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Top tags: 2020Trends  ExpertPanel  OfficeMarket  REIT 

Office Market Trends and Predictions for 2020

Posted By Kelley Olinger, Friday, February 14, 2020
Updated: Friday, February 14, 2020

NAIOP welcomed insights on office market trends and predictions for 2020 from an expert panel during its January breakfast meeting. Providing lively discussion, Matt Carlson moderated the panel that included Maureen Neilly, Peter Jenkins, and Glenn Gardner. Bringing decades of wisdom and experience, the panellists shared their expectations through to 2024 with a particular focus on inventory, demand, and economic influences.

The Panelists

Maureen Neilly, the Director of Commercial Leasing with QuadReal Property Group, is responsible for both office and industrial space and has completed over 600,000 square feet of new deals and renewals.

 

Peter Jenkins, the Director of Leasing at Great West Life, is responsible for all leasing and marketing initiatives of a 2.5 million square foot office portfolio including the pre-leasing of Vancouver Centre II.

 

Glenn Gardner, a Principal of Avison Young, has developed long-term corporate relationships and in doing so has successfully completed over five million square feet of leasing.

Backfilling Office Space

Companies like B2Gold, DLA Piper, and PI Financial are quickly moving into new office space, leaving their current spaces vacant. The panellists weighed in on whom they expect will backfill these spaces, and just how quickly. Jenkins felt there will be a good list of groups. He pointed out that spaces coming up soon will likely have quicker lease-up because of the existing demand on the market. Gardner, who pointed out the likelihood of growth from existing tenants, was quick to illustrate the beneficial state of the properties being left behind. “The spaces that they’re getting back aren’t terrible spaces, they’re pretty nicely improved. Someone could potentially go in there without having to spend a tremendous amount of money.” Neilly agreed with the strong sense of demand suggesting that prospective tenants might be those looking to rightsize, or tech firms looking to expand or relocate from either the US or elsewhere in Canada.

Remaining Competitive with Rising Rates

With increasing demand and limited space, new buildings have continually increased their rates to match the market, yet, in some cases, still haven’t found tenants. Rather than decreasing rates, the panellists shared creative strategies for attracting tenants. Jenkins spoke to the need for “future-proofing” assets which he feels “grabs people’s attention”. The panellists listed off desired amenities including nap pods, dog pods, yoga studios, fitness centres and rooftop decks. Instead of impressing the employer, “...the employer is looking to impress their employees”, according to Gardner. QuadReal, Neilly suggested, is “upping our game…” as it relates to tenant amenities. She spoke of an onsite refrigeration space allowing employees to have their household groceries delivered to work, lessening the need for post-work grocery shopping trips.

Forecasting Lease Rates

Looking towards 2023 and 2024 the panellists provided an ‘it depends’ answer when asked to forecast lease rates. Considering larger tenants, Gardner felt the introduction of one more Amazon and a few more Shopify-type-tenants could leave rates the same or cause them to climb. Sadly though, he illustrated the lack of sustainability for smaller firms. “An increase for a small firm,” Gardner said, “could be the difference between hiring two or three people.” Suggesting industry shock with the historical 40-dollar rent at Telus Gardens, now, according to Jenkins, “... you’re hearing rumours of rents with a seven in the front”. Though rent is heading in the direction of big cities like San Francisco and New York, Gardner isn’t so sure our market has the necessary depth (or diversity in our inventory) to reach those numbers. 

Tags:  2020Trends  ExpertPanel  OfficeMarket 

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The Global Economic Downdraft and B.C.’s Prospects

Posted By Kelley Olinger, Monday, January 27, 2020

At a recent breakfast meeting, NAIOP members received an economic update from Bryan Yu, Central 1 Credit Union’s, Deputy Chief Economist. Yu offered a host of statistics reflecting the macro and microeconomic conditions impacting global, provincial and regional growth. In addition to outlining overall economic drag, Yu shared his thoughts on an impending recession while also speaking to some strong economic sectors.

