While only some highlights from the breakfast meeting are outlined below, you can listen to the entire conversation by following this link.

Moderating the panel was Alicia Chung, Senior Director of Sales & Marketing at Conwest Developments, who welcomed the expert panelists:

• Baktash Kasraei – Executive Vice President, JLL
• Drew Gilbertson – Director, Asset Management - Industrial, Oxford Properties
• Roy Pat – Vice President, Investments & Asset Management, Dayhu
• Sean Ungemach – Executive Vice Chairman, Cushman & Wakefield ULC

From the outset, Chung framed a central tension: Vancouver’s industrial market is no longer moving as one. Instead, it is splitting into two distinct stories.

Large-Format: The Flight to Quality is On

While Q3 2025 vacancy reached 4% (a 10-year high), the picture changes dramatically when you break it down by size.

Large-format leasing is, in the words of Sean Ungemach, “amazing.” After a period when his team “couldn’t get a tour,” the last six months have marked a dramatic reversal. His group has leased more than 800,000 square feet, driven largely by 3PLs and global consumer product companies—including Amazon, which is back in the market for additional space.

The major catalyst? A Flight to Quality.

  “Companies are relocating to more efficient buildings… your rate is 15 to 20% less than it would have been two years ago,” Ungemach explained.

Large corporate occupiers sense the market is at a bottom and are aggressively consolidating outdated, multi-site footprints into newer, high-bay Class A space.

Leasing Climate: The environment has shifted from a “multiple-offer” scramble to a “multiple RFP” landscape. Landlords are now offering significant concessions, including compressed annual escalations (sub-3%), extended fixturing periods, and net asking rates dropping below $20/sq. ft. from previous peaks of $22–$23.

Small-to-Mid-Bay & Strata: Stuck in Structural Softness

If the large-format market is outperforming, the small-to-mid-bay segment is experiencing the opposite. Vacancy challenges are most acute for spaces under 50,000 square feet, which rely heavily on the health of local businesses.

According to Baktash Kasraei, this weakness reflects a deeper structural issue in the Canadian economy:

“Vancouver used to be a city where we had a lot of startups… that’s where we’re seeing the most stress right now or softness in the market.”

These entrepreneurial users are largely waiting for sentiment to improve and for the residential construction sector—one of their biggest demand drivers—to rebound.

The Problem of "Fake Inventory"

Transitioning from leasing performance to ownership dynamics, Roy Pat highlighted a unique distortion in today’s strata market: 2.1 million square feet of vacant standing strata that is effectively “fake inventory.”

The Valuation Gap: Much of this supply is “unleasable” because leasing the units would establish a lower rental income value, directly reducing the owner or investor’s expected user-based valuation.

The Falling Knife: Pat likened the strata market to residential condos:

Buyers are “sitting on the sidelines constantly asking… ‘Has anybody written an offer?’”

No one wants to “catch a falling knife,” leading to a freeze in transaction volumes even as pricing has fallen by as much as $200/sq. ft. from the peak.

The panel agreed that without a recovery in residential construction—a key engine for small industrial users—the strata and small-bay market could face one to two more years of difficulty.

Capital Agnostic: Fundamentals Matter

Shifting to the investment landscape, the panel addressed how institutional capital is behaving in this new environment.

Drew Gilbertson noted that capital today is fungible, constantly measured against global opportunities and even high-yield debt. Institutional groups are recycling out of lower-upside assets and redeploying into higher-return U.S. markets or credit strategies.

Roy Pat echoed this trend, sharing that they are actively pursuing debt deals, including one asset in Alberta generating a 13% yield on a B note—a level virtually unheard of historically.

The Land Market Correction

The conversation then moved to land—an asset class undergoing its own recalibration.

Cap Rates: Pat observed that Vancouver is starting to look attractive again as the market moves away from its “three- and four-cap world.” Buyers can now find opportunities at a five-cap, a level not seen since 2013–2014. Class A cap rates are expected to settle in the high fours to sub-five range over the next 12 months.

Land Values: Land values have dropped 20% to 30%, and financing is increasingly difficult to secure. Without strata developers propping up values, land prices are reverting to income fundamentals—meaning a site must pencil out at a healthy 5.5%–5.7% yield to justify development.

For additional NAIOP news and resources, follow along with the 2025 Webinar Series, and follow NAIOP Vancouver on YouTube, LinkedIn, X (formerly known as Twitter), and Instagram.

"Who would have been disappointed if this was over Zoom? Right, me!" This self-deprecating line, delivered moments after moderator Ted Mildon successfully pulled off a hilarious "unforeseen circumstance" fake-out—pretending to join the panel via a glitchy video link—set the tone for NAIOP’s highly anticipated September breakfast. The successful gag served as a perfect opening, with Mildon reminding the audience that the authentic, in-person engagement is exactly what the industry needs, saying, "I love seeing you all here today... [The in-person experience] is not as good as the authentic."

