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Weekly Buzz: Chinese investment and ramifications, Vancouver’s housing shortage

Western Investor's media content roundup for the week of Feb. 27 to Mar. 3, 2017, featuring top stories from WI and Business in Vancouver
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This week’s top stories cover two of arguably the hottest topics in B.C. real estate: lack of rental housing and how City officials plan to remedy it, and Chinese investments and how its presence (or disappearance) affects Vancouver’s economy and affordability.  
Earlier this week, Western Investor broke the news of a popular downtown hotel being sold to Chinese investorsBusiness in Vancouver reported on the news, too, expanding to cover the state of the region’s hotel market. Western Investor also took a look at foreign investment present in the Lower Mainland’s retail market, while BIV talked about the possible dangers of limiting foreign investments amidst a cooling housing market. 
For the breakdown on the week’s top stories, look no further than Western Investor’s Weekly Buzz. 

Hong Kong investors to buy Rosewood Hotel Georgia for $145 million – Business in Vancouver 

Hong Kong-based firms Able Shine and Magnificent Hotel Investments Ltd. have purchased the Rosewood Hotel Georgia from a local developer – reigniting the conversation around Vancouver’s busy lodging market.

Hotel real estate, however, has been a very hot asset class.

British Columbia Investment Management Corp. (BCIMC) in January sold its Vancouver-based chain of 26 hotels, known as SilverBirch, for what is estimated to be about $1 billion.

The exact sale price was not released.

Real estate brokers who specialize in hospitality properties would not discuss SilverBirch’s sale directly but they told Business in Vancouver that demand for hotel properties across Canada is strong.

“Hotel owners divest for a number of reasons,” said CBRE Hotels executive vice-president Bill Stone.

“They may choose to exit an asset class or to sell because hotels require capital or they have financing issues or brand issues or they’re being strategic in taking advantage at a buoyant time.”

Stone said that it is difficult for investors to shift to underperforming real estate asset classes because real estate investments as a whole are doing so well.

The hotel real estate niche is the hottest real estate asset class in terms of growth.

Canadawide, hotel real estate transactions were worth $3.3 billion in 2016. That is 72% more than in 2015.

“The level of hotel transaction activity in 2016 was a record and we’re seeing the beginning signs that 2017 will be in the same bracket for record activity,” added Mark Sparrow, who is a senior vice-president at JLL.

“Hotel fundamentals across the country are incredibly strong.”

[Business in Vancouver]


White Rock retail and homeowners move uptown and away from oceanfront – Western Investor

Home and business owners in White Rock are moving inland and away from the White Rock pier and waterfront front, and some commentators believe its because foreign investors have swept in to purchase prime real estate – driving up the price for local perspective purchasers.

One of the flashpoints has been along Marine Drive in White Rock, a commercial street known for locally run restaurants and shops. White Rock city councillor David Chesney said in the past few months as many as six restaurants have closed down. He said there’s a number of contributing factors from poor marketing to high parking rates and traffic congestion steering tourists away. He said when it comes to real estate’s role, one aspect sticks out.

“I’m under the impression from what some people have told me that a lot of the commercial property along the waterfront has been bought by offshore investors,” he said. “So they don’t care if it sits empty or it falls apart.”

Chesney mentioned an empty home tax like Vancouver’s might help alleviate some of the problems; however it would have to apply to commercial in this case. He added with no incentive to have a new tenant move in, the area gets a run-down feel and tourists head to other areas.

Janet Wait, the owner of Jan’s on the Beach, located on Marine Drive close to the White Rock Pier, agreed with Chesney’s assessment.

“There are some overseas landlords that have raised the rents lately, but there’s also some local landlords doing it too. Deluxe on East Beach has been sitting empty for three years. They raised the rent on that, so the restaurant couldn’t afford to stay there and they moved out and it’s still empty.”

The high rent is apparently not universal, however. Western Investor found prime vacant restaurant retail space on White Rock’s Marine Drive – kitty-corner from the landmark pier – from $14 per square foot on an annual lease basis, comparable to lease rates in north Surrey and lower than in White Rock’s uptown strip along 152nd Street.

Retail developers are moving into White Rock and South Surrey, but they are just not building close to the beach, according to a report from Lee & Associates of Vancouver.  

[Western Investor]



China crackdown threatens to cut foreign investment – Business in Vancouver 

If B.C. did completely lockdown on all forms of real estate investment by Chinese professionals, how would it negatively impact Vancouver’s cooling housing market? Business in Vancouver explored that question.

“We do expect a slowdown in outbound investment made by Chinese investors because of strict capital controls, which is not likely to be loosened any time soon,” Zhou said in email to Business in Vancouver. “The impact will be felt across all the major global cities where Chinese investors have been active over the past few years.”

Vancouver might already be sharing the pain.

“I have been hearing rumours of some key China-based players in Metro Vancouver not waiving their conditions on transactions due to lack of investor funding,” said Stanley Chui, vice-president of Gammon International Real Estate Corp., which is active with foreign investors. Chui said he has seen no issues on foreign-buyer real estate deals worth less than $5 million, “because at this level the deals can be all cash.”

But others say any waning of Chinese interest in Vancouver real estate is likely a temporary reaction to a cooling market.

Immigration lawyer Richard Kurland said the 15% foreign-buyer tax, declining values in Metro Vancouver residential real estate and better opportunities in other foreign markets could be having a bigger effect than China’s current controls.

“[Currency controls] may well be an excuse to dodge deals,” he said.

[Business in Vancouver]


Vancouver looks to increase number of townhomes, row houses, duplexes – Business in Vancouver

The conversation continues on how the City of Vancouver promises to address and remedy the affordable housing shortage, which included building up on existing stock rather than trying to squeeze stock out of land that simply isn’t available.

"We want to make sure we do this very carefully," the mayor said in a 45-minute speech to guests and members of the B.C. chapter of the Urban Land Institute. "But at this point, we need to see change, we need to see new homes, new supply in our single-family home neighbourhoods."

Robertson didn't provide specifics but city council has heard previously from city staff about the so-called "missing middle" in Vancouver, where there is a shortage of affordable townhomes, row houses and duplexes.

"Why aren't we adding a fourth floor to the three-storey walk-ups that are all over the city?" the mayor said.

Robertson said he believes there are ways of adding more affordable housing options into single-family neighbourhoods without land assemblies, where residents on a block get together and sell their homes to one developer to maximize their profits.

"The choice isn't between change and no change because the single-family home neighbourhoods are changing right now," the mayor said. "We're seeing character homes being razed and replaced with much larger single-family homes. So the essence of the neighbourhoods is already in great flux."

[Business in Vancouver]