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NAIOP Vancouver Commercial Real Estate Awards of Excellence (2018-04-06)

Posted By Administration, Thursday, November 14, 2019

It’s that time of year! The bi-annual Commercial Real Estate Awards are set for May 17th at The Fairmont Waterfront, and we couldn’t be more excited to recognize those who have excelled in the industry during 2017.

For those of you who are unfamiliar with this event, the NAIOP Vancouver and Business in Vancouver Commercial Real Estate Awards of Excellence celebrates quality and performance, innovation and creativity, teamwork and collaboration, as well as community and environmental awareness.

From Best Industrial Development to Best Investment Transaction, we’ll be presenting on a diverse range of industry achievements.

In 2016 we had an impressive line-up of winners. In case you missed it, here are three developments that took home the top award:

Best Mixed-Use Development: Marine Gateway by PCI

Located on the Canada Line, Marine Gateway combines 820,000 square feet of residential condominiums, rental housing, an office building, retail, and public space. This new neighbourhood centre provides convenient and walkable retail, services, and amenities to the local community and transit users.

Best Retail Development: McArthurGlen

A unique shopping oasis near the YVR airport, McArthurGlen has more than 70 retailers that range from affordable fashion to luxury brands. This includes designers like Coach, Hugo Boss, and Polo Ralph Lauren, to Nike, Gap, and Sketchers. Accessible by the SkyTrain, it’s become a popular destination for outlet shopping amongst locals and tourists. In fact, it’s set to expand another 240,000 square feet, adding 35 new retailers by 2019.

Best Office Development: MNP Tower by Oxford and CPPIB

The 35-storey MNP Tower is a striking glass office tower in Vancouver's Coal Harbour district. The mission of the project was to create a landmark, sustainable 'AAA' boutique office building that capitalized on its central location, spectacular mountain and water views, and sensitive contextual relationship to the Marine Building, which is considered one of Vancouver's most significant heritage buildings.

Most notably, it was the first WELL Certified project in Western Canada, achieving a high degree of energy efficiency and sustainability, with virtually zero greenhouse gas emissions and a LEED Gold Core and Shell designation.

With such an impressive list of winners, we can’t wait to unveil who will take home this year’s top honours! To see a full list of award categories and nominees, visit our website for full details.

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West Vancouver: A Population Declining (2018-03-27)

Posted By Administration, Thursday, November 14, 2019

While cities like Langley, Coquitlam, and Squamish have seen up to 25% in population growth since 2011, there’s one municipality that is experiencing the complete opposite: West Vancouver.

As the fastest shrinking city in the Lower Mainland, West Van has garnered recent media attention for its steady decline in population. There’s been a variety of issues that are being blamed: foreign buyers, soaring house prices, and an aging population that won't move out to name a few. But is there a more underlying factor? According to Ryan Berlin, Senior Economist at Rennie, there is.  

“In certain pockets, factors like foreign ownership and affordability could be to blame. But to me, it’s a lot simpler. The diversity of housing keeps people within a market. So if you don’t build it, they won’t come,” said Berlin.

Data has shown there is a 90% correlation between the addition of homes and the addition of people. For cities that are slow to develop their residential and city centres, we are seeing a hollowing out of communities that aren’t changing. Without building the dwellings, they won’t yield the population.

West Vancouver Mayor Michael Smith told The North Shore News, “The numbers are troubling and a sign that West Van needs to change its attitude towards new development.”

He went on to share he has major concerns about losing young families and the ability to hire young employees at the district and school districts. In fact, the last policeman he swore in lives in Chilliwack, citing this as “a real problem”.

In the past 40 years, the West Vancouver council has only approved one all-rental project. Most of this stems from the attitude of preserving their current communities, making them resistant to change and development.

For the projects that do get approved, the majority of units do not cater to all demographics and incomes, particularly millennials or young families. This makes it impossible for policeman, firefighters, teachers, and nurses to live and work in West Van -- jobs that are vital for the area.

As Mayor Smith noted, without housing, employment will become a huge concern for small businesses in that area. Do you think there will be a change in the rate of development over the next five years to reverse this issue? Let us know your thoughts by tweeting @naiopvancouver.

Also, we’re now on Instagram! Follow us for behind-the-scenes updates.

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Myth Busting: Millennials and Vancouver Real Estate (2018-03-20)

Posted By Administration, Thursday, November 14, 2019

We’ve all heard that millennials are being priced out of the city. Just compare the average income to the average cost of a home. Whether it be a condo, townhouse, or detached dwelling, there is significant imbalance.