The panel that followed offered invaluable insights into the current, nuanced state of Vancouver's Office Market, tackling everything from design psychology to capital markets.

While only some highlights from the breakfast meeting are outlined below, you can listen to the entire dialogue by following this link.

The panel, moderated by Ted Mildon, VP, Office Leasing & Operations at Oxford Properties, welcomed as panelists:

• Alain Rivere – Senior Vice President, The High Technology Facility Group (The HTFG) at CBRE
• Bryce Margetts – Senior VP Western Canada, Canderel
• Robin Rosebrugh – Director of Workplace Strategy & Research, Aura Office

Market Bifurcation and the Flight to Turnkey Quality

Mildon opened the discussion with stark market data, revealing a significantly bifurcated market. While the total downtown vacancy rate sits at 12.6% in Q3 2025, the vacancy for AAA and A-class space is a much tighter 9.5%. This contrasts sharply with B and C-class space, which is at 17.2%.

Panelists agreed that this widening gap, currently at a 770 basis point difference between the best and worst assets, is accelerating.

Alain Rivere offered his market headline: "It's a dynamic market and also very nuanced." He noted that while major positive transactions like Lululemon’s massive commitment are happening, so is a large influx of space coming back to the market.

Both Rivere and Bryce Margetts agreed on one key trend driving leasing activity: the demand for turnkey, move-in-ready space (spec suites).

"I don't have the bandwidth to think about picking and selecting carpets and finishes," Rivere shared, quoting a client. "Don't even talk to me about it."

Margetts affirmed that spec suites are "100%," adding that if landlords don't offer them, "you’re not going to lease anything." They both concluded that for many tenants, especially those under 5,000 square feet, the days of managing a complex design and build-out process are gone, even in new AAA buildings.

From Individual Tasks to Team Innovation: Redefining Productivity

Robin Rosebrugh, whose background includes a Master’s in Organizational Psychology from Harvard, steered the conversation on productivity, urging a "huge shift in how we’re thinking about productivity."

She challenged the common worker-centric view that being "productive" at home simply means completing a to-do list (task-based individual productivity). Instead, she advocated for recognizing the value of the "distractions" that happen in the office.

"Those things that we consider distracting—a colleague asking a question, spending time at the coffee machine—actually lead to greater team and organizational performance," Rosebrugh explained. "It is sharing knowledge... building social capital, which leads to trust, which again, leads to more innovation."

Rosebrugh added that accommodations, which have seen a 21% increase in requests this year according to one study, are often a "design problem." She argued that many requests for remote work—the number one accommodation—are a "fleeing [of] bad design."

To counter this, design trends are moving away from the "clubhouse" concept toward providing:

• Quiet Places: Libraries, reading nooks, or even designated "black desks" that signal "do not disturb."
• Recharge Spaces: Environments that encourage breaks to combat burnout and signal to employees that "they’re allowed to take a break."
• Analog Meeting Spaces: Rooms that feature whiteboards and physical materials over purely virtual tools to leverage the brain’s spatial memory for learning and creativity.

Capital Markets, Global Trends, and the Next Building Wave

The panel turned to the investment landscape and future supply. Margetts noted that Canderel's investment focus has shifted, as the attraction for foreign capital is no longer Vancouver’s low cap rates (previously 4% to 4.5%).

"The cap rates are up. They are definitely up well over six... That's the appeal. You can get into a great market, steady at a higher cap rate."

He and Rivere confirmed that the market is seeing a sideways movement of positive absorption, but the overall momentum is there, with strong demand coming from the financial sector—a trend currently on fire in Toronto with millions of square feet in new requirements.

In terms of new supply, panelists were skeptical that much of the next pipeline will be built by 2031, given current construction and financing costs.

• Rivere noted that while the next five-year build cycle will take at least five years to complete, the right investor who starts soon will capitalize on a tightening market.
• Margetts shared that a recent build-to-suit deal for a 400,000 sq. ft. tenant was shelved because the underwriting was too tight, requiring 70% pre-leasing just to achieve a 10% profit.

The panel agreed that, barring an unexpected market shift, the next wave of speculative office development remains challenging.

The Bottom Line

Vancouver’s office market is not in freefall; it’s aggressively bifurcated. AAA assets are winning by providing move-in-ready, high-quality, and highly programmed spaces.

Landlords must now compete by providing an experience that justifies the commute, shifting the design focus to wellness, flexibility, and productivity that comes from in-person collaboration. While capital markets are cautious, higher cap rates are making Canadian assets appealing to foreign investors looking for stable income, setting the stage for future growth as supply remains constrained.