The Global Economy

Stemming largely from the approximately 300-billion dollars imposed on Chinese goods, there is, according to Yu, an overall drag in economic growth. In what’s been described as The U.S.-China Trade War, the tariffs, applied to goods exported from China, ultimately increase the cost for producers, importers, and then ultimately, the consumer. Describing goods and services as synchronous, this drag, described by Yu, is seen not just in goods, but in services too. Though growth is sluggish, the International Monetary Fund (or IMF) suggests global growth will rise from 2.9% in 2019, to 3.3% in 2020.

With a slower growth profile, Yu is often asked his thoughts on an impending U.S. recession. Describing the country’s momentum as slow, Yu doesn’t see evidence of a recession at this time.

The Provincial Economy

Forestry and Mining
Yu spoke of weakness in sectors like forestry and mining. Though rural, Yu suggested, it’s important to note the tight linkage these industries have to the professional services (in places like Vancouver) that support them. With a decline in overall exports, he went on to note a 30% decline in forestry product dollar volume year to date. The forestry revenue decline is multi-faceted resulting from situational factors like declining prices, sawmill production diving, and the long-term impacts of the mountain pine beetle epidemic. The Ministry of Forests, Lands, Natural Resource Operations and Rural Development share that more than 4,000 jobs were lost just this year, with five mills closed and many communities left devastated.

Retail
Moving to industries like retail, Yu noted weakness in brick and mortar - only 0.5% growth compared to 9-10% growth in previous years. That being said, Canadian online sales (which have grown 30% year over year) have the potential to further mask the weakness in brick and mortar. Though many weaknesses were illustrated in the provincial economy, Yu shared the strength reflected in B.C.’s tourism, population growth, non-residential construction, and offered positive insights from the labour market.

Labour
With a strong labour market, among the lowest unemployment rates in the country (roughly 4%), and the highest jobs vacancy rate (4%), Yu says that if a person needs a job, there’s a good chance they’ll find it in B.C. Wages are increasing, due to a significant shortage of skilled labour. Though many factors point to B.C.’s slowdown, Yu feels wages (what people are earning) and social contribution (what people are paying) are a good “bellwether” signalling strength in consumer demand, leaving B.C. with one of the strongest growth profiles in the country.

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The Ever Changing World of Technology in the Workplace

Posted By Kelley Olinger, Thursday, December 5, 2019

Outlining the acceleration and disruption of technology, Sunny Ghataurah, President of AES Engineering, offered a compelling presentation at NAIOP’s October breakfast meeting. With the belief that “If you don’t understand technology, you will be replaced by it,'' Ghataurah shared impressive tech-related advancements in a variety of industries. Below is a brief recap of the key messages from Ghataurah’s presentation including the speed of growth in tech, industry-specific tech advancements, and the tech advancements specific to building and infrastructure.

The Pace of Tech

Technology, previously thought to double every two years (a feature known as Moore’s Law), is as it exists today considered to be the 4th industrial revolution. Using timely examples, while explaining the differences between linear and exponential growth, Ghataurah shared that the current tech growth estimates say the industry doubles every six months, and, in some cases, doubling in only a matter of weeks. Where linear growth is predictable, exponential growth seems predictable, but then, without notice, industries are radically revolutionized overnight. 

As an example, Ghataurah shared how Uber previously known for upsetting the ground transportation industry, is quickly (and perhaps unpredictably) going head-to-head with companies like GM in the driverless car space. Additionally, Uber announced in early January its plan to provide an on-demand aerial taxi service known as Uber Air. Now, Uber is racing head-to-head with Boeing in an effort to launch the first-ever flying cars.

Incredible Advancements 
Touching on only a few of the endless revolutionary developments, Ghataurah explained how tech is impacting industries like health care, agriculture, and retail. Healthcare, as an example, is just beginning to see the emergence of nanotechnology, a process that uses nanoparticles to deliver, detect and treat specific cells. Agriculture, as another example, is quickly embracing vertical growth, providing opportunities in challenging climates, and requiring (in some cases) only one-tenth of the space previously necessary. In retail, Amazon is beginning to toy with anticipatory shipping, where they’ll ship an item anticipating, in advance, you’re likely to purchase it. 
 