An article in The Vancouver Sun in the fall of 2017 reported that the median total income for households in Metro Vancouver was $65,241, while the average price of a home is $1.4 million. It’s no wonder why many are claiming that millennials have it much worse than previous generations.

Given current headlines, it’s understandable to think that there are less and less millennials living in city because they are being priced out. But just how accurate is this claim?

Before we jump to conclusions, let’s take a look at what the trends and patterns are for millennials, their housing choice, and their mobility patterns.

What are millennials?

The general consensus is that millennials are those who were born between 1981 to 2000, and are approximately 18 to 37 years old. Given the recent data, there are actually more millennials today in the City of Vancouver than we had five years ago, at 218,250 people.

This is despite the fact that housing prices increased significantly between 2011 and 2015.

“It’s difficult to reconcile this notion that we can't keep millennials in this city, when this is the biggest number we’ve seen to date,” said Ryan Berlin, Senior Economist at Rennie.

So then why are people leaving?

Today, the average age women are having children is in their early thirties. As the majority of millennials live in condo dwellings, once their family starts to grow, they want more space that’s closer to the ground to raise their family. This explains why the age of mobility out of the City is around 35 years old. 

“Housing stock is the reason people leave, not price,” said Berlin. “This is the main driver of why millennials are leaving for the suburbs.”

Berlin also noted in his presentation that while the City may not provide the diversity of housing necessary to equally accommodate residents at all stages of life, the regional housing market does a pretty good job.

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Busting the Baby Boomer Myths with Economist Ryan Berlin (2018-03-12)

Posted By Administration, Thursday, November 14, 2019

There is a common held perception that Canada’s housing market is by many ways being driven by outside forces, most notably, foreign investment. However, CMHC has recently released a comprehensive assessment of the true drivers of real estate prices nationwide, and it comes down to a grab bag of factors.

While it included better known causes like economic fundamentals, rising disposable incomes, and favourable ending conditions, it also revealed one major driver: demographics.

“Demographics serve as the foundation of a number of issues. This includes the housing market, goods and services, decision making around spaces and places, and anything about our communities that makes them tick,” said Ryan Berlin, Senior Economist at Rennie and keynote speaker at our February Breakfast Event.

We often dichotomize age groups by associating shared values, traits, and behaviours. But Berlin was quick to point out that our preconceived notions are often quite different than reality, especially when it comes to Baby Boomers.

Baby Boomers and Vancouver Real Estate

“Boomers are often viewed as the pig and the python. There were more babies in this 20 year period than we’d ever seen before. So we needed to build homes, build schools, and create jobs once they graduated. Now they’re looking to retire and take on new hobbies,” said Berlin.

In 1966, David Foot published Boom, Bust & Echo, which became a national phenomenon. Foot predicted that the downturn in Canada’s market would continue from the nineties into the 2000’s, because successive generations to the Boomers wouldn’t be high enough. Foot believed there would eventually be too much housing available, causing rates to stay on a steady decline.

Obviously, Foot’s prediction was incorrect, as we’ve seen robust growth in both demand and prices. Affordability has become an on-going debate and a growing concern for Metro Vancouver.

So where are we today? Berlin shares 3 common myths about this generation.

Myth #1: Although Boomers have a lot of klout when it comes to wealth, income and spending, their numbers are shrinking. Millennials have come to prominence. There are currently 692,000 Boomers in the Lower Mainland compared to 860,673 Millennials.

Myth #2: Boomers are retiring earlier and staying in their homes longer. Downsizing is not as prevalent in this generation as expected.

Myth #3: People retire earlier than we think they do. The average age is now 54, not 65. This has very significant implications for our workforce and individual businesses looking at succession planning. It also means they have to bring in people who can somehow pick up the slack left by someone who had 40 years under their belt.

It’s obvious that we have an anecdotal understanding of the role played by Boomers in our society, but most of these notions as Berlin explains are not supported by data or empirical evidence.

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Vancouver Industrial Real Estate: Will Tenants Leave? (2018-02-19)

Posted By Administration, Thursday, November 14, 2019

If you’re looking for industrial real estate properties, it won’t take long until you realize that supply is not only limited, but also extremely competitive and expensive. So what’s preventing businesses from moving to our much more abundant and affordable neighbour, Alberta?

From housing to supply, the Metro Vancouver market can’t compete with their land and lease rates. Calgary and Edmonton have the square footage and price tags that tenants are looking for, especially for those who need custom spaces with room to grow.