For additional NAIOP news and resources, follow along with the 2025 Webinar Series, and follow NAIOP Vancouver on YouTube, LinkedIn, X (formerly known as Twitter), and Instagram.

His Biggest Learnings So Far

After being asked about the biggest learnings of his term so far, Mayor Sim quickly pointed to his surprise at the incredible skill set of the people at the City of Vancouver.
Although he knew the employees were skillful, he was astonished by their dedication, their intelligence, and their thoughtfulness. He went on to share that despite the aforementioned attributes, the employees are stuck working in a broken system, a system Mayor Sim (along with his team) is looking to fix. Secondly, Mayor Sim, in referencing the park board, shared how he learned that change is challenging. According to the Mayor, the park board, an institution that’s 133 years old, needs to change to serve the community members. With recent support, Mayor Sim feels his team will work to effect this change.

Challenges Despite a Very Clear Mandate

Although Mayor Sim has a very clear mandate and enjoys a super majority, Mildon probed the Mayor to share something difficult to accomplish despite this. First, sharing that of 94 things listed in their platform, 70% of which have been started or completed, the Mayor did circle back to the City’s culture. Again, referencing the incredible City staff, he described the culture as broken and one that leaves its people feeling trepidatious. He feels that saying no to something, as a City employee, is often easier due to this broken culture. Answering no, leaves a person less at risk of being penalized, according to the Mayor. The Mayor is highly focused on correcting the culture moving forward.

Utilizing Business Savvy in His Role as Mayor

With 400 locations and 15,000 team members, Mildon asked Mayor Sim how his business skills that led to the success of Nurse Next Door can help him as Vancouver’s Mayor. Recruiting and grooming future leaders who are better than himself is the secret to his business’s success. Employing those better than himself while ensuring that an organization isn’t solely dependent on one person is what Mayor Sim hopes to create at the City of Vancouver. What happens in the four-years after he’s gone, is how Mayor Sim will measure his success. If it gets better after he’s gone, that’s his metric of success as Mayor. 

Winning Business in the City of Vancouver

Shouting from the rooftops that Vancouver is open for business is how Mayor Sim describes his team’s best method for attracting business to the city. Although he could not specify certain events (as they were still in negotiations at the date of this breakfast meeting), he shared that he’s expecting to land a significant conference expected to generate 150 to 200 million dollars and one that will host 35,000 delegates. A 400 million dollar head office is expected to be secured too. He went on to say that his team is making their best efforts to clear roadblocks and to communicate in any way he can that Vancouver is open for business.

The Bottom Line

Mayor Sim is proud of the people working for the City of Vancouver and hopes to improve the culture they work within. And, with his business savvy from his existing company, Mayor Sim looks to groom Vancouver’s future leaders while attracting new business to the City of Vancouver.

For additional NAIOP news and resources, follow along with the 2024 Webinar Series, and follow NAIOP Vancouver on YouTube, LinkedIn, X (formerly known as Twitter), and Instagram.

The panel, moderated by Tony Quattrin, Vice Chairman of Capital Markets with CBRE, welcomed as panelists:

• Eric Carlson -  Founder and CEO of Anthem Properties
• Shenoor Jadavji - Founder and President of Lotus Capital
• Avtar Bains -  Founder and President of Premise Properties
  

Advice for Young Professionals

Bains, having experienced numerous market cycles in his lengthy career was asked by Quattrin to offer his advice to young people. Bains went on to illustrate historical dips and peaks in the market preceding this one. With the current market described as both challenging and frustrating, Bains encourages young people to embrace the market along with the current market dynamics. “There are,” he says, “many advantages to a down market.” According to him, it’s a good time to learn one’s trade, refine one’s skillset, and perhaps most importantly, learn the discipline of getting through a challenging market.

Comforting Team Members in a Challenging Market

“This is where opportunity starts,” was Jadavji’s response to how she comforts team members in this challenging market. Because Vancouver can be a tough market due to its dependence on appreciation rather than cash flow, Jadavji, said it’s where Lotus Capital spends the least of its time. Instead, their organization considers opportunities in Alberta, out East and the Maritimes. There, they look for undervalued assets. And, according to Jadavji, while 50 deals might be underwritten this year, perhaps only 3 deals might be done. Conversely, n 2025, she suggests, 25 or 30 deals might be done. So, yes she feels, the market is challenging, but, it will pass. Jadavji feels now is the time to get ready for what’s to come. Her advice to team members is, “just settle down and get to work.”

Is Residential a Generational Buying Opportunity?

