The dust has settled since BC Assessment released its 2017 property assessment values at the beginning of January and with it has come an influx of property owners upset with the subsequent steep rise in this year's property taxes. The assessments have caused some to consider cashing out of the market, while others are questioning the criteria by which BC Assessment evaluates properties. We’ve also taken a look at Greater Vancouver’s increasing demand for industrial and office space amidst tight supply.
Here is Western Investor’s pick for the top articles covering what’s buzz-worthy in Western Canada’s commercial real estate scene this week.
Niels Bendtsen, world-renowned Vancouver furniture designer and manufacturer, spoke with The Globe and Mail to discuss what he considers to be the unfair and at times inconsistent way BC Assessment evaluates properties to determine their property value. Bendtsen’s warehouse facility in Vancouver’s Railtown district tripled in value this year – and he’s not the only business owner who’s upset with the dramatic jump and planning to take action.
Mr. Bendtsen’s property at 405 Railway was just assessed at $14.512-million, up from $5.751-million last year. In 2016, he paid $68,852 in taxes. Based on the 2017 value, his taxes will be an estimated $175,000.
Mr. Bendtsen says it’s unfair to penalize small and mid-size businesses that bring manufacturing jobs to the city. He has 75 employees in Railtown; however, he is considering a move to Toronto, where commercial properties are much cheaper.
“[The city] says they want this type of business down there, and yet they are taxing us out of there,” says Mr. Bendtsen.
“I was going to develop one of the properties, build on it and make a new building. But with these tax rates, there’s no way of doing it,” he says. “Of course I can sell them, but that’s not really what I felt like doing. I want to be in business.”
Paul Sullivan, of property tax consultants Burgess Cawley Sullivan & Associates, says he’s preparing for what could turn into the “biggest tax revolt in Canadian history.” Although Railtown was one of the hardest hit areas, Mr. Sullivan says Vancouver’s insane property market is wreaking havoc for businesses throughout the city. In the West End, on major shopping streets like Denman, Robson and Davie streets, it’s the small retailers getting hit hard.
Recent assessments are cause for worry in the multi-family sector as well as the industrial and retail sectors, as Business in Vancouver covers how rental apartment value increases are making some landlords consider cashing out.
Rental apartment buildings are classified as Class 1 residential, the same as a detached house, but none qualify for the B.C. homeowner grant. Multi-family apartment buildings have seen higher assessment increases than in the overall residential market, which also means most landlords will not see any relief in property taxes under a ratio being used in most municipalities to level out the tax bite.
However, as the only income-producing properties classified as residential, apartment buildings have a lower mill rate than neighbouring commercial properties.
Still, some landlords are squeezed between the rising taxes and provincial rent regulations.
“For some, this [higher assessments] will be the last straw,” said appraiser Jeremy Bramwell, principal of Bramwell & Associates Realty Advisors.
Sky-high property taxes aren’t the only issue small business owners looking to set up shop in Greater Vancouver’s industrial arena are facing. The North Shore News took a look at Avison Young’s 2016 report on the North Shore commercial market and found an alarming decreasing in the region’s light-industrial vacancy rate.
Office space vacancy sat at 7.8 per cent the end of the third quarter, which is considered the upper end of a healthy commercial vacancy rate. Industrial land, however, is another matter with only 0.4 per cent vacancy, down from 0.8 per cent the year before.
“On the industrial side, the vacancy rate is dangerously low and it’s allowing landlords to set their targets at much higher rental rates than they may have achieved in the past,” said Terry Thies, principal of Avison Young.
A lack of available undeveloped land, plus longer processing and approval times from municipalities means it takes much longer for any new office, industrial or retail space to come on to the market, Thies said.
“There’s a much larger gap in the ability to deliver product than what there used to be,” Thies said.
The District of North Vancouver is looking to add to the supply of light-industrial land as it moves through its planning process for the Maplewood town centre, which Thies has some advice for.
“We would like to see the municipality open their zoning books a bit more broadly to accommodate more of a blend of uses within that Maplewood area,” he said, pointing to some recent projects that bring together light-industrial, office space and residential units in East Vancouver as an example.
All commercial sectors are facing high demand in Vancouver, and on the more positive note, this bodes well for investors. Low interest rates and lots of tenant interest are driving sales rather than leases in a landlord-favoured market.
“There’s no indication that the feds are going to raise the interest rate, so … I think we’re going to continue to see strong demand both from the owner-user side and the investor side in commercial product,” said Glenn Gardner, a principal with Avison Young in Vancouver.
Avison Young is bringing approximately 46,000 square feet of strata office and retail space to market in the mixed-use tower Bosa Properties Inc. and Arpeg Holdings Ltd. are building at 1575 West Georgia Street. The 26-storey tower will have 175 condos with offices on the second to fifth floors and retail at grade.
“We’re going to see a lot of interest in this product,” said Gardner, anticipating demand from both owner-occupiers and investors. “It’s a really unique opportunity for somebody to acquire a high-end office premises in downtown Vancouver that’s built to a LEED [Leadership in Energy and Environmental Design] Gold standard.”
With residential units in the tower fetching premium prices, he expects the commercial component to do the same.