So what’s keeping them here?

“The move doesn’t make up for losing staff,” said Jason Kiselbach, Vice President, Personal Real Estate Corporation for CBRE Limited. “I can’t name one tenant who has moved to Alberta just because of affordability and space.”

Kiselbach notes that Vancouver’s market conditions here are simply too good to leave. This includes our city’s growing population, which increases by 100 people per day. In addition, consumer spending has been growing at record rates, and B.C. has led the country in GDP growth.

“Staffing is the hardest challenge for our clients,” said Ryan Kerr, Principal of Industrial, Investment, Sales & Leasing at Avison Young. “They’re not going to pick up and move provinces if they have to start over again and hire from scratch.”

Despite the attractive conditions, it may not be enough to keep business around.

“If we can’t accommodate businesses, they’ll adapt and go somewhere else. This affects jobs,” said Robert Eyers, Director of Leasing at Wesgroup Properties. “This will affect our economy. If we can’t provide the facilities and space, companies will find somewhere and someone who can.”

One of the ways that tenants are trying to secure industrial real estate properties is by purchasing well in advance; a practice that was seldom seen in this market until recently. The requirement is to now look at least 12 to 18 months for pending vacancies before you need to move.  

Others are doing deals with much longer lead way.

“We’re doing deals two years in advance. Companies are learning they have to get in early, and hope that their company doesn’t grow or decline substantially,” said Eyers.

So are we in a land crisis?

“I disagree massively with this statement,” said Eyers. “Compared to other cities like New York and Tokyo, there is a lot of room for growth. There are far denser cities that are doing much better than we are at balancing demand with supply.”

According to the experts, there are budding areas throughout Metro Vancouver that are seeing more investment than others. This includes South Vancouver, North Burnaby, and Campbell Heights in Surrey.

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The Top 5 Driving Industrial Commercial Real Estate Rates Up in Metro Vancouver (2018-02-08)

Posted By Administration, Thursday, November 14, 2019

It’s taken twenty years for the industrial real estate market to reach the current record-breaking rates. And everyone in the industry seems to have different reasons as to why.

“There has been a profound change in the market,” said Jeff Juhala, Director of Investment at Concert Properties. “I’ve spent over 26 years in the business, and it’s not until recently that it’s been like The Wizard of Oz. Instead of yelling ‘Lions and tigers and bears!’, people are crying ‘Borders and mountains and oceans, oh my!’”

But why now? Why not 10 years ago?

Ryan Kerr, Principal of Industrial, Investment, Sales and Leasing at Avison Young, shared the top 5 culprits that he feels are driving the increase:

  1. The growth of the gross domestic product (GDP) in B.C., and how the province has been leading Canada's economy for the past two years.
  2. Population increases in Metro Vancouver.
  3. Appreciation of U.S. to Canadian Dollar. This has been particularly influential in the film industry. In 2015 and 2016, there have been massive spaces taken up by film groups with deals that last 10 years; quite different than the typical month-to-month terms. 
  4. Realisation of Gateway. In 2017, there were 7 deals over 200,000 feet and 10 deals over 100,000 square feet. From a historical context, these are massive deals for Metro Vancouver. There’s clearly a demand for large distribution centres in our market.
  5. Densification of industrial core. Increased rental rates are pushing tenants outwards to the suburbs.
  6. According to Blake Asselstine, Director of Leasing at Beedie, there’s a more underlining issue as to what’s driving rates up.

“You have to talk about scarcity of land in this category. There’s a big gap between old product and new product, but five years ago there wasn’t. Now land is going through the roof. As a developer, we’re paying millions for properties, so if we want to make money, we have to take $12-$13 per square foot. Having higher priced leases on these new properties allows us to push up rates on older ones.”

As rates have increased and land has become scarce, so too has the hype and sense of urgency for developers and businesses to get into the industrial market.

“In the last three years, absorption has increased two-and-a-half times the annual rate than the previous eight years,” said Jason Kiselbach, Vice President of Personal Real Estate Corporation at CBRE Limited. “We’ve also had record low vacancy, and as a byproduct, people have purchased land based on that they think rates will go up. So you have the perfect storm.”

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Industrial Real Estate Update: Here’s What Happened in 2017 (2018-01-30)

Posted By Administration, Thursday, November 14, 2019

There’s only one thing Vancouverites like to talk about more than the weather, and that’s real estate. Rarely has a day gone by over the past four years when a headline wasn’t dedicated to the current market. And while most focus on residential, there’s another sector that has been experiencing similar skyrocketing demands and sales figures: industrial real estate.