Reiterating incredible demand and limited supply, factors that, on first glance, leave residential looking like an incredibly desirable asset class, Quattrin looked to the panellists for their perspective. Carlson, without hesitation, said “no” residential is not a generational buying opportunity. Devling beyond simple supply and demand, he went on to outline the struggle to find capital and sluggish approval processes. Although recent political moves might force municipalities to rezone land to free up capacity, there is, Carlson says, still collateral damage from previous demand management policies. “You still have to get infrastructure to catch up with your development service agreements. And, you have to get through your DPS. And, cities need the capacity to do that.” He went on to say that simple policy change isn’t enough. “It’s not just wave your magic wand and rezone your land. You have to have schools and roads and sewers and infrastructure.” So, without capital for these other things, cities, Carlson feels, can’t keep up. And, because of this he feels residential will remain bogged down.

The Bottom Line

Looking back, those with years in the business can see that this challenging market is simply part of a bigger cycle. And, while it’s potentially challenging, it’s a good time to brush up on one’s skillset. Like the old adage, with enough time, this too shall pass. 

For additional NAIOP news and resources, follow along with the 2024 Webinar Series, and follow NAIOP Vancouver on YouTube, LinkedIn, X (formerly known as Twitter), and Instagram.

The panel, moderated by Jasmean Toor, Vice President of Real Estate Finance with EDGAR Development, welcomed as panelists:

• Gagan Lalli - Vice President of Real Estate Finance for CMLS Financial
  
• Nate Larsen - Senior Director of Mortgage Origination for Canada ICI Capital
• Matthew Middleton - Director of Real Estate Debt at Nicola Wealth Real Estate
• David Gilbertson - Regional Director for Commercial Mortgages in Vancouver RBC

The Impact on Credit Decisions

Toor began the discussion by asking panellists to comment on the overall impact to credit decisions and unwriting over the last six, twelve or eighteen months. Lalli, whose firm initially questioned their client's ability to weather the storm (as he called it), has seen an increase in the amount of cash needed for deals. “The metrics are stretched with higher rates”, he said. “You have lower debt service and less loan to value.” More cash is required. Gilbertson commented that he observed an increase in underwriting quality, and says things now are tighter. According to Gilbertson, it was only three to five years ago that RBC was underwriting with test rates plus 200 to 250 basis points. Now, he says, things are tighter with RBC writing to ‘actual’ and the underwriters are increasingly focused on the quality of the location, the tenant and the operator. 

The Change to Covenant Requirements

Gilbertson said that RBC hasn’t changed much when asked how covenant requirements might shift to mitigate risk following so much market and regulatory change. Instead of changing requirements, Gilbertson shared that tenants and tenant tenure are being increasingly considered. “We’re just scrutinizing everything a little bit more.” Expanding on Gilbertson's sentiments, Lalli said CMLS isn’t just looking at the property, but taking a more global approach. CMLS is looking at the borrower overall, along with liquidity. “We are looking at the overall picture much much more than we ever have before and with that we want cash flow and liquidity.”

A Perspective from the Borrower's Side

Middleton, representing the only borrower on the panel, feels that a lack of terminal rate certainty and an overall lack of transactions have additionally challenged the market. Without rate certainty, Middleton says he’s seen underwriters writing deals with a ‘seven or eight handle’, numbers that, according to him, will kill most proformas and will help to put a fork in any deal. Now though, he feels, with other panellists in agreement, there are glimmers of certainty, which might also help bolster transactions. Without recent transactions he feels, it’s challenging to put a value on properties and there’s a resulting lingering divide between buyers and sellers. Transactions provide the real-time market context necessary for valuation. Middleton’s key takeaway though, as a borrower, is the importance of existing lending relationships. “You used to go for a financing quote from 12 lenders and you’d get 12 quotes in a pretty tight range,” he said. “Today, you’d go to 20 lenders and maybe get six quoted with a wide range.”

The Bottom Line

Although rising interest rates, shifting government regulation and inflation have challenged the market, glimmers of stability have begun to emerge. More cash may be needed for deals and lenders, who may not adjust their covenant requirements, may increasingly consider their tenants and tenant tenure. Borrowers, who may be limited in receiving financing quotes, may be best to count on their already-established lending relationships.

For additional NAIOP news and resources, follow along with the 2023 Webinar Series, and follow NAIOP Vancouver on YouTube, LinkedIn, Twitter, and Instagram.

While only some highlights from the breakfast meeting are outlined below, you can listen to the entire dialogue by following this link.

The panel, moderated by Andrew Dickson, a Director for Oxford Properties, welcomed as panelists:

• Janay Koldingnes - Partner & Design Director for Edit Studios
• Kevin Nelson - Vice Chairman for CBRE Canada
• Glenn Gardner - Principal with Avison Young
• Jarvis Rouillard - Senior Vice President for PCI Developments

The Office - Is It Dead, Plateaued, or Picking Up?

