The week’s top stories nearly all tackle the biggest issue in Vancouver real estate – unprecedented demand that has driven up prices at an unmatched rate. As resorts in the province enjoy a busier-than-ever-seasons, housing for locals and seasonal workers struggles to catch up and remain at a price point within reach. Meanwhile, the pricing of new developments across the Lower Mainland is begging the question – is more supply helpful, when it’s overpriced? On the commercial side, downtown office space continues to test price limits, even on spec buildings, while an iconic retailer considers cashing in on the lucrative market.
Here is Western Investor’s pick of the top four most buzz-worthy real estate stories.
Seasonal workers and locals struggle to find accommodation at Interior B.C. mountain resort, as home prices continue to soar and demand outpaces supply.
Last winter Sun Peaks Resort had one of its busiest seasons ever. The number of rooms booked jumped 15 per cent from the previous winter, and all indications point to an even better 2017. The ski resort has a scheduled opening date of November 18, which would make it the first mountain to open in B.C. this year.
September was the 30th consecutive month of increased room bookings. However, Sun Peaks Mayor Al Raine said housing has been struggling to keep up with the increase in seasonal workers.
“Last year it hit us right between the eyes,” Raine said. “There was a serious problem. We’ve been experiencing double-digit growth [in resort visitors] for the last two or three years … and I must confess we were a little bit asleep at the switch.”
Sun Peaks Resort, located about an hour’s drive northeast of Kamloops, is Canada’s second-largest ski hill with 4,270 acres of terrain spread over three mountains. The municipality has about 700 full-time residents and adds 1,500 seasonal residents during the winter, which does not include visitors to the resort. From January to April of this year, Sun Peaks had 390,000 unique ski visits, a record high.
Raine said that as last winter’s ski season ramped up, the resort’s ski lift corporation had to truck in temporary trailers from Kamloops to accommodate its employees when workers couldn’t find housing.
This season, some employers have already put holds on rental housing for seasonal staff, and the youth hostel at the hill is being expanded.
Area real estate has boomed. In 2012, the average price for a Sun Peaks townhouse or condo was $386,968; today it’s $580,693. In 2012, $7.3 million worth of condos and townhomes were sold; so far in 2017, that number has hit almost $25 million. Last year the area broke a number of real estate records. Detached-home sales set a record for volume and pricing as 22 properties sold at an average price of $827,117. Average sale prices of townhomes and condos set a record at more than $466,211, and the number of units sold almost doubled to 50 last year from 27 in 2015.
Liz Forster, a Sun Peaks-based managing broker for Sotheby’s International Realty Canada, said momentum and interest in the area have been growing for years.
“More people are moving to Sun Peaks full time as the community grows.”
Columnist Peter Mitham reports on the Urban Developments Institute’s views towards new developments adding to supply in Metro Vancouver, but priced often beyond most people’s reach.
A flashpoint for his comments was Joyce, a 256-unit tower Westbank Projects Corp. is developing in Vancouver’s Joyce-Collingwood neighbourhood.
Westbank has sponsored the Fight for Beauty exhibit at Fairmont Pacific Rim, but Ferreira suggested affordability is the bigger battle.
Warning of buyer fatigue as square-foot pricing sails past $3,000 downtown, $1,500 in Mount Pleasant, $1,100 in Metrotown and $750 in Surrey (“of all places”), Ferreira said builders shouldn’t take demand for granted.
“Just because you can, should you?” he asked. “There needs to be some caution in terms of not trying to push that price too high and too far beyond what the market is prepared to pay just because there appears to be a lot of demand.”
Vancouver is arguing for the right housing options in the right location, but Ferreira – speaking personally – took issue with the city’s approval of Joyce and the project’s pricing.
“I don’t think we should be approving projects in a neighbourhood like Joyce-Collingwood that will command $1,200 to $1,300 a square foot, whether it’s a beautiful design or not,” Ferreira said. “$900 to $1,000 a square foot … would be perfectly acceptable.”
Who’s keeping shop?