Technology for Building and Infrastructure
Allowing builders to see their projects before they exist, or offering the ability to document every step of the construction process are only some of the ways new software platforms aim to increase efficiency while providing real-time problem-solving opportunities.  HoloBuilder, a technology and software platform, aims to document construction site progress. Working to reduce photo documentation time, eliminate the need for regular site visits, and ultimately reducing labour costs, Holobuilder provides 360-degree photo capture covering every phase of a project’s life cycle. Microsoft’s HoloLens, on the other hand, places holographic images in a user’s physical environment. The software provides construction teams and architects with the chance to explore design flaws before they exist in real life.

The Bottom Line
Though Ghataurah acknowledges likely job loss, he also sees an inverse correlation between labour hours and required manpower. Where, historically, fewer people were required to complete a task with more time, now, (and moving forward) more people will be required but for less time. Moving forward, Ghataurah feels, “it’s crucial to understand what work is changing and what jobs are changing.”
 

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Real Estate Investment Market Update

Posted By Kelley Olinger, Friday, November 15, 2019

Gleaning insight into the trends and future of commercial real estate investment, NAIOP welcomed an expert panel to its September breakfast meeting. Moderated by Tony Quattrin of CBRE, Greg Spafford, Andrew Tong, and Darren Wong brought decades of wisdom and experience to the discussion. Here, they discuss their approach moving forward, the future of REITS, and their outlook on office space.

The Panelists

Greg Spafford is the Managing Director and Senior Portfolio Manager for Manulife Canadian Real Estate Funds responsible for strategy, acquisitions, execution and overall portfolio management.

Andrew Tong is the Senior Vice President of Investments for Concert Properties and is responsible for leading the strategic planning and key operational activities of Concert’s income portfolio across Canada.

Darren Wong is the Director of Investments with Peterson Investments and is responsible for their real estate investment strategy and acquisition process, including income property and development land.

Using Past Investment Success to Predict the Future

Whether bullish or bearish when it comes to commercial real estate investing, each panellist spoke to their experience, providing a measure of assured success. Spafford, acknowledging the challenge that is real estate investing, wouldn’t consider himself ‘bullish’ per se, but recognized that real estate that’s “well-managed” will provide good steady returns. Tong, quick to say he’s ‘bullish’ on the ”right” real estate, shared, “We exist to know the difference between what will make money and what won’t. So, yes, we are bullish, but on the right real estate.” And, Wong, who operates in private equity isn’t bullish when it comes to Vancouver, but is bullish when it comes to the right product. “To be competitive, we might look for deals that are a bit more complicated or have bit more hair on them, or we’ll look for off-market opportunities like Toronto, Dallas, LA, Chicago, Denver.”

The Future of the REIT

Offering a potentially ominous sign for the future of REITs, Tony Quattrin, asked the panel their thoughts on headlines like the sale of Michael Coopers Global REIT. Seeing an opportunity for private equity, Wong views selling opportunities as potential buying opportunities, noting, “...as they sell off some of their real estate, private equity can move in.” Tong, acknowledging the cyclical nature of REITs and their 25-year longevity, shared, “I don’t see them disappearing, but they may consolidate and internalize.” Since REITs are more like equities, their nature is equally volatile, according to Spafford, “REITs will be back...they’ll get stability again.”

With Vacancy Rates Less Than 3%, Is Office A Good Choice?

Sharing the consensus that not all office space is necessarily good office space, Tong shared the strength of “patient capital,” and waiting for opportunities. “If the building is changing or the area is changing, for us, that’s winner,'' he said. Wong, considering opportunities outside of Vancouver, is buying in Toronto and Orange County, where Spafford evaluates the ways he can compete with new buildings. “We consider how to compete with new buildings that are coming up, and one way to do that is by looking for historic character - places that can be edgy co-working space. We like office, but we do need to have that angle to make money.”

Tags:  REIT 

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May Breakfast Meeting with Vaughn Palmer (2019-06-20)

Posted By Kelley Olinger, Thursday, November 14, 2019

With his eyes and ears tied to the dynamics of Canadian politics, award-winning Vancouver Sun political journalist, Vaughn Palmer, spoke at a recent NAIOP breakfast meeting. Spanning ten Premiers over 35 years, Vaughn has covered extensive issues impacting BC politics. On some top-of-mind topics, Vaughn shared his perspective and insight on the recent gasoline inquiry, The Non-Financial Severance Arrangement, BC’s credit status, and another reminder that every vote counts.