When asked whether the office is dead, plateaued or picking up, the panelists offered diverse perspectives. Gardner commented on the variation of return by industry. Law and accounting firms as an example, have long returned to the office. The mining sector, according to Garner, requires employees to be in the office three to four days per week. In contrast, though, he says tech is still struggling. Nelson shared, that a recent CBRE study suggests that hybrid and full-time work represent 90 plus percent of companies, so work-from-home is less than 10%. He went on to comment on general observations of busy elevators and occupied parking garages speaking to an overall return. Rouillard, who provided some contrasting data from a recent NAIOP Converge Conference, said he anticipated hearing a negative scope, instead, he said, the data was dire. Based in the US, the conference reported a 60% return-to-work US-wide, statistics Rouillard felt are economically driven rather than those reflecting a general return-to-work.

Workplace Design and Its Evolution in Meeting Employee Demand

With a need to attract employees back to the office, moderator Dickson, leaned on Koldingnes to provide insight into current trends in office design. Physical and acoustical privacy rank among the highest priority for employees, she shared, according to recent stats. Koldingnes said that statistics coming out of 2020 and 2021 outlined employees' dislike of being disrupted and having to work in open office environments. Following a large client survey conducted in 2021, employees, according to Koldingnes, identified a cubicle reminiscent of a 1980s government building as a space they’d want to come back to. Shocking the leadership for which the survey was crafted, the preferred space made clear the need to offer private spaces like libraries, phone rooms and reading nooks. Koldingnes said that shared office space is another increasingly popular office offering - an office only being used three days per week, as an example, could be booked by another employee on days it’s otherwise unused.

Initiatives to Encourage Employees Back to the Office

NAIOP panelists offered several initiatives used to secure landlords and help encourage employees back to work. Rouillard pointed to increased safety as one measure. He shared that 24/7 lobby guards have helped PCI secure some tenants. Collision, according to Rouillard is another measure helping to attract tenants and their employees back to the office. Collision means the ability to collide, not just with colleagues but also with people from other companies within the same building. Expediting permitting is another measure utilized by PCI. Rouillard says that PCI does some guesswork and goes ahead with TI permits allowing a tenant to go in for an amendment rather than moving through the entire permitting process.  Other panelists outlined the importance of high-quality building amenities. Things like a ‘real’ gym, restaurants, cafes, and conference rooms. With a panelist sharing a quote previously mentioned by Andrew Dickson, NAIOP members were reminded that “We’re not in the business of leasing space, we’re in the business of creating an environment where people want to come.”

The Bottom Line

The state of the office market is dependent on the industry being considered and its location. While the office is challenged in some markets, Vancouver, according to statistics, remains resilient and strong. With a focus on employee wants and needs, privacy and shared spaces are trending from a design perspective. And, initiatives like safety, expeditious permitting and amenities like gyms, restaurants and conference rooms are considerations for attracting employees back to work.

For additional NAIOP news and resources, follow along with the 2023 Webinar Series, and follow NAIOP Vancouver on YouTube, LinkedIn, Twitter, and Instagram.

While only some highlights from the breakfast meeting are outlined below, you can listen to the entire dialogue by following this link.

The panel, moderated by Paul Tilbury, the Chief Operating Officer at the Dayhu Group, welcomed as panelists:

• Jaclyn O’Neill - Principal for BentallGreenOak

• Ryan Kerr - Principal for Avison Young

• Charlie Deeks - Chief Investment Officer for Pure Industrial

• Josh Gaglardi - Founder & President for Orion Construction

The Future of Industrial Lease Rates

After being asked whether she thought lease rates were softening, O’Neill echoed something shared earlier by Kerr: that the market might just be returning to normalcy. Moving from a frenzied state, she felt that this new sense of normalcy and a sanity check of sorts might just be the market that allows landlords and tenants to plan and to understand what the terms of a deal will be which the previous market pace didn’t allow. “So, while there’s maybe a bit of a sanity check going on right now and a return to normalcy,” O’Neill said, “Uh, I certainly don’t think that I would characterize it as a softening.” 

Offering perspective from the East, and following the same question posed to O’Neill, Deeks said, “...no doubt that there’s softening, but you’re also seeing face rates increase.” Sharing that Pure Industrial is still seeing growth, Deeks said that developers sitting on land for the past two to three years keeps him up at night. With construction costs having increased, and financing costs having increased, Deeks worries that developers may panic and do a below-market lease that he feels would have major implications across the entire industry. “Let's just hope,” he says, “it doesn’t come to that.”

