For the second edition of WI’s new Weekly Buzz feature, we’ve curated some of the top real estate stories on what’s affecting Western Canada’s commercial market – and a couple of them happen to be issues Western Investor has previously reported on.
From Vancouver’s red-hot hotel market, to the commercial real estate market perking up as investors are put off residential real estate following the foreign buyer tax, the focus of this week’s top stories should be familiar to Western Investor readers and provide additional perspective on some of the hottest real estate issues in the country right now.
The Financial Post reported that Vancouver’s lodging sector saw significant, record-breaking levels of demand through 2015 and into 2016. The Post cited a report by Jones Lange LaSalle Americas Inc., a Chicago-based real estate company, who recorded Vancouver’s occupancy rate at 80 per cent – 13 per cent above the national rate.
Vancouver’s revenue per room (REVpar) also grew at an exponential rate in 2015. But in 2016, Vancouver was bumped out of the top spot for REVPar, with Toronto taking its place.
Vancouver’s lack of supply growth helped pushed the average daily room rate in the metro area to $181.60 over the first nine months of 2016, up 8.5 per cent in the last year and 25.5 per cent in the past five years. Toronto’s rates are up 10 per cent in the past year but Vancouver still has the most expensive rooms in the country.
The problem in Vancouver is the price of land is now $350 to $400 per square foot of buildable space, a price too high for hotel development. “Most of that land is going to condo developers,” said Sparrow. “It’s really hard to pencil a hotel development.”
Last month, Western Investor reported on HVS Toronto’s annual hotel valuation report, and noted Vancouver’s REVpar growth and it’s high per-room value. In contrast to Vancouver and Toronto, our article also took a look at Alberta and Saskatchewan’s falling markets.
According to a Re/Max Commercial Investor Report cited by The Globe and Mail, the total dollar value of commercial real estate transactions is up 94 per cent since 2015. The amount of transactions has also increased over the year, from 1,138 sales in the first half of 2015 to 1,464 during the first half of 2016. The Globe noted that low interest rates on commercial properties tend to attract investors, as well as these properties not being subject to the foreign buyer tax.
And some, including Tony Letvinchuk, managing director for Macdonald Commercial Real Estate Services, believe that the foreign-buyer tax on residential purchases will play a role in driving the market, which is generally perceived as a balanced mix of local and foreign buyers.
“There’s no question that the additional 15-per-cent property purchase tax will motivate foreign entities – being those who are not Canadian citizens or permanent residents – to consider purchasing commercial properties located in Greater Vancouver, where such transaction tax does not apply,” he says.
Western Investor cited the same Re/Max report in a recent article that quoted local real estate agents who had seen increased interest in industrial land from foreign buyers following the implementation of the residential tax.
In the same vein as the last edition of Weekly Buzz, it seems Canadian media is still abuzz about Trump’s impact on the real estate investment market. More than two weeks out from the election, and the Calgary Herald has reported that Calgary’s real estate stocks are still feeling the aftershocks of Trump’s looming presidency.
Two Calgary-based real estate investment trusts — Boardwalk REIT and Northview Apartment REIT — have seen their share prices tumble since the U.S. election Nov. 8. Similarly, two Calgary utilities, TransAlta Corp. and ATCO Ltd., have seen their share prices drop since Trump’s victory, though TransAlta’s stock has nearly recovered its loss.
Frederic Blondeau, head of real estate research for Dundee Capital Markets, said market speculation that interest rates will rise was behind share price declines for both Boardwalk and Northview, though he noted Boardwalk was also hit by weaker than expected quarterly earnings.
Before the U.S. election, Blondeau had warned, “it was time to take a pause” on buying REIT stock because rising investor interest had driven up share prices. At the same time, he wrote in an Aug. 3 note that interest rates were expected to remain low — “unless they became subject to a shock.”
“For us, it was good timing to be a bit more conservative on the sector but never in a lifetime I would have predicted that Trump would get elected, but it happened,” Blondeau said Tuesday. “That was the shock.”
As reported by Western Investor sister publication Vancouver Courier, plans for the city’s second collaborative living complex, Little Mountain Cohousing, are moving along smoothly. Cohousing residences such as Little Mountain operate with an emphasis on communal living, including common meals and shared duties such as housework and childcare. With move-in date slated for Spring 2019, investors and potential residents are already showing interest in what just may be a growing trend in Vancouver.
The complex will also be the city’s second Passive House multi-family building — the first is being constructed at Skeena and Hastings Street. Passive House is an international standard of energy efficiency, focusing on reducing energy used to heat the building by creating an airtight structure through high-quality windows, super-insulation and good ventilation.
McGrenera maintains demand is high for cohousing-style living, pointing out 200 people are on Little Mountain Cohousing’s interested list, while 300 are on the interested list for another project under development in North Vancouver.
“Some of the emails I get people are just pleading, ‘Please, put me on your very, very interested list,’” she said. “People are looking for alternative ways to find community.”
If approved by via public hearing early next year, Little Mountain Cohousing will be built at 4983 to 5007 Quebec St. in Vancouver. Visit Vancouver Courier for more coverage on Little Mountain Cohousing.