The week’s top stories focus on new commercial real estate proposals and sales activity, from the Lower Mainland to Vancouver Island. Investment activity in Victoria is booming, specifically in the office and industrial sectors, while developments in downtown Vancouver Coquitlam and Richmond are driving residential, hotel and retail activity in these areas.
Here is Western Investor’s pick of the most-buzzworthy real estate stories published this week.
Strong return on investment is driving activity in the capital city’s industrial and office sectors.
Value for money and a strong return on investment will continue to drive activity in Greater Victoria’s commercial real estate market, according to a new report from CBRE Group.
The commercial real estate firm said there is still strong demand for good office space from the provincial government and the private sector, while investors and developers see the region as a relatively good bargain.
“We still see a tremendous appetite for investment product in Greater Victoria and I think the same can be said for development properties,” said Ross Marshall, vice-president with CBRE Victoria. “Investors and developers see value in Victoria [because] it didn’t get over-inflated like Vancouver.”
Marshall said there are some “game changing” real estate deals in the works involving Lower Mainland players.
“The lion’s share of transactions are now with Vancouver-based investors and developers,” Marshall said.
Marshall said both groups have been looking at moving money from other markets into the capital region to add to their property portfolios.
He said they see Victoria as a safe and secure environment.
“And our yields are higher than Vancouver, and everyone is chasing yield, so we are a pretty attractive place,” Marshall said, noting strong demand from tenants has driven up rental rates across property classes.
According to Colliers International, downtown Victoria office vacancy was at 6.4 per cent overall in the fourth quarter of 2018, down from 7.2 per cent in the fourth quarter of 2017. That drop came despite the addition of 280,000 square feet of new office space to the mix.
Marshall said there was a flight to quality, with professional firms and government moving to Class A space, freeing up Class B and C space in the region, with some of that taken up by the growing high-tech sector.
Given the region’s strong fundamentals — low unemployment and a strong, diverse economy — there’s no reason to expect developers and investors to back away from the region anytime soon, he added.
Marshall said he has fielded inquiries from the Lower Mainland, across Canada and the U.S. expressing interest in some of the larger properties available in the region.
“They have a lot of confidence in the fundamentals evident in Greater Victoria,” said Marshall, who sees demand outstripping supply for the next couple of years. “The reality is a lot of these groups are looking for vehicles to invest in, and the West Coast and, in particular, Vancouver Island, [is] shining.”
One of his biggest challenges has been to find large enough properties to suit some of the investor groups.
But even in rosy conditions, the cost of construction, increased development fees, approval delays and other factors could affect the appetite for development in the downtown core.
Marshall said in some cases, it has spurred developers to explore other municipalities that might be keener on development.
The report also noted that Victoria’s industrial market is experiencing historically low availability, while land constraints have led to upward pressure and record-high lease rates.
Will new commercial developments provide image makeover to Granville Street? – Business in Vancouver
Office space and other developments are set to transform the key downtown business and entertainment corridor of the Granville strip.
Can redevelopment provide an image makeover and bring high-end bustle to one of downtown Vancouver’s main streets?
That’s the question set to be answered by at least five projects in various stages of completion along the Granville strip.
They promise to provide a broader mix of businesses and more pedestrians during the day – elements that could change the image of an area that some city residents see as threatening.
Office space is key to the transformation.
More professionals have been walking on the street during the day since 2015, when the Nordstrom building’s renovation completed and tenants, such as Microsoft Corp., Miller Thomson LLP and Sony Pictures Imageworks combined to fill 725 Granville Street with more than 290,000 square feet of office space on the building’s upper floors.
Bonnis Properties' former Tom Lee Music building has more recently been renovated and leased to global co-working giant Spaces, which has agreed to temporarily sublease all of its 78,000 square feet of office space to Deloitte.
Bonnis has two other office projects that are in the wings.
David Goldman last May sold Bonnis a Robson Street site, where four small-business tenants have operated for years, on the southeast side of the block between Granville and Seymour streets. City Cannabis Co. is a fifth tenant on the site. It moved there more recently, and intends to relocate across the street to another Bonnis-owned property.
Kerry Bonnis, who owns the company along with brother Dino, told Business in Vancouver that he gave the tenants one year’s notice, and he predicted that he will let them stay past July’s eviction deadline if the city is slow in providing building permits for the 13-storey office building that is slated for his site.