The Gasoline Inquiry

With rising gas prices, the BC Utilities Commission launched a public inquiry into gas prices. Through this inquiry, the Utilities Commission is allowed to call the executives of the gas companies and ask them to explain ‘gouging,’ a term noted within the terms of reference. Vaughn pointed out that the Utilities Commission is paradoxically not allowed to look at any decision made by the provincial government, or any policy (provincial), or any tax or regulation (provincial) that might contribute to gasoline prices. Calling the inquiry a “farce,” he also noted the expected timing of the report, August 30th and said, “By the time we get the answers from this inquiry, it’ll be beside the point, and, maybe that’s the point of the entire inquiry.”

The Non-Financial Severance Arrangement

Following allegations of misconduct by the Clerk of the Legislature and the Sergeant at Arms, Beverly McLachlin (the retired Chief Justice of Canada), found the Clerk guilty on four of eight counts. Upon presentation of the findings, she further announced the Clerk’s retirement - effective that very day. Vaughn shared the ironic details of the non-financial arrangement reached that day. The Clerk received six-months pay for the six months he was on suspension. He’d keep $5,000 worth of luggage he acquired at the taxpayers’ expense. And, resulting from a retirement scheme terminated some 25 years earlier, he’d keep $259,000 from a retirement allowance program paid out in 2012 even though he hadn’t retired.

BC’s Credit Rating

BC’s current credit rating, according to Vaughn, is AAA, a measure determined by comparing BC’s financial position to other jurisdictions. So while the government enjoys a strong credit rating and a balanced budget, the surplus inherited from the previous government is rapidly shrinking. Currently at two-to-three hundred million dollars according to Vaughn, he reminds us that there’s still plenty of promises which have yet to be paid for. Over two to three years, $1.8 billion will pay for three years of raises for public sector workers - a figure which doesn’t account for any new workers. Vaughn feels the Community Benefit Agreements, which force hiring from a hiring hall, will increase labour costs, further pressuring the budget. Also, there’s work to be completed on a 2 KM stretch of the Trans Canada Highway near Revelstoke - something projected to cost $85 million (a 35% increase from its original estimate). In this case, the federal government elected to cap their contribution, leaving the entire 22 million dollar overrun on the shoulders of British Columbians. The best way to cope according to Vaughn is to scale down the number of projects, or increase debt.

Every Vote Counts

Referring back to May 24th, 2017, Vaughn detailed the single vote in Courtenay/Comox which resulted in the NDP’s not only winning an additional seat but costing the Liberals their majority. Vaughn reminisced about a similar 1979 election outcome in the riding of Atlin. The vote, decided by one vote on a recount, was increasingly significant when the losing candidate and his wife admitted they neglected to vote themselves. Vaughn used these examples as a reminder that BC elections are often close - every vote does count.

Summary

Vaughn feels these are uncertain times in the world for any incumbent government - especially those in Canada. Following the credit crisis in 2008, most governments that faced an election were returned with a majority. The significance, according to Vaughn, is that in times of heightened insecurity, there’s an unwillingness to take a risk on something new. Since 2015 though, the opposite has happened. Of the ten governments sent to the polls, only two have emerged with a majority. Vaughn says, “Trudeau is right to be worried. He should be.”

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Retail Market Update (2019-06-06)

Posted By Kelley Olinger, Thursday, November 14, 2019

Retail is in a constant state of hyper-evolution. Facing economic and market-based headwinds like rising rent and online shopping, retailers have become increasingly creative and adaptable. Working closely with marketing teams, research teams, landlords, and leasing agents, retailers seek to improve the consumer experience while increasing revenue in an ever shifting marketplace.

During a recent NAIOP breakfast meeting facilitated by Mike Hodge of Avison Young, three experts, Stephen Knight, CEO and Managing Partner of Sitings; Emilie Lok, Leasing Manager for Westbank; and Derick Fluker, co-founder of Form, explored trends in the retail market while forecasting what lies ahead in 2019.

The Reality of Retail

Retail, like so many industries, is in a perpetual state of ebb and flow. Certain segments of the market become weak while others prove stronger. As storefronts are consistently opening and closing (something that’s historically never changed), Fluker noted how street-front retailers, who used to struggle in years past, are strong with larger power centres in weaker positions.

