This week’s top stories stretch out across the Greater Vancouver region to take a look at Delta’s dwindling industrial supply, European investment in Canada post-Brexit, the NDP’s appeal in neighbourhoods with rapidly-increasing home values and the sale-lease-back trend that has one developer reaping major benefits.
Just how much can an owner profit from a sale-lease-back arrangement? Will European investment eclipse Chinese capital? Read on to find out the answers to these questions and more, in this week’s edition of Western Investor’s content roundup!
Robson Telus tower flipped and sold for double the value – Western Investor
Local security company Avigilon came away with a massive profit after acquiring the downtown Telus tower in late 2015 and selling it this year after extensive renovation.
The Vancouver security company sold the nine-storey tower to an undisclosed buyer for approximately $107.5 million.
Avigilon announced the deal last week.
The company purchased the building in November 2015 for $42 million, said James Henderson, Avigilon’s chief operating officer.
The recent sale is a sale-lease-back arrangement that will allow Avigilon to use the renovated 135,000-square-foot space.
“We're very pleased with the investment we made in the building," said Alexander Fernandes, Avigilon's founder, president, CEO and chairman of the board. "The transaction unlocks over $100 million in cash, will substantially reduce our debt, and secures a state-of the-art facility to support our growing business.”
The sale is subject to certain conditions typical for a transaction of this nature, including completion of the purchaser's due diligence, completion of applicable filings, and finalization of the terms of the building lease.
The property, including the building, was valued at $46.8 million last year, according to BC Assessments.
The tower, located at the corner of Robson and Seymour streets sits adjacent to the $750-million Telus Garden development. The Robson Street tower was the former Vancouver headquarters for Telus.
The deal was brokered by Kevin Nelson of CBRE Ltd.
Foreign buyers seek shelter from the storm – Business in Vancouver
Canada has emerged as an investor’s safe haven amidst political uncertainty in other major markets like the U.S. and the UK, according to CBRE. Business in Vancouver explores whether Europeans will represent the next big wave of foreign investors after new numbers reveal investment values above the historic average.
CBRE broke down the sources of foreign investment in Canadian commercial real estate through the first half of 2016. The findings proved somewhat surprising.
“When you break down the sources of foreign capital in 2016, buyers from China and Hong Kong make up 65 per cent of foreign capital transactions by volume,” Morassutti says. “However, what is even more interesting is nearly a third of the total foreign investment volume came from European buyers. This is more than double the historic five-year average and appears to reflect the growing geopolitical uncertainty in the EU [European Union].”
While new restrictions on capital outflows from China could put a damper on activity and the U.K.’s decision to leave the European Union turning investors’ attention to North America, many in Vancouver expect Asia to remain the leading source of investment in 2017.
Jim Szabo, who with Tony Quattrin leads CBRE’s national investment team in Vancouver, sees no indication that investment from Europe will edge out Chinese capital. European investors remain small players, engaging in just one of last year’s big deals, he notes.
“Royal Centre – that was the only one,” Szabo says. “It was a big one, it was $425 million, but it was one deal, whereas if you’re looking for a trend, I would say the mainland Chinese are more of a trend than one European buyer, which is more of an anomaly.”
The past three years have seen Chinese investors push foreign involvement in Vancouver commercial real estate deals from 15 per cent to 44 per cent.
“I don’t see that going higher – it might stay at that level for 2017, in that 40 per cent range,” Szabo says, pointing to the restrictions facing Chinese capital flows. He expects the proportion to decrease further in 2018 and 2019, but remain relatively high.
CBRE’s national outlook underscores the “ample reasons to believe that Vancouver investment activity will be sustained,” including the flight to safety and quality among global investors as well as interest in gateway cities with rare properties.
This bears out what Jon Ramscar, senior vice-president with Jones Lang LaSalle (JLL) and leader of its capital markets group in Vancouver, sees among investors.
“We just don’t have very many opportunities to meet the demand of that capital,” he says, pointing specifically at inflows from Asia, which – despite uncertainties in Europe and even the U.S. – continue to trump alternative sources. “The scale and nature of the Asian market has been on the increase. I wouldn’t say the European investment has changed from a year-on-year typical appetite.”
Supply can’t match industrial demand – Delta Optimist
The industrial pinch has Delta in its pincers, as its desirable market and limited supply has driven up prices and pushed down vacancy rates to a scant level. The Delta Optimist took a look at a recent report by Avison Young that highlights the pessimistic conditions for the industrial market in Delta and nearby cities.
In its latest industrial land overview report, the commercial real estate firm notes that while Delta’s industrial market remained active last year with 45 transactions valued at a near record $233 million, there are few options for those businesses seeking space in excess of 75,000 square feet.
The report found that despite a limited number of properties being transacted in Delta’s industrial market since last summer, some large leases were recorded in the Nordel, Tilbury and Annacis Island areas. That includes one of the largest industrial leases in recent history with the B.C. Liquor Distribution Branch leasing the former Home Depot distribution centre in the Tilbury Industrial Park.
Mayor Lois Jackson and others recently broke ground on the Beedie Development Group’s Delta Link Business Park in the Tilbury area.
The Avison Young report notes new supply is not anticipated to relieve upward pressure on rental rates or tightening vacancy in Delta in the next 24 months.
“Richmond and Delta will remain two of the most desired markets for tenants and owner-occupiers alike,” the report states.
In an associated news release, commercial real estate brokerage firm CBRE said Metro Vancouver’s industrial vacancy is just 2.2 per cent, while space completing this year is already 55 per cent preleased or sold. In 2015/2016, demand for industrial space was three times greater than total new space added to the market.
NDP candidates dominate in priciest Metro housing neighbourhoods – Western Investor
The recent provincial election on May 9 saw a closer race than expected between the BC Liberals and the BC NDP, lead by an orange sweep in some of Metro Vancouver’s priciest neighbourhoods for buying homes. Our editor Frank O’Brien spoke to real estate analysts to see why the party was decidedly popular in these areas.
Other factors were in play May 9 as an urban-led orange surge nearly sank the governing BC Liberals, but it is housing that might have played a dominant role in creating B.C.’s first minority government in 65 years.
It is no coincidence that the BC NDP’s biggest upset wins were in Metro Vancouver and Fraser Valley communities that have seen double-digit annual house price increases over the past two years, and a shortage of rental homes, real estate analysts say.
Election maps show the NDP’s orange wave extending from the shores of Point Grey to well south of the Fraser River, taking down top-tier Liberal cabinet ministers and capturing 25 of the 48 Lower Mainland ridings, up from the 16 the NDP won in the 2013 election.
Vancouver-Fraserview, where the benchmark house price has increased 56 per cent from the last election to $1.92 million, elected its first NDP candidate in 21 years, defeating former B.C. attorney general and minister of justice Suzanne Anton in the process.
David Eby, the NDP housing critic who famously defeated Premier Christy Clark in the 2013 election, played the affordability card to rake in 54 per cent of the vote in Vancouver-Point Grey, where the typical house price on election night was north of $3.4 million.
During the campaign, the NDP promised to build 114,000 rental and co-op homes and to cut renters an annual $400 cheque, while raising property taxes on expensive homes bought by speculators.
“Ironically, the NDP policy offered nothing for market housing,” noted Bob de Wit, CEO of the Greater Vancouver Home Builders’ Association. “But its assistance to renters likely appealed to an urban audience.”
De Wit said an NDP victory would have “meant a slowdown in [housing] starts and investment.”