Currently at a nine year low, industrial property vacancies are sitting at 1.9%. Most notably there’s been a significant jump since 2015. In just under three years, absorption grew from $8.10 to $9.67.

Roy Pat from Colliers International shared with us a few major highlights that have shaped the current Metro Vancouver market in the past year:

1. Pre-Leasing (Well) in Advance

“From K-Bro Linens to Artizia, we’re seeing a growing trend of long lead times for businesses who need a lot of space in specialized facilities,” said Pat. “Most recently, a confidential tenant in Delta has leased 23 months in advance to secure the space they need. In today’s market, this is the only way to get what you need, at the time you want. You have to plan well in advance.”

2. Off Market Sales

The demand for industrial square footage is so high that properties don’t even hit the market before they’re snatched up. Last year, over $330 million in off market transactions were completed in Metro Vancouver. This includes the largest sale at 6845 Tilbury Road in Delta, which was purchased by the Dayhu Group of Companies for $47,925,000.

3. Port of Vancouver Acquisitions

According to a press release on their website, “The Vancouver Fraser Port Authority...has recently completed the purchase of three strategic industrial-zoned properties in Richmond and Port Coquitlam. The acquisitions were made to secure trade-enabling land to support future port growth, facilitate Canada’s trade and contribute to our local economy.” In total, they acquired $94,150,000 for 35.59 acres in Metro Vancouver.

4. East Vancouver Land Values

In 2016 and 2017, there were 13 property sales each year in East Van. However, there was one significant difference in 12 months: price per square foot.

“In 2016, the average price per buildable square foot was $122.30, and the average price per acre was $15,980,000. Last year, that changed from $158.46, and $20,707,000. What’s more telling is that the site size was on average smaller than 2016.”

So what does this mean for 2018? According to Pat, “we need to build more density” in order to keep Vancouver’s market thriving. And thanks to factors like the bridge tolls being removed from the Port Mann, the industrial market is thought to continue this upward trajectory throughout the Lower Mainland.

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3 Ways to Improve the Municipal Development Approval Process (2017-12-14)

Posted By Administration, Thursday, November 14, 2019

NAIOP Vancouver brings together a diverse group of commercial real estate professionals. Members of this experienced chapter have worked in different jurisdictions across Canada, and have seen how other municipalities approach the development approval process.

At a recent Breakfast Event, we asked Chuck We, VP of Leasing at Oxford Properties, and Geoff Heu, VP of Development in Western Canada at GWL Realty, to weigh on in new structures and systems they’ve been inspired by which would benefit the local market.

“Coming from Toronto, one of the things our development team says to me is, “Why can’t Vancouver have a Board of Variance?” said We.

A Board of Variance can look at what the developer is trying to achieve, and offer ways to improve minor variances to what’s already withstanding.

“In Toronto there’s a structure where we can go to the Board, articulate the issue, ask what we would need to change, and get input on how we can get things approved in a creative way. This saves a lot of time for everyone.”

We says another municipality he’s been inspired by is actually in our own backyard. In Surrey, The Economic Development Office Donna Jones invited several members of NAIOP Vancouver to brainstorm new ideas to grow the city’s economic development.

“One idea that came up was when [a developer] rezones a property, they risk their property taxes going up. They’re carrying that risk into their pro forma. So how can we minimize this when we’re looking for tenants?”

The group thought about introducing a formula where the developer pays old property taxes initially, then leases up to 50% of the site, and therefore cuts down the property taxes by 50% so they can attract more tenants.

“This system was enacted in Bridgeview, when Frito Lay got approved. This minimized controllable development risk, inspired developers to put more capital into the area, and now the city has the proof of concept and property tax revenue. So there are creative ways to speed up this process where everyone wins.”

When Geoff Heu was looking for development permits on the North Shore, it was clear to him where he wanted to build.

“The District and City of North Vancouver are very different in terms of their approval process. In the District of North Van, you have to apply for preliminary rezoning. Then normal rezoning. Then the DP process. We move over to the City of North Van, and they’ve combined rezoning and the DP process. So instead of feeling like you’re going through the ringer three times, it’s all done in one shot. From a risk point of view and moving things forward, so we saw that a really big difference.”

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Tips for Fast Forwarding City Permits and Approvals (2017-12-12)

Posted By Administration, Thursday, November 14, 2019

Time translates into money in the development business. For anyone who has dealt with applying for permits for a new site, then you know just how frustrating it can be. On average, it can take 14 to 18 months to receive word on whether you’ve got the green light.