The Must-Haves for New Builds

Referencing improvements to newly constructed industrial space, Gaglardi agreed that yes, people are elevating their game in new builds and, in some cases, existing spaces too. The changes are things like increases to typical clear heights. Where traditionally 26 feet might be a minimum, now, you might see 32 or even 40 feet. According to Gaglardi, clients with older buildings that might not get a good lease rate may consider new paint, lifting the roof, or upgrading the sprinklers to an ESFR (Early Suppression, Fast Response) system. That being said though, after costs come through, proposed upgrades to existing buildings, often fail to make financial sense. “...I think more likely those old buildings,” said Gaglardi, “are going to continue to be old buildings and demand a lower lease rate, and in enough time, they’ll be redeveloped for a higher better use rather than the lipstick.”

“If we’re building today,” said Deeks, “we want to have a building that’s future-proof.” Clear heights of 36 feet are the norm for Pure Industrial. Referencing a 4-million, billion-dollar development in the pipeline, Deeks shared Pure Industrial’s focus on carbon-zero or carbon-zero-ready buildings. Changes include electrification of buildings, moving away from natural gas, EV charging, and rainwater collection. Although this type of building costs more, Deeks is confident tenants will pay for it, especially those with multinational footprints.

The Bottom Line

With vacancy rates increasing, the panel seems to agree that the market is moving towards a more balanced state and away from a frenzied pace. New spaces are being constructed with the future in mind featuring sustainable features. So, are times changing? Yes, it’s safe to say that the market is evolving and adapting to the needs of both tenants and landlords.

For additional NAIOP news and resources, follow along with the 2023 Webinar Series, and follow NAIOP Vancouver on YouTube, LinkedIn, Twitter, and Instagram.

While only some highlights from the breakfast meeting are outlined below, you can listen to the dialogue in its entirety by following this link.

The panel, moderated by Blaire Chisholm, the Chief Operating Officer for Pooni Group, welcomed as panelists:

• Sean McGill - City Manager for the City of Delta

• Paul Mochrie - City Manager for the City of Vancouver

• Vincent Lalonde - City Manager for the City of Surrey

The Role of a City Manager?

The primary and most simplistic function of a city manager is the oversight of all city employees as they work to execute the decisions made by the city council and the mayor. City Managers work to remain impartial and work to provide information flow-through. Comparing the operation of municipalities to many large organizations, one panelist outlined a big difference which is the diversity of focus on any given day. As an example, he went on to explain that one meeting might be spent sourcing lifeguards to ensure the ongoing operation of community pools while the following meeting is to discuss an upcoming development project. City Managers also provide continuity, as one panelist pointed out. While city managers don’t always survive election cycles, those that do provide continuity to various stakeholders including (but not limited to) the provincial government, the federal government, the health board, and the school board.

Working from Home & Looking to the Future

Chisholm asked the panelists what the future looks like for each municipality following the pandemic. Each panelist commented on the status of working from home with some that mentioned ongoing staffing challenges. Employees for the City of Delta work from home 60% of the time according to McGill. Difficult though is balancing fairness. He said that front counter employees, for obvious reasons, can’t work from home, where many other employees can. And, although working-from-home poses a threat to the need for office space, Lalonde says he’s bullish on the office believing it’ll never cease to exist. “It’s critical,” he says, “to be together”. Echoing this sense, Mochrie stated, “We’re not shedding all of our office space. We’re rationalizing it”.

Fluctuating Policies and Their Impact on Investment Decisions

Developer’s determine the viability of their investment decisions based on the policies in place at the time. Chisholm illustrated how sudden policy changes without the benefit of grandfathering can have a negative economic impact resulting in overall uncertainty in the market. How then, she asked, can cities balance needs of developers with the direction provided by council, while also ensuring that investors continue to invest in said communities?

Admittedly, according to Lalonde, Surrey does change policies from time to time. But, he went on, grandfathering has always been a big part of policy change. Giving consideration to the state of a development, grandfathering is seen as critical. On the flip side, Lalonde shared, policies are meant to improve land-use and, in some cases, eliminate things that are antiquated or no longer suitable to the market. 

In Summary

City Managers provide information flow-through between city employees, the city council and the mayor. With some municipal employees still working from home, each municipality is continuously fine-tuning residual pandemic related work-from-home policies. And, hoping to retain and attract investors, municipal policy changes work to improve land-use with grandfathering leveraged for developments already underway.

For additional NAIOP news and resources, follow along with the 2023 Webinar Series, and follow NAIOP Vancouver on YouTube, LinkedIn, Twitter, and Instagram.

NAIOP’s recent breakfast meeting helped to highlight that while recent media headlines reflect retail doomsday following the closure of stores like Nordstrom and Bed, Bath, and Beyond, quite the opposite is true, retail is at an all-time high. Panel moderator, Madeleine Nicholls, shared incredibly optimistic statics as she leaned on industry experts to give a true sense of the current state of the retail.

