Our specialists at Maude, MacKay keep their ears to the ground to find situations that could offer advantageous investments. The knowledge base and contacts that we have accumulated over the decades allows us to identify and highlight the “property hotspots” across the region.
Hot Spots 2020 – Trends and Projections
Metro Vancouver has emerged as Canada’s #1 market for real estate investment for 2020 as reported by Western Investor. This positive outlook even extends to British Columbia hinterlands. Significant growth is expected in areas such as Kitimat with its LNG development, as well as along the Trans Mountain pipeline. Kitimat itself is expecting a doubling of population from its existing 8000 residents during the completion of the first LNG facility.
Vacancy rates at the end of 2019 in Metro Vancouver are; Office 3.1%, Industrial 1.8%, Retail 1.5%. Warehousing space is definitely at the top of investors’ minds as a direct result of increasing e-commerce. The attraction of this sector is partially due to the built form being a square box that requires less capital and which can be re-used or reformatted. Industrial space construction continues to lag behind demand, with vacancy at 1.8% and year-over-year rent increases averaging a whopping 9.6%. The lack of available space is the result of the contracting amount of industrially zoned land in Metro Vancouver.
Rising rents are not great news for tenants but makes new construction much more viable in the face of rising costs. Vancouver is actually cost competitive in terms of overall business costs, in that it is relatively cheap compared to other gateway markets such as Seattle and San Francisco, where rents and wages combined are 71% and 101% higher respectively.
Very large development plans and construction are underway at some mega-sites in Metro Vancouver, such as Daiya Foods in Burnaby where a 400,000 sf facility is near completion, and Amazon’s downtown location where 1.13 million sf of facilities are also nearing completion. This compares to the total of 4.3 million sf of commercial floor space under construction and expected to be completed by 2023 in Metro Vancouver. Of this 4.3 million sf, 70% is already leased. When salary costs average around 70% of overall operations costs, the lower salaries in Vancouver are a major attraction to big firms.
While total sales activity in Metro Vancouver commercial properties is down from 2018, much of this relates to the extremely high activity in recent years, with pent up demand in evidence by the end of 2019, as illustrated by the extremely low vacancy rates. The downtown Vancouver office vacancy has declined in 2019 from 3.1% at the start of the year to 1.9% currently. Although 67% of new commercial construction is occurring in the downtown core, rents are expected to continue to increase due to low vacancy and high projected overall demand.
From a land purchase perspective, older buildings are being targeted by larger institutional buyers who are eyeing opportunities to redevelop sites to higher densities, especially if in close proximity to existing or planned rapid transit.
Even with the overall contraction of bricks and mortar retailing worldwide, retail sales have held steady in Metro Vancouver, with vacancies at 1.3% and rent increases of 5.5% year-over-year.
Rental residential is being fueled by foreign students, downsizing seniors, tech industry workers, and high residential purchase prices. Urban Analytics state that 30,000 units need to be built in BC over the next 2 years to meet these demands.
Key trends for 2020 are; No relief in sight for vacancies or rents, the advent of multi-storey warehousing will increase, capital attraction is expected to continue due to comparative competitiveness.
To keep up to date
From time to time, there is an area or a segment of the market that represents an opportunity that we would like to bring to our clients’ attention.
To receive our regular thoughts on BC hotspots, simply complete the form on the right.
And if you have a more specific interest, please complete the contact form below and one of our specialist will contact you.
Our Hot Spots