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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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Interest Rates in Canada: Is The Party Over? (2017-11-16)

Posted By Administration, Thursday, November 14, 2019

With cap rates low and real estate value high, 2017 was a prosperous year for anyone in the commercial real estate market. And with Canada expected to pass the U.S. to top G7 growth, demand doesn’t seem to be going away anytime soon.

However, if we’ve learned anything from 2008, we know that nothing is guaranteed, especially when it comes to real estate and the economy. And despite there being all of the ingredients for a successful recipe, there is a lingering threat that could cut the party short: interest rates.

“The party’s not ending, but there’s definitely things to look at,” said Vice President at PCI Group and former NAIOP Vancouver President, Jarvis Rouillard. “I think interest rates are going to creep up a little further into next year, and this will affect property values moving forward. [Increased interest rates] will affect our tenants, their income, and the rents they can pay.”

Adam Mitchell, Director of Investments at Bentall Kennedy, shared a similar outlook.

“I don't see a huge interest rates increase in the short term. It only depends on where the general economy goes. Maybe another 50 basis points next year, if I had to make a prediction. At that rate, people are prepared to live with it, though any more of an increase could be a concern.”

If interest rates were to rise by one percentage point over 2018, the average Canadian household would have to spend an additional $130 on debt servicing costs. According to Global News, Canadians currently have $200 or less per month to spare after paying their bills and debt obligations, which only means they could only fall deeper into the red.

“It’s not just commercial real estate; so much of our economy hinges on interest rates,” said Scott Chandler, Senior VP at Colliers International in Toronto. “I hope the government treads cautiously.”

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Vancouver: The New Commercial Real Estate Capital of Canada (2017-10-26)

Posted By Administration, Thursday, November 14, 2019

For the first time ever, Vancouver has surpassed Toronto in investment activity by more than $1 billion. In a recent article by The Western Investor, our city had a record-setting $7.8 billion in commercial real estate investments, making up 41% of the national market compared to just 34% in Toronto.

While Vancouver is no stranger to real estate demand, it’s largely made its name for the residential side of the market. However, it’s clear that we’re starting to become a new epicentre for economic activity.

Here are a few reasons why business is booming on the west coast:

Big Transactions

This year saw some of the largest sales the city has seen to date. Most notably (as reported by The Western Investor), the sale of the Cadillac Fairview office portfolio for $1.25 billion. In addition, Oakridge Centre shopping mall by Ivanhoe Cambridge sold to QuadReal Property Group for more than $961 million. 

Tech’s Coming To Town

Vancouver’s growing tech industry has garnered international attention, as we’ve covered in recent blog posts. Kraig Docherty, Director of Talent Programs & Hub Operations at BC Tech, shared that B.C. currently employs more than 150,000, and brings in $126 billion a year. In just four years, this is expected to increase to 196,000 jobs, with many more roles that will need to be filled.

President Trump

As reported in Politico Magazine this past month, the Trump administration has moved to cut legal immigration by half over the next decade. He’s also suggested limiting startup visas for high-tech entrepreneurs entering the United States, and cutting funding for scientific research.

These initiatives would enhance Canadian talent and economic growth, as we grant work permits at a much faster rate than our US counterparts. In particular, Prime Minister Justin Trudeau is said to be “welcoming skilled, ambitious talent that drives innovation and economic growth, including top thinker and workers in technology and industry.”

Affordability

It may seem ironic that one of the most expensive cities in the world could be attracting business for its affordability, but relative to other corners of the globe, our price per square foot is considered a steal.

Kevin Nelson, Senior Vice President of The High Technology Facilities Group at CBRE, shared that in Silicon Valley, tenants are paying more than $90 per square foot. In Vancouver, similar spaces are $45 per square foot. That, coupled with the higher American dollar, has caused many companies to head north.

Lifestyle

Very few cities in the world can compete with oceanfront properties, mountain views, and lush green surroundings all within a few kilometres of one another. Known for its laidback lifestyle, Vancouver is a haven for outdoor enthusiasts, a young population, and a leading culinary scene. These factors, among many others, are attractive features for those recruiting international talent.

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The 3 Biggest Threats to Vancouver’s Tech Industry (2017-10-17)

Posted By Administration, Thursday, November 14, 2019

While the tech industry in Vancouver has seen a dramatic growth over the past five years, like all things in real estate, nothing is guaranteed. And though we have many factors in our favour, there are some significant threats that could steer this industry away from the west coast.

According to Kraig Doherty, Director of Talent Programs and Hub Operations at BC Tech, “Seattle just sees Vancouver as an immigration landing page. They train employees here, wait for the U.S. permit to be approved, and then migrate them down south once they’re approved. We should be creating an environment that keeps talent here.”