During a stable market, developers have accepted this lengthy process. But what happens when the market’s not as stable, and each month that passes comes at a premium cost?

Graeme Silvera, VP of Retail Development at Ivanhoe Cambridge, asked current developers in Metro Vancouver to share strategies that they’ve used in past projects to reach deadlines and approvals successfully.

Collaboration is Key

“It comes down to dialogue,” said John Conciella, COO of Serracan Properties. “When we were proposing to do a mixed use project in 2009 at 13th & Lonsdale, we knew there would be challenges.”

“This was a unique project at the time, as we were building 45% of the building for commercial use, and the balance residential. The City of North Vancouver was implementing [Community Amenity Contributions] but didn’t have any real policies set in place. So they were going to charge us at the commercial rate, despite the majority being residential.”

As we all know, commercial developments pays five times the tax rate at residential. Conciella went back to the City and emphasized the opportunity this project would bring.

“It would employ 200 people, and become an anchor that would have an impact on this community. Every other municipality would have loved this opportunity.”

Conciella said he took a collaborative approach, working together with the City of North Van to create a policy in which the project would work for both parties.

“The success of this project approval was a result of having an open mind and two willing parties coming together to create something from scratch.”

He notes it also takes tenacious developers. “No means yes. It wears you down or brings you up, there are only two ways.”

Hire the Right People

When Geoff Heu, VP of Development in Western Canada for GWL Realty Advisors, embarked on developing a 160 unit market rental in Lower Lonsdale, he knew he was going to face some serious challenges.

“We have a very thin margin of error. We’ve got some nasty neighbours that we know are going to protest because we’re blocking their views. We also have 64 rental tenants that we have to evict. There’s a lot of risk for us, so we had to ask ourselves, how are we going to ‘de-risk’ it?”

In addition, Heu and his team do not have the relationships and contacts that they typically do in other municipalities. North Vancouver is a completely new city to them.

“We decided to look around to similar projects, and hired the same team. From a credibility standpoint, you can find people with the right connections. Yes, these guys aren’t cheap. But the risk of not hitting your timelines, or compromising on the density and design, is worth it.”

They also had to think of their reputation, as evicting 64 tenants is not something that they want to do, but have to in order to make the project come to life. That’s why they’re working with tenant relocation specialists to make the process easier for those involved.

“My advice is to hire experienced people and consultants. The right people can open doors for you. They’ve taken us to meet the mayor, the councillors, and the staff. And now, we’re feeling pretty good.”

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Embrace the Future: Development Panel and Cost of Business Survey (2017-11-29)

Posted By Administration, Thursday, November 14, 2019

After years of frustration over the laborious development application process, Graeme Silvera decided to do something about it.

“Every time I wanted to submit a new development, I had to visit each municipality. I waited in line, met a clerk, got a photocopy of a bylaw, and so on and so forth. You can't just go in the computer and find out permits, you had to go in person. That’s why we invented the survey.”

Started in 2000, the purpose of the Cost of Business Survey is to create greater transparency around municipal development fees and the approval periods across the different municipalities in Lower Mainland.

“In the past 17 years, there’s been a dramatic shift and a transformative force in the market on two fronts. The first is the explosive surge of residential value, and the second is the shift towards mixed-use products, which is what we saw in this year’s Pacific Northwest Real Estate Challenge.”

Silvera, who is the VP of Retail Operations at Ivanhoe Cambridge, shared that there are no longer stand-alone buildings. There must be two to three uses required to make the economics work. In addition, affordability issues never seen before in previous generations have come centre focus. 

The Future

As we’ve mentioned in previous blog posts, Vancouver is a tech savvy city, and leading the market in a number of ways.

“Generally we are in positive trajectory, but the construction and development industry has been relatively slow to adopt and embrace new tech. This includes our municipal partners on whom we rely on development.”

Silvera believes there are better ways of doing business that would influence supply, but only if we start thinking outside of the box.

“Why can’t we pursue an application that allows every municipality to pay online? Why can’t I see the building permit requirements through my computer? Why can’t I track the status of my permit? I can do it with Fedex!”

Despite the advancing architectural profession, the industry still uses the same tactics as in 1910. When submitting a development, Plan Checkers have to physically look at the roller drawings to check code compliance. 

Silvera hopes to create more progressive municipalities that can use survey data as a benchmark to establish competitive fees and address bottlenecks necessary to attract new real estate investment.

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