This week’s top stories highlight the game of opposites present in Western Canada’s commercial real estate market. In Greater Vancouver, high demand is leading to soaring rents and higher dollar volumes of investment sales in retail, multi-family and office sectors. Senior housing is facing a similar crunch for availability as most rental stock, while skyscrapers in Calgary continues to lie empty. On the residential side, housing commentators are still waiting to see how the results of the B.C. election will affect housing policy.
Here is Western Investor’s pick of the hottest real estate stories published this week.
Senior housing availability takes a nose dive – Western Investor
Although bay boomers are heralded as having more money and thus more housing options than the millennial population, seniors are still struggling to find available units at senior living facilities. However, developers stand to make a lot of money if they provide supply to the dearth – if they can get past the permit delays.
The rental vacancy for seniors’ housing units across B.C. fell to 4.7 per cent this year, down from nearly 10 per cent two years ago and 6.3 per cent in 2017. In Metro Vancouver, just 4.6 per cent of the 7,586 private seniors’ housing units are vacant, compared to more than 9 per cent a year ago.
Only 500 new privately built “independent living spaces” for seniors have been built across B.C. in the past year, CMHC notes, and half of these were in the Okanagan.
B.C. senior tenants, at an average age of 82, are forking out an average of $3,009 per month. That rises to $3,600 in Metro Vancouver, up an average of 9 per cent from a year ago.
These rents are well above the conventional apartment market, which averages $1,099 in B.C. and $1,400 across Metro Vancouver, according to CMHC’s latest data.
About a fifth of senior tenants require staffed medical and housekeeping assistance, which pushes average Metro rents above $6,900 per month, CMHC reports.
“Few developers are building new seniors’ rentals because of the delays in getting permits,” said Candy Ho, vice-president of communication at Element Lifestyle Retirement Inc. (TSX-V:ELM), which is completing Vancouver’s only new seniors’ complex, the Opal on Cambie Street. “There is a huge demand and no new supply.”
At the Opal, a luxury seniors’ residence with 56 rental units that opened its office May 20, rents range from $10 to $11 per square foot. That pencils out to an average of $5,980 per month for a one-bedroom and north of $9,300 for a two-bedroom suite.
Ho said 20 per cent of the Opal’s rental units were registered with seniors in the first week it opened. Element has also sold 23 condominiums in the Opal complex at an average of $1,300 per square foot.
It has taken five years, so far, to get the Opal through Vancouver’s development permit process, and Ho added that it won’t open until 2019.
There is no guarantee that rentals booked today at Opal will not rise by the time the project completes, however.
Housing advocates welcome coalition policies – Business in Vancouver
Since the provincial election results dashed any chance of a Liberal majority and the Greens and NDP united, housing commentators have speculated on how the power shift would affect the housing crisis in Greater Vancouver. Business in Vancouver joins the conversation.
The question is, will those who sought an alternative to the delayed and tepid housing policies the BC Liberals introduced get what they wanted?
High housing costs haven’t gone away, and with spring sales pointing to renewed pressure on both prices and supply, discontent isn’t about to disappear, either.
“This problem is galvanizing many young people to seek change in housing policy,” Paul Kershaw, an associate professor in the University of British Columbia’s School of Population and Public Health best known for his leadership of housing advocacy group Generation Squeeze, said prior to the May 9 election that reduced the BC Liberals to minority standing.
Kershaw wanted to see signs of real change in the platforms of all parties, dismissing the steps Clark’s government took as “nowhere near sufficient.”
Now, the governing agreement struck by the so-called “GreeNDP” coalition has committed to “making life more affordable” in B.C. by “increasing [the] supply of affordable housing and tak[ing] action to deal with the speculation and fraud that is driving up prices.”
It also promises to address affordability through a guaranteed-income program in its first budget.
There are few details, though the pledge reflects the NDP platform, which called for building 114,000 new homes over a 10-year period as well as a task force to combat the use of B.C. real estate to launder money and commit fraud. The focus on supply pleases Bob de Wit, CEO of the Greater Vancouver Home Builders’ Association, whose members will benefit from a rise in construction.
“Unfortunately, [the plan is] not enough to begin to solve the supply challenge that we have in Metro Vancouver,” he said, adding that getting the necessary approvals will also take time. “Even though it sounds like a big number, [it’s] really scratching the surface of what’s needed.”