Here are three major threats that our city faces in today’s tech industry:

1. Lack of supply and slow approval

When it comes to square footage, it’s no secret that Vancouver is in very short supply, but very high in demand. This becomes particularly challenging when tech giants like Amazon need at least 50-70,000 square feet to accommodate their staff. 

“We are losing business because of lack of space,” said Gavin Reynolds, Executive Vice President at JLL. “We need clusters like the False Creek Flats for these companies to move in to.”

Since pre-existing buildings are difficult to come by, some tech brands have decided to take matters into their own hands by building their offices from the ground up. But taking this route isn’t without its obstacles – the most notable: permits.

“Amazon is just starting to break ground on [401 West Georgia Street]. It took ten years to get a permit,” said Steffan Smith, Director of Leasing at GWL Realty Advisors. “There are so many buildings in the queue behind us. It takes a long time get new space built.”

2. Lack of education and talent

“By 2021 there will be 30,000 empty positions in Vancouver,” said Reynolds. “Education plays a massive part in order to fill these roles. Currently we’re playing the catch-up game, with more grads in Ontario than B.C 

Having only a small pool of professionals to choose from may be a deal breaker for companies looking to move north, deterred by having to recruit international talent. This would then have a domino effect, as Vancouverites will have to look outside of B.C. to work for big names in the industry.

3. Lack of marketing and promotion of our city

We’re not the only town that’s garnering new commercial real estate interest from the tech industry. Charlotte, Tampa Bay, Toronto, and Montreal are all vying for I.T. attention.

“We really need to market our city,” said Doherty. “Vancouver is just a beneficiary to these super-tenants. We have a lot of work to do.”

Reynolds agrees, saying that we are losing key business because we’re failing to invest resources in promoting ourselves.

“New York City is giving a $20 million tax break to companies that employ more than 2,000 people. For companies like Google and Facebook, this is huge. If a city like New York, who is notorious for real estate demand, is starting to promote themselves and offer benefits, we should be no different.”

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Vancouver Commercial Real Estate: What Tech Tenants Really Want (2017-10-06)

Posted By Administration, Thursday, November 14, 2019

With the recent announcement that Amazon will be taking over WeWork’s new office space, it’s clear that Vancouver is attracting major names in the industry. From start-ups to industry giants, brands that were once synonymous with Silicon Valley are moving up north, with sights set on our west coast city.

Many of those in the commercial real estate industry can attest that tech companies are not your typical tenant. With a shortage of professionals to hire from, offering state-of-the-art offices with modern amenities are vital to compete for top talent.

We talked to Gavin Reynolds, Executive Vice President at JLL, to weigh in on what tech tenants really want.

Flexibility is King

“The biggest differentiator between a tech client and say a law or accounting firm comes down to flexibility. It’s a very different mindset.”

Reynolds explained that smaller tenants are now demanding short two year leases with flexible terms. They also have more demands, and need the option of being able to expand.

In this industry, entrepreneurs can raise major capital in a relatively short time frame. Within a few months, they may need to hire 50 people. Therefore, tenants don’t want to be locked into contracts, otherwise they’ll keep looking.

More Amenities

“There’s been a massive shift from four or five years ago,” said Reynolds. “There’s a trend away from the flexible work schedule. People are no longer spending two to three days working from home anymore. Instead, they’re spending more time at the office.”

From fitness centres to state-of-art-kitchens, in order to offer work perks like meditation rooms and an in-house chef, tenants need to space to build their amenities, or at the very least, take advantage of already-existing ones.

Corporate Culture

“Tech companies place a much bigger emphasis on worker experience. They attract talent through their company culture, and office space lays the foundation for this.”

In other words, desks and lounge chairs aren’t going to cut it. From nap pods to volleyball courts, there’s pressure to create an environment that fosters innovation and community.

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Silicon Valley...North? Here’s Why Vancouver is Attracting Top Tech Talent (2017-10-02)

Posted By Administration, Thursday, November 14, 2019

For years, Silicon Valley has been the epicentre of technology and innovation. Much like aspiring actors flock to Hollywood, startups have rushed to this corner of San Francisco in hopes of becoming the next Mark Zuckerberg.

It’s no secret that Vancouver’s tech industry has been growing at an impressive rate over the past few years. However, it could be tipping the scales as the unlikely underdog that’s poised to become the next Silicon Valley.

“A recent tech talent report found that B.C. currently employs 150,000 people and brings in $126 billion a year,” said Kraig Docherty at our recent Breakfast Event. As the Director of Talent Programs & Hub Operations at BC Tech, Docherty says that this trend is only going to increase. “By 2021, we expect 196,000 people to be working in tech, with many more jobs that will need to be filled.”

Kevin Nelson, Senior Vice President of The High Technology Facilities Group at CBRE, shared that San Francisco is no longer the hot spot for tech giants as it once was. In fact, more and more people are leaving each year.

