Here is Western Investor’s pick of the top commercial real estate stories published this week.
Over the second half of last year, a surprising development occurred – the net inflow of people moving to B.C. from other provinces fell sharply, Business Council of British Columbia’s Jock Finlayson and Ken Peacock report.
The drop showed up in the third quarter and persisted through the final months of 2017. Looking ahead, we suspect that B.C. may receive fewer interprovincial migrants than pundits and policy-makers have been counting on – particularly working-age migrants, as opposed to retirees. If our hunch is correct, employers in B.C. are likely to face more widespread hiring challenges in the years ahead.
Within Canada, people are free to move and work where they choose. As a result, migration has long been shaped by variations in economic and employment conditions across the provinces. When jobs were plentiful during the pre-Olympic boom years, for example, large numbers of people migrated to British Columbia from other parts of Canada. In the post-Olympic period, the net inflow gradually waned and then switched to a net outflow, mainly because Alberta’s economy was growing at nearly twice the rate of ours, and lots of high-paying jobs were created in the oilpatch.
Then the 2014-15 oil price crash sent Alberta into a deep two-year tailspin. Over the same period, B.C.’s more diversified economy strengthened. Job growth surged in B.C., while many employers in Alberta were shedding staff. Moreover, employment growth remained anemic in most other parts of the country. With B.C. boasting Canada’s lowest unemployment rate, the net inflow of people from other provinces accelerated. By mid-2014, interprovincial migration was adding more than 5,000 people to B.C.’s population every quarter – upwards of 20,000 annually. Over the subsequent three years, net interprovincial migration ranged between 4,000 and 6,000 per quarter. But in the third quarter of 2017, the net inflow plummeted to 500, and it stayed low (at 800) in Q4.
So why the change in historical patterns?
One likely reason is that labour markets are tightening in other provinces, too, as more baby boomers exit the workforce and the effects of population aging are felt. Alberta’s jobless rate dropped from 8.7% at the beginning of 2017 to 6.3% in the first quarter of 2018, signalling to would-be migrants that it is easier to find gainful employment in their home province compared with a year or two ago. Similarly, Ontario’s unemployment rate now sits at 5.5%, down a full percentage point from last year. So even if employment prospects are still decent in B.C., job seekers may not perceive them to be sufficiently better to justify the cost and disruption of moving. As labour market slack disappears, the number of job vacancies continues to climb – according to Statistics Canada, B.C. continues to have the highest job vacancy rate in Canada – but vacancies have also jumped in both Alberta and Ontario, the two provinces that account for most of B.C.’s interprovincial migration flows.
The other side of the interprovincial migration ledger is British Columbians who leave home. Out-migration to both Alberta and Ontario has risen over the past year. A more buoyant job market in these provinces is one reason. But “push” factors, notably the high cost of housing in B.C.’s urban centres, are probably more important. The combination of unusually steep local housing costs and brighter job prospects in other regions may be prompting more British Columbians to pick up sticks. High housing costs are also discouraging some potential migrants from other provinces from relocating to B.C.
What are the implications of these migration developments?
The sudden drop in net interprovincial migration, if it persists, is a sign that the tight Canadian labour market may dampen overall labour mobility.
Realtors are concerned about the government's definition of what constitutes a conflict of interest when intervening with the market.
A new real estate regulation came into force this week that British Columbia real estate agents say will take away the right of consumers to decide whom they can hire to buy or sell a home.
Changes to the B.C. Real Estate Services Act, effective Friday, June 15, prohibit "double ending" – representing both a buyer and a seller in a real estate transaction – along with other strict regulatory changes.
The practice, known in the industry as limited dual agency, also includes agents representing two or more buyers vying for the same property, or rental agents representing both a landlord and a tenant. The ban on limited dual agency aims to avoid conflicts of interest when the agent is working on behalf of their client.
The new rules also may require agents to stop representing a client if other possible conflicts of interest occur. For example, if a potential buyer makes an offer on a property listed by an agent who has previously represented that buyer, the agent may have a conflict of interest and be required to refer the listing to another agent. This conflict could mean the listing agent potentially has confidential information about both the seller and the buyer.
The changes were to come in March, but the Office of the Superintendent of Real Estate postponed it after hearing “considerable concern from industry surrounding the implementation of the new rules and the impending implementation date.”
While tweaks were made, agents are concerned about a broad definition of what constitutes a conflict of interest.