Kershaw also questions how a potential GreeNDP government would implement the plans, but he takes heart from the strong signal voters sent to the BC Liberals that home prices need to be brought in line with incomes.
This is where the aggressive tax policies of the Greens, muted in the coalition agreement, encourage him.
Kershaw likes the Greens’ pledge to make the tax on residential purchases by foreign nationals province wide and boost it to 30%, as well as taxing capital gains in excess of $750,000 on residential properties owned for less than five years. With three Green MLAs holding the balance of power, he sees potential for change.
Vacant skyscrapers are an ‘albatross’ that Canada’s oil capital can’t shake off too soon – Financial Post
The oil recession in the Prairies has led to many businesses to claiming bankruptcy, leaving behind a slew of vacated office spaces. A couple years later, the glut still remains, to the tune of 24 per cent vacancy throughout the city. The Financial Post took a look at what the future for office real estate looks like in the Prairies.
Landlords are offering bargains galore, such as free rent for a year in exchange for long-term commitments and free upgrades at the most luxurious addresses such as new carpets.
One landlord, Aspen Properties Ltd. executive chairman Scott Hutcheson, inspired by Silicon Valley campuses, is renovating one of the emptiest buildings — Encana Place, with a vacancy rate of 62 per cent — to attract more tech companies that employ millennials by adding a dog park, basketball courts, gym facilities and a putting green.
There was a time when Hutcheson wondered “if we were just too risky” in spending millions to renovate during a period of high vacancy, but he said the strategy is paying off. New tenants are moving in because “this building is uniquely positioned in the market.”
Another landlord, Centron Group, paused construction of an office tower just outside downtown on 10th St. and is considering redesigning the building to house condos. And Brookfield Asset Management Inc. put a second planned tower for Brookfield Place on hold.
No one expects the remaining energy companies, including the handful that have become giants by acquiring the assets of competitors who left the city, will need more room in the future because they want to keep their costs in check.
You will see companies that take 50,000 square feet right now (that) might take only 45,000 because they will become more efficient as technology takes over,” Kwong said. “I have been told by people in the industry, ‘We don’t need 10 engineers to drill a well any more, we only need five and a software program.’”
TransCanada Corp. and MEG Energy Corp. have put large blocks of space up for lease. Cenovus Energy Inc. has also tried to sublease space as it concentrates multiple locations into two towers. The company leased 71 per cent of Brookfield Place when times were good and is due to move in sometime in 2019, but the building likely won’t be full when it opens.
In response, the city has launched a multi-pronged effort to attract new companies before it falls behind like a rust-belt city.
“My job is to continue to win back that business one square foot at the time and see how we do,” Mayor Nenshi said. “In Alberta, when times are good, we sometimes lose the discipline to be creative and innovative to solve our various business issues.”
Office and retail dollar volumes increase 80 per cent year-over-year – Western Investor
New statistics from the Real Estate Board of Greater Vancouver show that a slowdown in commercial real estate sales does not necessarily translate to a decrease in dollar volumes – similar to home sales, dollar volumes are increasing in many commercial sectors.
Commercial real estate sales in the first quarter of 2017 have slowed compared to last year, but dollar volumes are on the rise thanks to an impressive increase in office and retail prices.
Real Estate Board of Greater Vancouver (REBGV) statistics released today (June 12, 2017) express a 19.7 per cent decrease in sales since 2016. The first quarter of 2016 saw 699 total commercial sales, while 561 total sales were recording during the first quarter of 2017.
“Commercial real estate activity is below last year’s record-breaking pace and more in line with historical levels in the Lower Mainland,” said Jill Oudil, REBGV president.
Dollar volumes, however, are up 18.2 per cent over 2016. Total sales value rose from $3.287 billion in Q1 2016, to $3.884 billion in Q1 2017.
An overall dollar volume increase is lead by an 80.1 per cent increase in office and retail value, and a 55 per cent rise in multi-family prices.
Retail and office sales value rose from $896 million in 2016 to $1.61 billion in 2017. The number of sales only decreased 2.4 per cent, from 208 property sales in 2016 to 203 in 2017.
Multi-family dollar volume grew from $242 million in 2016 to $375 million. Twenty-seven multi-family properties sold across Greater Vancouver during the first quarter of 2017, versus 39 in first quarter 2016.