Here are three reasons the tech scene is migrating north:

Inexpensive Rent

Despite being the most expensive city in Canada to rent commercial real estate, Vancouver’s price per square foot is considered a steal compared to Silicon Valley.

“In San Francisco, tenants are paying more than $90/square feet. So when they see offices here going for $45/square foot, it’s considered on sale,” said Nelson.

Affordable Salaries

According to a study by PayScale, the salaries in Silicon Valley range between $80,000 to $150,000 per year. In addition, companies are expected to often provide housing, transit, and a variety of perks to keep attracting top talent.

“The biggest expense for tech companies is talent. Real estate is only 7% of the total cost, whereas 93% is in labour,” said Docherty. “The same professional in Vancouver would be paid $60,000 a year, whereas in Silicon Valley they’d earn around $120,000.”

Not only are Vancouver professionals paid less, but companies also save due to the dollar. Plus they’re often not expected to provide the same level of perks as their San Francisco counterparts.

Political Landscape

With a president who has been tightening immigration and work permits, it’s much easier for businesses to employ international talent in our city. Work permits can be issued in a few weeks, compared to the months or even years it would take south of the border.

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Staying Power: Retailers Who Are Winning (2017-07-20)

Posted By Administration, Thursday, November 14, 2019

There’s no question that we’re undergoing a Retail Apocalypse’. Some of the most recognized brands like Macy’s, Abercombie & Fitch, and Sears are rapidly demising. Store closures, layoffs, and bankruptcies have dominated the headlines. However, the future of brick-and-mortars isn’t coming to extinction just yet, as these retailers prove that physicality still plays a role.

Uniqlo

Having recently doubled their number of stores, the Japanese company offers a unique approach to fashion that has helped differentiate it from the pack. With ambitious goals to generate $50 billion in revenue per year and overtake Zara and H&M as the world’s number one apparel brand, a major component to this strategy is through the expansion in North America. Currently there are 40 stores in the U.S. and a plan to open 100 more in the next few years. Vancouver will receive its first location, a 20,630-square-foot space at Metropolis at Metrotown in Burnaby, this fall.

Zara and H&M

As pioneers of fast fashion, Zara and H&M have built their success on quickly churning out runway looks at an affordable price. By selling their own brands and constantly replenishing new styles, they’ve been able to reach global expansion. Earlier this year, Spanish retailer Zara pulled further ahead of its Swedish rival H&M thanks to its expansion online and a larger market presence.

Next on Zara’s sights is Asia and India, two of their fastest growing markets. They’ve also announced they will be slowing down the number of stores they’ll be opening and instead focus their efforts to ecommerce over the next year.

Frank and Oak

This Toronto retailer has taken an atypical approach to the current market trends. What originated as an ecommerce store has become 10 brick-and-mortars across North America over the past 5 years. Two if its Toronto outlets are in malls while others are on trendy neighbourhoods, even blending its store with a coffee shop. It also creates pop-up locations, offering a more diverse reach to new audiences.

Dollarama

Clearly consumers value a good deal, as the dollar store chain’s sales were up 11.5% and net earnings per share up 24% in the fourth quarter, according to their press release. Today there are approximately 1,100 locations today, with plans to increase this to 1,700 in the next eight to 10 years.

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NAIOP Members: Making An Impact on Vancouver’s Commercial Real Estate (2017-07-13)

Posted By Administration, Thursday, November 14, 2019

Fifty years ago, the first chapter of the Commercial Real Estate Development Association was formed. Known across the globe as NAIOP, our organization was designed to bring together developers, owners, and investors to gain industry insights, network, learn, and professionally grow. 

NAIOP Vancouver has become one of 50 chapters in North America, offering a forum for continuing education and effective public policy at all levels of government. Whether it’s industrial real estate or retail, our members are working together to build a strong commercial real estate market for Metro Vancouver.

And it shows. In a study prepared by UBC’s Centre for Urban Economics and Real Estate, NAIOP members currently own or manage 68.4 million square feet of commercial and mixed-used properties in Metro Vancouver. Equivalent to $30.6 billion, this is broken down into 22.2 million sq.ft. of offices, 15.9 million sq.ft. of retail, 3.9 million of residential, and 26.3 million sq.ft. of industrial. This has huge impacts on the city, as members’ annual tax contributions total $514.5 million in property tax payments in 2015.

In addition to holding property, NAIOP members develop most of the commercial real estate in the city. Every year, local developers add more than 865,000 sq.ft. of office space, 453,600 sq.ft. of retail, 192,000 sq.ft. of residential/mixed-use, and 646,300 sq.ft. of industrial to the city.