Vancouver businesses pay 4.87 times the residential tax rate, the highest multiple in Canada, according to a new report from Altus Group and Real Property Association of Canada, and up 11.2% from last year. (See “Taking municipal tax ratio to task,” page 23.) This equals $2,000 a month for Sabrina Faas, owner of Bayswater Tea Co., a 1,265-square-foot shop that’s operated at West Broadway and Bayswater for more than 12 years.
Faas says the bill compounds the effect of shifts in surrounding residential properties, which are either underpopulated or left empty by new owners.
“Before, there’d be a family in the top and students in the bottom, which for me is anywhere from two to eight customers, including a huge gamut of students that need jobs,” she said.
The combination of fewer customers, a smaller labour pool and higher operating costs has pushed Faas and other West Broadway Business Improvement Association members to make hard choices. Some close temporarily or altogether; others move.
Altus Group says shopkeepers typically expect a 15% to 18% margin after operating expenses, but Paul Sullivan, principal of appraisal firm Burgess Cawley Sullivan & Associates Ltd., says Vancouver’s best eke out 5%. Preserving that means selling an extra $200,000 a year just to cover tax increases.
New speculative towers are expected to push rents to record highs as vacancy rate continues to tighten.
In 18 months Vancouver’s downtown office vacancy rate has been cut in half, plunging to 5 per cent, the second lowest in North America, and accelerating a new cycle of speculative tower construction.
The unprecedented demand could also lead to record-high lease rates in the core with suggestions that prime rents could top $50 per square foot.
The October 11 start of the 33-storey Vancouver Centre 2 office tower, backed by the Healthcare of Ontario Pension Plan (HOOPP), Great-West Life Real Estate Fund, and London Life Real Estate Fund, kicked off the latest wave of office development and gave Vancouver a major credibility boost, said Norm Taylor, executive vice-president of CBRE Vancouver.
“HOOPP backing an office tower on speculation – that is a bold move and an endorsement that a major pension fund believes in B.C.,” Taylor said.
Vancouver Centre 2 will be followed by a smaller, nine-storey office tower at 401 West Georgia Street by Oxford Properties, the real estate development arm of the Ontario Municipal Employees Retirement System (OMERS) pension fund.
Avison Young forecasts that the third new office building will be a 350,788-square-foot tower on West Georgia Street, a joint project by Westbank Corp. and Allied Properties Real Estate Investment Trust. Known as the “lantern” because of its innovative design, the tower is to be built using a fast prefabricated construction system and is expected to be completed in mid-2020, a year ahead of the similar-sized Vancouver Centre 2.
Taylor suspects a separate OMERS proposal, a 499,000-square-foot Oxford tower at 1133 Melville Street, could now move up the queue as the fourth tower to join the wave. Also near the starting point is Morguard’s 25-storey office building at 601 West Hastings Street.
“While relief for tenants is on the horizon in terms of these new buildings, in the short term, businesses seeking office space in Vancouver will see an upward pressure on rents,” said Taylor.
The store is expected to sell for as much as $900 million, following HBC's new partnership with co-work space company WeWork.
Hudson’s Bay Company’s (HBC) is inviting bids on its iconic flagship store on Granville Street, following news of the retailer’s Lord & Taylor Fifth Avenue sale in New York.
The Toronto-based HBC reported last week it would be selling its New York store in nearly $1.1-billion deal that would include leasing significant floor space to collaborative workspace company WeWork. As part of a new partnership, WeWork announced it would also be leasing space at the Granville Street’s Hudson’s Bay store.
“This partnership places HBC at the forefront of dynamic trends reshaping the way current and future generations live, work and shop: the sharing economy and urban and suburban mixed-use real estate planning,” said Richard Baker, HBC’s Governor, Executive Chairman and interim CEO, in a statement.
This week, HBC has gone a step further and revealed plans to sell the Vancouver store, according to a report by The Globe and Mail.
HBC has enlisted real estate advisors CBRE and Brookfield Finacial Corp. to find a buyer for the location, the report shows.
The six-storey Granville Street store built in 1927 is known for its iconic cream terra cotta exterior and Corinthian columns. The 650,000-square-foot building is one of the largest retail spaces in Vancouver and has an assessed value of nearly $59.7 million. However, the property is expected to sell for as much as $900 million.