“The new rules governing real estate practices mark a significant shift in how realtors in B.C. work with their clients,” said Darlene Hyde, CEO of the British Columbia Real Estate Association.
“It’s important that consumers know what to expect when the changes come into effect.”
The BCREA estimates that less than 5 per cent of residential transactions in the province involve a dual agency, but the June 15 ban on dual agency will affect every home sale in the province.
The Real Estate Council of British Columbia’s (RECBC) Independent Advisory Group advised the dual agency ban in 2016. This followed a handful of high-profile cases of realtor misconduct in Metro Vancouver’s white-hot housing market.
The connection flagged under the new rules need not be related to real estate; it could be any former social, business or community connection. In such instances, the realtor may be required to refer the seller to another agent.
“Say your mom and dad are selling their house and they choose an agent they trust to handle the sale,” said Michael La Prairie, owner of a Century 21 real estate franchise in Vancouver and president of the Real Estate Brokers’ Association. “Then a buyer comes in with another agent, but the buyer happens to know your parent’s agent, say from their church community.
“Under the new rules, the listing agent could be requiredto walk away from the listing.”
The 626-foot GEC Education Mega Center will be second in height only to downtown Vancouver's Shangri-La hotel, toppling the Trump hotel.
A roller rink in Surrey is closing its doors to make way for what will become Metro Vancouver’s second-tallest building.
Central City Arena at 10240 City Parkway in Surrey’s Whalley area will hold it’s final public roller skate on Saturday, June 23. The property will be demolished for construction of GEC Education Mega Centre – a 55-storey international student campus proposed by CIBT Education Group and WestStone Group, and designed by Chris Dikeakos Architects.
The $230-million building will total 550,000-square-feet of floor area. At 626 feet, GEC will be second in height to the 659-foot Shangri-La Vancouver Hotel, towering over the 619-foot Trump International Hotel & Tower Vancouver upon completion.
Plans for the centre include: ground-level retail space; academic space to be leased by educational institutions; 192 short-stay student hotel suites to accommodate visiting students up to 20 weeks; 264 long-term, fully-furnished apartments with four bedrooms each; and amenity space to be accessed by residents, including a fitness room, lounges and library.
The project was first proposed in 2016 and is pending final approval.
Vancouver land values are beckoning bulldozers, while lot assemblies signal wholesale housing demolitions.
The three houses on East Sixth Avenue in Vancouver would have likely lasted for years: two of them appear fairly modern, but the value of the land beneath them combined with higher-density zoning doomed them.
Assembled into a 14,000-square-foot land assembly, the detached houses sold in May for a combined $5.74 million, the equivalent of nearly $410 per square foot, for a new townhouse development.
Soaring Vancouver land values are also leading to a rush of strata windups, where owners of older townhouse or condominium projects vote to sell the entire complex for the land value. A recent example is in the West End, where a 53-unit condo project on less than half an acre sold for $52 million. In North Vancouver, sites with old townhouses on them are selling for up to $10 million an acre.
In the first three months of this year, residential land sales in Metro Vancouver dominated real estate investments, with $1.14 billion in transactions, according to a survey by Altus Group. Land sales accounted for 57 per cent of the entire real estate investment market in the first quarter, noted Paul Richter, an Altus Group director.
Due to a lack of vacant Metro land, the majority of residential land deals lead to demolition of existing homes. In the past 30 years, 26,700 Vancouver detached houses, or 40 per cent of the all houses, were demolished and replaced, according to a teardown index study from the University of British Columbia (UBC) school of architecture.
UBC architectural professor Joseph Dahmen, co-author of the teardown study, estimated that one-quarter of the Vancouver houses being sold today will be demolished.
The bulldozers could get even busier, because of a new City of Vancouver plan for blanket zoning of single-family neighbourhoods to allow for development of townhouses, row houses and laneway houses.
The city’s Making Room plan, which goes to council this week, would rezone 65,000 single-family detached lots over the next year to 18 months for higher density housing which, according to a city report, “are affordable to medium-income residents.”
Soaring land values, however, threaten that affordability scenario. In the Cambie Street corridor, which already has higher-density zoning for detached lots, the current benchmark price for a detached house is $3.5 million, according to the Real Estate Board of Greater Vancouver. In December 2017, however, a condo developer paid $8.5 million for a “teardown” 66-year-old house on an 8,760-square-foot lot at West 35 Avenue at Cambie Street as part of a land assembly.