Not only does this provide inventory in a highly sought-after market, but it will also create jobs and strengthen Vancouver’s economy. Through indirect and direct employment, NAIOP members provide more than 230,500 jobs. This, along with their properties, generate nearly $10 billion in economic activity and $4.53 billion to Metro Vancouver’s GDP.

If you’re looking to advance your career or build brand awareness for your company, becoming a member will offer high returns for your investment. You’ll automatically be connected with the biggest names in commercial real estate industry by joining the vast network. As NAIOP extends to chapters across North America, it’s a great way to learn more about other markets that could benefit your business.

Our team is always hard at work creating new events to attend. From our monthly Breakfast events with expert panelists to trips to New York, you’ll always find new ways to meet members and learn more about the industry. Thinking of joining? It’s easy! Visit our website for details. 

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The Amazon Empire: How This Company is Shaping the Future of Retail (2017-07-07)

Posted By Administration, Thursday, November 14, 2019

Following the recent announcement that Amazon had acquired Whole Foods for $13.7 billion dollars in cash, it’s clear that this online retailer is spreading its empire. Now the third biggest retailer in the world, experts predict that Amazon will take the number two spot by next year, second only to Walmart.

It was only a few years ago that many of these same experts thought that Amazon was never going to succeed. Now, everyone is worried. Currently there are over 2 million sellers in their digital marketplace, making way for “a future where the number of actual brick and mortar stores will diminish,” said retail expert David Ian Gray at our Breakfast Event last month.

According to Gray, Amazon’s success is based of a simple, two concept model: “One: sell everything. Two: sell everything at the best price with super convenient service.”

One of the ways they’re growing at such a rapid pace is by diversifying, made evident by the Whole Foods acquisition. However, they’re also pushing forward into fashion by selling private labels, providing a marketplace for other brands to sell, and even acquiring other online retailers.

One of the most recent ventures that disrupts retail even further is the Amazon Wardrobe Service. All a customer has to do is pick three or more items, whether it be shoes, clothing, or accessories. Then they have 7 days to try them on at home and decide what they want to keep. Anything you don’t want you can just drop off at your local UPS location or schedule a free pick-up. 

To incentivize keeping their purchases, the company is offers an extra 10% off when you hold on to three items, and 20% off if you keep five or more. This new form of e-tail could have a detrimental affect on malls and brick-and-mortars, as it makes the shopping experience easy, fast, and cost effective for the consumer; three elements they can’t compete with.

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The Polarization of Retail (2017-06-30)

Posted By Administration, Thursday, November 14, 2019

From bankruptcies to store closures, it seems like every story you read about retail these days involves some kind of negative spin. While the future may appear to be doom and gloom for long-standing brick and mortars like Macy’s, Sears, and JCPenney, the retail industry is anything but dead. As we discussed in our last blog post, the consumer has changed. The market is now driven by Millennials, and those who have been able to adapt to the polarization of their shopping preferences have come out on top.

Retail stores have fallen into three distinct categories: discount, middle, and luxury. Two of these segments are thriving, projecting to follow continuous growth right through 2020. The other is barely hanging on by a thread. Any guesses as to which one?

If you said the middle sector, you were right. Anchor stores that catered to the middle class, like Sears, Mexx, and Esprit, have either completely shut down or are slowly on the way out. As the audience has shifted, the opposites ends of the retail spectrum are taking the lead. Dollar stores have become some of the biggest retailers in Canada, and even discounted versions of luxury department stores are outperforming their premium parent company. In fact, Nordstrom Rack is growing almost four times higher than Nordstrom, at 23%.

Fast fashion retailers like Uniqlo and Zara continue to open more stores across the globe every year. On the opposite end of the spectrum, luxury retailers are also growing, at 7.1% compared to the middle-retail sector, which is currently 4.5%. High-end brands like Louis Vuitton and Gucci are expected to outperform all retail to 2020. 

“Price and experience are what brings people into these stores,” said Joel Turner, Senior Manager in Deloitte’s Retail Industry Consulting practice. Turner assists retailers to transform their business in this rapidly changing, polarized landscape. “Brands are going to have to do omnichannel integration well in order to stay in business and appeal to future consumers, but at this point, no one is.”

So why is Dollarama thriving, and department stores going out of business? According to Price Waterhouse Cooper, consumers want a new shopping experience. This means smaller store formats, adaptation of social media to sell the lifestyle of the brand, and an easy online purchasing experience. From an economic standpoint, Canadians have the highest level of debt compared to their income. This has increased to 160% from 140%, which means they have less discretionary income to spend than before.

According to Nielsen’s latest global retail report, 68% of North Americans say they enjoy taking the time to find bargains, while 55% say low overall prices are highly influential in their decision to shop at a particular retailer. That means omnichannel, where retail integrates with different methods of shopping like online or through mobile, will play a vital role if retail companies want to stay afloat.

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NAIOP Vancouver Chapter

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