Nicholls shared Canadian retail sales are currently at 735 billion dollars, a figure that’s 19% higher than 2019. She went on to say that the national vacancy has only decreased by roughly 1% resulting in an overall 7% vacancy rate. And, after surveying retail tenants (who occupy some 10 million square feet), Nicholls shared that 57% reported they plan to keep the same size space, 15% said they want more, and only 9% need less. 

While only some highlights from the breakfast meeting are outlined below, you can listen to the dialogue in its entirety by following this link.

The panel, moderated by Madeleine Nicholls, the Senior Managing Director with Colliers Vancouver Brokerage and the National Retail Brokerage Lead for Canada, welcomed as panelists:

• Shane Epp - Vice President, Leasing, BentallGreenOak
• Katie Bertram - Leasing Manager, H&M Canada
• Brodie Henrichsen - Executive Vice Presient, JLL Canada 

Who Will Occupy the Big Box Vacancies?

Following up on the significant big box closures of Nordstrom and Bed, Bath, and Beyond, Nicholls leaned on Henrichsen (who works with brands like Winners, HomeSense and TJX) to learn who he felt might occupy these large vacant spaces. Although he’s unable to say who, Henrichsen did confirm that following this 3 million square feet coming back on the market due to these closures, 51 of the 65 Bed, Bath, and Beyond locations already have offers on them. “80% has been picked up”, he said. “This speaks to the robustness of the market”.

US Brands and Their Success (or not) in Canada

Illustrating long-standing brands like PetSmart and Staples, Nicholls asked Henrichsen to share why he thinks certain US brands thrive while others fail in the Canadian market. Key to success, according to Henrichsen, is fully understanding the Canadian customer. Although, at first glance, according to Henrichsen, Canadian and American customers seem similar, the brands that succeed (like Costco, HomeDepot, and TJX, to name a few) understand the differences. He went on to say that these brands immerse themselves on Canadian soil, setting up head offices and, in general, end up with thousands of employees. For those US brands who want to succeed in Canada, according to Henrichsen, remote operation from the US isn’t an option.

Succeeding in an Increasingly Competitive Market

Uncovering the best methods of attracting new tenants, Nicholls asked Epp to share what he does different in an increasingly competitive market. “The depth of market research”, Epp said. Previously, Epp shared, he used to draw a 5 KM circle around a particular site and then evaluate demographic details of the population along with their household income. Now though, he says, the amount of data provided by customer phone data is unprecedented. Able to learn where a customer lives and what they spend on everything, Epp can determine his trade area exactly. Using this information, he can determine the retailers and restaurants frequented by customers and can subsequently see who he needs to go after and how he needs to market.

The Bottom Line

Although the media may subtly infer a struggling retail industry portraying the closure of a select few big-box stores, often neglected to be publicly shared is the speed at which these spaces are snapped up and secured by new tenants. In a state of constant evolution, retail seems to favour those who reinvent their strategies and who fully and completely work to understand their customer.

With increasing interest rates, inflation, and ever-increasing governmental regulations, NAIOP welcomed a panel of experts to its most recent breakfast meeting to explore the current state of the commercial investment market. Covering assets classes like retail, office and industrial, moderator, Tony Quattrin posed questions that resulted in insightful strategies and forecasts moving forward.

While only some highlights from the breakfast meeting are outlined below, you can listen to the dialogue in its entirety by following this link.

The panel, moderated by Tony Quattrin, Vice Chairman, Capital Markets for CBRE Limited, welcomed as panelists:

• Jordan Carlson - Senior Vice President, Investment Group, Anthem Properties

• Alex Messina - Vice President, Acquisitions, Nicola Wealth Real Estate

• Vera Liu - Director, Investments, KingSett Capital

Should Investors Invest Now Despite Current Market Conditions?

Citing rising interest rates, increasing regulation, and a general market downtown, all panelists seems to agree that yes, investors should proceed and invest anyhow. Liu, who says KingSett hasn’t pumped the brakes on investment necessarily, looks to be more strategic (utilizing asset swaps or seeking unique capital) instead. Messina, identifying real estate as a very important part of a wealth management firm, says real estate contributes to the diversity of their portfolio and feels that it’s something that’s helped in both good years and bad years. 

Noting Anthem’s seemingly bullish approach to real estate, Quattrin asked Carlson to speak to their strategy in this market. Comparing investing to a thesis, Carlson said that while rising rates, inflation and higher taxes have the ability to impact the market quickly, the strategy recalibration necessary in a changing market takes both time and energy - two things that have the potential to slow prospective investing. That being said though, Carlson went on to say that overall, “there is a market here and there are good fundamentals right now.”