“[The tenants] have been enjoying submarket rents to the tune of one-third to one-half of gross rental rates,” he said.
The public has until April 1 to provide feedback to the city on Bonnis’ second proposed office project on the strip – at 950 Granville Street, in the three buildings to the south of the Roxy Cabaret to toward the 7-Eleven.
The Roxy Nightclub is directly south of the Vogue theatre, which is a landmark because of its large neon sign. Tenants that will be displaced in the three buildings include a Money Mart, a Harvey's, Aldo Shoes and Doner Shop. The womenswear store Ardene had been in the block but it has moved across the street. The Republic nightclub continues to operate although it has agreed to cancel its liquor licence in the future to allow a new licence to be issued by the city and be used by Cineplex for its future entertainment centre.
Bonnis does not need to rezone the site, however, because the site’s zoning allows for a building height of up to 90 feet, including a 75-foot facade, and a 3.5 floor-space ratio (FSR). Bonnis’ plan is for the project to have a 3.4 FSR – three storeys of retail below a 16,500-square-foot single floor of office space.
“We’d like in the future to have even more office on top of the building,” he said. “We’d like to see more density.”
To Bonnis, density is a win-win-win situation: good for tenants, the city and his company.
Panda Pod Hotel is the region's first "micro accommodation."
Travellers passing through Richmond will soon have the opportunity to sleep in the Lower Mainland’s first “capsule,” or pod, hotel.
Opening in April, Panda Pod Hotel, located near No. 3 Road and Granville Avenue, hopes to provide convenient accommodation at affordable rates. The catch, however, is that guests must be willing to spend the night in a “sleeping pod.”
These sleeping pods are stacked two high and are just large enough for a mattress, an adjustable small side table to use as a workspace and hooks to hang clothes. The pods will also feature adjustable ventilation and a privacy screen to pull down over the entrance. Each guest is also given access to shared washrooms and a place to securely store carry-on luggage.
Capsule hotels are well-known establishments originated in Asia and have already gained grounds in dense to other cities like New York, London and Sydney, etc. Panda Pod is the first of its kind in Vancouver,” said Sharon Cheung, general manager of Panda Pod Hotel in a press release.
The hotel has 64 single-occupancy pods, divided into male and female dorms. Unlike popular pod accomodations throughout Asia, Panda Pod Hotel says their pods are designed to be 30 per cent longer and wider than their Asian counterparts.
“Throughout the past 10 years, the hotel daily average rates and occupancy rates have been on the (rise),” Cheung said. “We would like to offer a more economical accommodation alternative for the travellers with budget concern.”
While the hotel is offering a special introductory rate of $49 for stays until the end of May, prices on Booking.com show the cost of a one-night stay to be around $60 before taxes thereafter, and upwards of $75 in the summer.
Canada’s first pod hotel, Pangea Pod, opened in Whistler last year in the hopes of offering more affordable accommodation at the renowned ski resort. Rates at Pangea range from $60 for a weeknight stay during the spring to $180 for a weekend stay in peak ski season. Pangea's pods, however, can accommodate up to two guests.
Marcon Developments has preliminary plans for 2,800 market units, 900 rental, office tower on the Coquitlam Chrysler site.
A 10-tower development at Lougheed Highway and Christmas Way in Coquitlam is in the preliminary planning stages between the developer and the city.
Marcon Developments, a Langley-based company, has made a pre-application to build six market residential towers, three rental towers and an officer tower on the Coquitlam Chrysler automobile dealership site as well as two properties on Christmas Way and another on Pheasant Street.
According to Marcon Development manager Chris Wilkinson, preliminary plans call for a total of 900 rental units and 2,800 market units, but he stressed the company is still in the early stages of discussion with the City of Coquitlam’s planning department and the heights of the towers have yet to be determined. He also noted the city is in the process of developing a city centre area plan that will influence the project’s planning.
“We’re being very respectful of that process,” Wilkinson told The Tri-City News. “We’re working with staff not to advance that faster than that plan, so we’re a little hesitant to stick our necks out and disrupt that relationship.”
Wilkinson said because the company is still working on the schematic design of the project it could not provide any more information until it can get more feedback from city staff and present a full application to city council.
At a recent meeting, council discussed the desire to have more office space in the city centre area, especially south of the Lougheed Highway and near the Coquitlam Centre SkyTrain station which is to the west of the proposed project. The proposed commercial area totals 266,00 square feet, with an additional 125,000 square feet of office space.