Retailers are highly aware of their need to adapt and evolve along with the shifting consumer experience.  Artizia, as Lok pointed out, are looking to have fewer stores, instead having more flagship stores - some with cafes inside. She highlighted that brands are looking to become experiential rather than transactional.  “Large anchor tenants,'' she said, “are finding small format concepts so they can have more variety while paying less rent.”

While it’s easy to think retailers parallel their American counterparts, Knight made clear that players like big box retailers do better in Canada.  “We have less competition,'' he said. “If you’re in the office products category in the states, you’ve got two or three competitors. Here, it’s down to staples and a few smaller players. We don’t face the same pressures as the Americans.”

Working with the Unknown of ‘What Lies Ahead’

Since no one, even the best, can predict what’s to come in an exponentially evolving retail market, how does one set themselves up for success?

In regards to trends to follow, it’s helpful to look to countries ahead of us, like Asia, and model those trends, according to Lok. She feels that being adaptable and flexible with one’s vision becomes crucial to succeeding in the current market. In Lok’s experience, doing your best to future proof plans will help, but some decisions are left to instinct. Sometimes you have to “follow your gut,” she said.

Balancing Loyalty and Business

Landlords and sellers have a tough balancing act. While leasing available space allows landlords control over the tenants in mixed use developments - protecting the interests of residents and fellow businesses, sadly, is not always the most lucrative choice.  More and more often, commercial spaces are being sold, rather than leased by developer and landlords.

Fluker points to the wide gap between strata values and lease rates, who he feels have little correlation to one another. Because strata values are more lucrative, Fluker shared that 25 to 45% of developers are selling their strata lots. Knight echoed this sentiment by saying that developers have the need to maximize their return.

The Bottom Line

While the retail space is forever evolving, it still remains strong. Similar to other markets, certain segments of retail strengthen while others lose steam - something unlikely to change. Landlords, developers and leasing agents are best armed by being ‘up’ on trends, diligently forecasting what lies ahead, and working to become increasingly adaptable.  

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Technology’s Impact on the Vancouver Real Estate Market (2018-11-23)

Posted By Administration, Thursday, November 14, 2019

Technology in Vancouver has continued to rule the headlines over the past few years. As 5% of our workforce, there are more people in tech roles than in oil, forestry, gas and mining combined. And it’s easy to see why. Not only is this industry future-proof, but it also garners 85% higher wages than the average B.C. salary.

Despite a lucrative and promising future, technology roles continue to be hard to fill. British Columbia in particular faces a job shortfall. By 2021, it’s predicted that 50,000 jobs in this sector will need to be filled. Of this number, only 17,000 are expected to be employed, leaving a 30% shortfall between supply and demand.

Vancouver real estate is predicated on tech companies continuing to thrive, grow and succeed.  

Downtown is increasingly defined by the technology sector, with 2.8 million square feet under construction. Out of the 1.1million square feet of leasing today, 700,000 square feet are made up of tech companies, as well as 64% of all pre-leasing.

With such a high stake in the market, a shortage of skilled talent to continue tech growth is a cause for concern amongst the industry. When there’s no talent, companies will close office and move elsewhere.

“It’s harder for tech companies to get employees, especially as housing and rents have escalated in Vancouver,” said Kevin Nelson, Senior Vice President at CBRE. “Every year the CBRE conducts a survey that compares the top 50 cities across North America. Vancouver was 50th on the list in 2015. Now we’re number 25: a 50% jump in just three years.” 

As a city that’s renowned for limited if not non-existent supply, companies have to think outside the box in order to find office space. This is part of the reason why coworking is blowing up, in particular for startups and small tech companies.

“You’d be hard pressed to find a tech company that can think five years in advance,” said Nelson. “It’s either two things: they’ve exploded in a great way and they have to move on, or things have gone in the other direction and we have to bail them out. No one ever fulfills full leasing terms in the tech industry.”

The Talent Equation: How Can Vancouver Increase Skilled Professionals?

Vancouver is only producing 25% of STEM grads in Canada, so we asked the experts what needs to be done in order to get more people in these fields.

Dario Meli, Founder and CEO of Quietly

“To help aid the problem, we need to fund universities and have those programs really developed so that they can produce a lot more engineering talent, which is the number one deficit that we see. As far as importing talent, our immigration laws are helpful compared to down south, but we also need to get more aggressive to retain people that would normally be heading to the U.S.”

Kevin Nelson, CBRE

“Talent shortage is a real challenge. There are several things we need to do, there isn’t just one answer. One is that we need to work with students earlier on. It’s the ages of 5 to 8 years old when kids start to become influenced in technology. Kindergarten to grade 12 curriculum is critical. Already we’re seeing our educational system do this.

We also need to consider mid-career and life long learning; key skill sets that are going to propel the workforce. There’s also tax reform and immigration reform; these are all key things that will help fill the gap.”

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Four Life Lessons with Doug Pearce (2018-11-05)

Posted By Administration, Thursday, November 14, 2019

For many, Doug Pearce needs no introduction. As the founding CEO and CIO of the British Columbia Investment Management Corporation (now QuadReal), Doug has built a 38-year career many can only dream of.

Taking a portfolio from zero to $18 billion in real estate assets, the icon shared with us some of his best achievements, lessons, and advice at a recent NAIOP event. Here are four tips from one of Canada’s most experienced and well respected investment professionals.

You Need a Long Term Perspective

In the 1980’s, Pearce shared how interest rates reached an all-time high of 18.5 percent. It was a period of doom and gloom, to say the least.

“I’ve learned that nothing is guaranteed. Despite sky-high rates, the markets began to change. During my career, interest rates were on the steady decline. This was a great tailwind that helped my career and certainly growing my fund.”

Pearce then shared how this same sentiment draws many parallels to today’s market.

“If you’re young and want to get into the market now, the prices are so high. You think you may not see a day when prices are much more reasonable. Back then it was hard to fathom that rates would be as low as they are today, but things will always change.”

Invest Wisely

Pearce shared that when you’re looking at a portfolio of assets, liquidity is a factor to always consider.

“What asset would I really want to own for the long term and has characteristics that meet my pension liabilities? It would be real estate. Bonds and public equity give you liquidity and it’s very tough for active managers to outperform the marketplace. That wasn’t such a great match to our liabilities. Real estate is the last asset you never get rid of.”

Raise Your Profile

“One of the largest cheques I ever wrote was when we bought the CIBC portfolio for $860 million. For an organization that had not written a ticket for more than $150 million before, this was a big step up.”

Another acquisition Pearce is proud of is the South Core Financial area in Toronto. They purchased the land from Fairmont Hotels, developing three buildings that cost over $1 billion.

“And that was a lot of fun. We were dealing with the city and every issue that came up through the development. That process was excellent.”

Know Your Limits

“I would’ve done the QuadReal model sooner, but it took an awful lot of effort. I ran out of energy to do it. BCI’s decision to form Quadreal was a great one. It really does help when departments are all under one roof and one identity. It’s your best chance to get the culture right.”

Don’t Buy In To Trends

Pearce shares that if you don't understand what you're getting in to, don't get into it.

“A great example is the subprime mortgage crisis in 2008. Everyone was doing it, but thankfully we didn’t believe the hype. Being based in Victoria, we were far enough away that we could assess what’s safe to invest in. Take your time and don’t feel pressured just because everyone else is doing something.”

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Is Food The New Fashion? Restaurants As New Retail Anchor (2018-06-25)

Posted By Administration, Thursday, November 14, 2019

Vancouver has garnered one of the strongest food cultures in the country. We’re lucky to have access to authentic and mouth-watering cuisines from just about every corner of the globe. From sushi to curry, you’ll never run out of options or new menus to explore.

Food has always been a social occasion. Whether it’s happy hour or brunch, cafes and eateries are typically packed with residents any day of the week. Residents of Metro Vancouver definitely love their restaurants, and commercial developers are taking notice.

“Our tenant roster is now 40 per cent restaurants,” said Stephen Knight, CEO and Managing Partner at Sitings Realty. “They’re becoming an important part. Regional shopping centres are now courting restaurants, and you’re going to see more and more as time goes on.”  

According to a Statistics Canada Survey of Household Spending, in 2016 the average household spent $390 more that year dining out than they did in 2011. This growth has been felt by some of the city’s biggest restaurant brands, including Glowbal Group.

“There is growth in Vancouver. Tourism is moving up, especially with the Canadian dollar so low,” said Emad Yacoub, CEO/President & Proprietor, Glowbal Restaurant Group. “However, as the growth goes up, all of our prices go up -- leasing, cost of products. It’s a game we have to play. It’s very important how we present our product to people when they have so many choices.”

One of the ways that restaurateurs are trying to drive sales is by looking at data, specifically cell phone technology.

“There are different aspects to consider when looking at enclosed malls versus street presence,” said Sharilyn Mason, Director, Capital Assets, Earls Kitchen + Bar. “We’re tapping into cell phone technology to learn how people move in communities. It’s actually become more of a collaboration, only the landlords are tracking the amount of people going through the doors while retailers are tracking the conversion rate.”

Yet as more and more people are increasing the amount they spend eating out, restaurants are still facing a number of challenges.

“A few years ago, I was paying $12/hour for dishwashing. Now I pay $17. My managers were making $40,000 per year, now they’re making $75,000,” said Yacoub. “I used to spend $9/pound on lobster, last month was $19. Like it or not, pricing has to match international pricing. There’s no choice but to increase our prices. We’re watching a growth in sales, and our bottom line goes down because the costs of goods are up: rent, product, materials -- everything is going up.”

Mason also shared that they feel the same pressure at Earls, however are reluctant to increase prices because they’re at the premium casual level and are cautious that it may drive patrons away. However, Yacoub argues this thought process.

“If I’m in Toronto, I’m going to pay $75 for a striploin steak, but in Vancouver, we’re charging $54. Pricing has to go up to match that.”

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The Retail Outlook in Metro Vancouver (2018-07-07)

Posted By Administration, Thursday, November 14, 2019

No market has been tested quite like retail. With a shift to online shopping, the influence of social media, and the increase of consumer expectations, many haven’t been able to weather the storm. Sears, Mexx, and Jacob, who were once prominent Canadian players in the market, have permanently shut their doors.

The Current Market

According to Anthio Yuen, Senior Manager of Research Services and Strategy at GWL Realty Advisors, Vancouver has led the way in overall growth, with 10% in 2017 and 5% in the first quarter of this year.

“The growth in retail is reflective of economic growth, housing, and consumer confidence,” said Yuen. “It all bodes well for the retail market in Metro Vancouver.”

However, Canadians are opting to spend their money in different categories, most notably groceries, dining, and event and travel. These sections saw an overall increase, ranging from $371 to $603 per month per household. 

The bottom three categories where we’re spending the least is in personal electronics, reading and print, and home electronics. Yet despite this dip, online retail is still a small portion of how we consume, making up just 4% to 7%. Canadians are primarily driven to in-store experiences.

“The Canadian retail market is young and immature. It’s only in the last couple years that grocery stores have started to add an online shopping platform. This is much different than the U.S. and U.K., who are global leaders in this area. They’re seeing 10% to 20% in overall online sales.”

What’s Driving Retail?

With most traditional retailers feeling the pressure brought on by shifting consumer patterns, there are a few outside factors that are driving Vancouver’s healthy market. According to Yuen, this is due to international tourism. With the Canadian dollar lower, we’re having an influx of American and Asian visitors.

“International retailers are choosing to open in Vancouver over Toronto and Montreal because of the high range of Asian tourists to the city,” said Yuen.

The Omni-Channel Difference

Yuen notes that the brands that survived and thrived are those that have embraced Omni-Channel Retailing. This is when the customer has an integrated experience that seamlessly connects online with in-store, and puts the power in the hands of consumer.

“Omni-channels allow for connection points at all areas of a consumer’s life. For example, I was watching a YouTube video on how to do lawn work by Home Depot. After it played, I was then shown links to purchase the products that were used in the video.”

So What’s Next?

Yuen predicts that retail destinations will be driven by food and community experience. In addition, there will be a bifurcation between luxury retail and needs of life retail. The first offering strong experiences both on social media, mobile, online and in-store. The latter, such as Costco and dollar stores, will continue to benefit from demand for value and convenience products. Those that are caught in the middle of this bi-furcation—notably mid-market retailers with limited experience or value benefits—will face challenges ahead.

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