This week’s top stories cover commercial lease and development activity, home sales, and a third quarter update on hotel market investment. Across Canada, hotel values have risen, perhaps signifying a return to pre-recession hotel demand in the Prairie provinces. In New Westminster, leasing activity in one of the city’s new, major developments has finally started to materialize, while a development rejection in Vancouver has left commentators disappointed in the City of Vancouver’s nixing of much-needed residential units. Meanwhile, home sales are beginning to increase following foreign-buyer tax implementation.
Here is Western Investor’s pick of the top commercial real estate stories published this week.
Per-suite hotel value rises 27% year-over-year – Western Investor
Colliers International third quarter hotel investment report shows a significant increase in sales activity in energy-reliant markets, showing cautious optimism by investors in the post-recession potential of Prairie markets.
Western Canada is seeing a rise in transaction activity, bolstered by a recovering energy market in Alberta.
A third quarter report on hotel investment by Colliers International shows a 27 per cent increase in per-room hotel value. The average price per room is sat at $161,200 this year. In total, national hotel investment volume hit $473 million this quarter.
Nearly $100 million in sales activity came out of Alberta.
“Hotel markets that are reliant on the energy sector have been through a difficult few years; however, the worst is now behind us. Lodging demand growth has returned and supply growth is moderating, providing the foundation for recovery,” the report states.
Alberta only saw $30 million in sales activity during the first half of 2017. In the third quarter, three boutique Edmonton hotels were sold for $65.6 million from Alberta-based property management company Westcorp to DSDL Canada Ltd.
The average deal size hit $21 million to-date this year, up 18 per cent from last year.
As Alberta begins to rebound from its energy recession, HVS Canada Vice-President Jason Wright suggests that now may be an opportune time to consider investing in energy-reliant hotel markets across Alberta and Saskatchewan.
“Financing [is] readily available and the performance of energy-driven hotel markets [is] improving,” he comments.
Anvil almost fully leased; AI set to retool office tower functions – Business in Vancouver
After a sluggish period, New Westminster’s Anvil Centre is leasing up, showing increasing interest in quality retail space in the city, Business in Vancouver reports.
Patience is paying off at the Anvil Centre in downtown New Westminster, which Kingswood Capital Corp. and CRS Group acquired in December 2014 for $35.5 million.
Bought from New Westminster when it lacked a single tenant, the 139,000-square-foot building is 93% leased to tenants that include Douglas College, Land Title and Survey Authority of BC, Evolution Gaming Ltd., Century Group and Aerotek. Leasing has proceeded steadily over the past 18 months, coinciding with the December 31 deadline for the final instalment on the purchase price.
The occupancies obviate the need to sell portions of the building, a scenario that was always possible but which came to the fore last year in view of strong interest in strata office sales elsewhere in the region. Ultimately, it seemed wiser to lease and have ongoing cash flow from the property.
“We just needed to be patient and everything would work out,” said Joe Segal, president of Kingswood.
“We waited it out to get the tenants we wanted,” added Suki Sekhon, president of CRS, who said the property’s central location in the region, adjacent to SkyTrain, made it an appealing location for tenants.
While most of the tenants have moved from older space within New Westminster, being close to rapid transit allowed the building to secure above-average rents that confirm the potential of on-transit office space.
Anvil Centre, while long an exception in the intermittent rapid transit indexes Jones Lang LaSalle produces, now confirms the rule of thumb that space within 500 metres of a transit station typically enjoys higher rents and lower vacancies.
Cushman & Wakefield Ltd., whose brokers Roger Leggatt and Max Zessel had the leasing mandate for the property, notes that overall office vacancies in New Westminster now sit at 11.9%. Space with direct access to rapid transit is 7.3% vacant.
Keefer Street rejection ‘sends a negative chill’ throughout development community – Western Investor
Vancouver permit panel votes down controversial Chinatown condo tower despite the development meeting city design and zoning requirements, drawing criticism from housing advocates.
The City of Vancouver’s Development Permit Board has rejected a controversial plan for a 111-unit condo tower in Vancouver’s Chinatown, the first such rejection in 11 years.
In a 2-1 vote on November 6, Gil Kelley, the city’s chief planner, and chief engineer Jerry Dobrovolny voted to reject the proposal, with assistant city manager Paul Mochrie voting in favour.
Beedie Group’s plan called for a nine-storey building with 100 per cent market housing and ground-level community space at 105 Keefer Street.
The proposal had faced stiff opposition from some local residents, including the Chinatown Action Group (CAC).
"We're over the moon that the [permit board] finally put a stop to Beedie's profit-driven development and, instead, protect low-income residents," said CAC spokesman Nat Lowe in a statement.
The CAC wants the site to be used for 100 per cent social rental housing with free public meeting space.
The development community, however, sees the decision as worrisome.
Anne McMullin, president and CEO of the Urban Development Institute (UDI), said, “UDI is disappointed by the City of Vancouver’s surprise decision to reject a residential building project that had met the municipality’s regulations and policies.”
She added that the Beedie proposal was revised five times over the course of four years and the final plan had received the support of city staff and the city’s Urban Design Panel, met existing zoning regulations and conformed to the official community plan.
“This is the first time since 2006 that the Development Permit Board has rejected an application. We, the industry, see no policy reason for why this was rejected,” McMullin said. “This project denial sends a negative chill throughout the industry.
“[It] creates significant uncertainty because our members don’t know if they can rely on zoning, urban area plans, advice of city staff or recommendations of the Urban Design Panel.”
Vancouver market has ‘regained lost ground’ after foreign-buyer tax last year: Teranet – Business in Vancouver
The effects of the foreign buyer tax have reportedly been short-lived, as new data shows home prices in Metro Vancouver rebounding to pre-tax levels, Business in Vancouver reports.
“The market remained tight, and by the beginning of this year, the index had regained the lost ground,” the report said. “It has risen to new records in each of the last six months.”
Victoria prices increased 0.1% in the month and 14.4% year-over-year; this is the eighth consecutive month in which prices have hit a record.
Across Canada, prices slipped 1% compared with September. This was the highest monthly decrease since September 2010 and the second consecutive monthly drop.
The decline nationwide was due to a 2.8% decline in Toronto repeat home sales prices. After Toronto, the biggest drops were seen in Hamilton (down 1.8%), Edmonton (down 0.7%) and Winnipeg (down 0.7%). The biggest increase for the month was Hamilton (up 1.8%), followed by Vancouver, Quebec City (up 0.6%), Montreal (up 0.4%) and Victoria.