An Approach to the Office Sector

Following work-from-home mandates, and sweeping tech layoffs, Quattrin asked panelists to comment on their approach to office space. Carlson shared that Anthem believes in office. He believes it’s here to stay particularly those spaces well-located and close to amenities. Although there’s office vacancy, Carlson feels now is simply a period of rebalancing. Liu, who made special note of a significant reduction in the quality of service offered by companies with high-rates of employees working from home, feels there will be more and more pressure to get back to the office. She feels landlords will need to become more tenant-centric (giving more thought to the tenants needs and requirements). “KingSett,” Liu said, “will continue to invest in office, but will pay even closer attention to underwriting.”

Some General Thoughts on Industrial

Panelists, asked to offer their thoughts on the state of industrial sector, all offered a unique and optimistic outlook moving forward. Carlson noted that Anthem likely wouldn’t buy brand new industrial space, but, if there was a reasonable internal rate of return, then maybe they would. Liu, who pointed to the benefit of scarcity, said KingSett is optimistic and isn’t concerned about industrial at all. Nicola Wealth Real Estate, according to Messina, looks for existing, small bay, for-lease product. This strategy, according to Messina, has huge rental rate growth with no new supply.

The Bottom Line

Although all investment sectors have been impacted by rates, inflation, and regulations, the general consensus from panelists is optimism moving forward. While some strategies are recalibrated to adjust to the changing market, those who adapt can certainly find opportunity.

For additional NAIOP news and resources, follow along with the 2023 Webinar Series, and follow NAIOP on YouTube, LinkedIn, Twitter, and Instagram.

• Wayne Berger - CEO North American & Latin America, International Workplace Group
• Luke Moran - Director of Leasing, Reliance Properties
• Chuck We - Executive Vice President of Pacific Northwest and Western Canada, Hudson Pacific Properties

The State of Office Market Portfolios

Providing a quick recap on some vital statistics, Gardner shared how vacancy has increased from roughly 2% in late 2019 to close to 10% (predicted) for the end of 2022. With these numbers in mind, he asked panelists to share the state of their portfolios. Citing Vancouver as a Tier One market, Berger said the International Workplace Group is seeing demand outstrip their own supply. “Vancouver has been an outlier market,” he said. After watching vacancy bounce from 0% pre-pandemic upwards of 4%, Moran echoed Berger’s positive sentiment by sharing their current vacancy of 2% makes them (Reliance) happy. Reliance’s success is perhaps due to their ability to be creative. Moran shared, “We can offer things the institutional guys can’t”.

We was quick to outline the difference between leased occupancy compared to physical occupancy. There can be a certain occupancy based on leases in place, but then there’s the physical bodies showing up to work within those office spaces. Bentall Centre, he shared, is considered a trophy asset, and when considering leased occupancy, it tracks above the general market. Physically though, according to We, Translink Ridership Stats help show downtown offices are back to 80% with Tuesday through Thursday as the core days. “As landlords'', said We, “we’re looking to grow the core hours.”

Returning to the Office

Recounting negative office headlines like ‘the office is dead’, Gardner asked panelists to detail the reason they feel Vancouver is insulated from the challenging situations happening elsewhere. We shared the moment his company called employees back to their office for four-days a week, a move at the time he felt was scary. “We only lost three employees”, he said. After re-posting the positions, We even recalled a decline from the typical resumes received. “Instead of 70/80 resumes” he said, “we got 30 or 40”. From that though, a common sentiment was shared among the prospective candidates. Generally, many expressed not having seen their boss in two years, they were sick of staring at their roommate and were tired of sitting alone in their living room. When these people applied, according to We, they were self-selecting a desired environment. We says, the new hires “bring a new vibe because they are people who want to be there.” And, it’s a vibe he says, that’s contagious. 

Berger immediately noted that no, the office is not dead. “People'', Berger says, “want the flexibility to select when and where they’ll work based on what’s required of them.” Very few people, according to Berger, want to work from home every single day, and conversely, very few people want to come back to the office every single day. Flexibility in the workplace is key. Looking to reduce liability, corporate clients approach IWG, who may be in 80 buildings and want to reduce to 30 instead. Tied to leases and leasehold improvements, these clients ask IWG to help operate flex spaces to mitigate capital losses as the leases run out, and at the end of the lease, will then decide what to do with the space.  “We’re seeing a lot of portfolio rationalization”, Berger said, “as they move away from capital leases because of the liability and the new movement towards flexibility - that’s the big big shift that we’ve seen.”

The Impact of Sub-Leases

As of the date of the panel discussion, The Altus Group reported 56 new sub-leases had come on the market in the last 90 days with 14 of them over 10,000 square feet. And, interestingly, 81% of the sub-leases are from the technology industry. Looking for thoughts on the sub-lease market, Gardner asked panelists to share their insights. Moran, reminded everyone of the risk in being a sub-tenant, something he feels head landlords need to ensure people understand. For best success, Moran says, “You need to outcompete the subleases by being as competitive as you can. Do what you can do. