubishi, which each hold 15 per cent, and Korea Gas Corp., which holds 5 per cent.
Kitimat has the LNG plant, but neighbouring, land-rich Terrace makes the Western Investor list at No. 2.
“We have the land,” said Danielle Myles, manager, economic development, for the City of Terrace. A key parcel is the 1,187 acres of industrial-zoned land bought four years by China-based Qinhuangdao Economic and Technological Development Zone (QETDZ) for $11.8 million. The land is in the city’s massive Skeena Industrial Development Park. QETDZ has cleared nearly 800 acres of land for development as part of its $100 million preparation budget.
Myles expects Terrace will be the staging site for much of the work for the LNG plant in Kitimat, which is a half-hour drive away. Terrace, unlike Kitimat, also has an airport and established and extensive retail, fitting a city that is known as the trading centre for northwest B.C. An idea of the momentum: commercial building permits in Terrace have soared nearly 300 per cent over the past two years. You can still buy a detached house in town for an average of $337,000, up 18 per cent from a year ago.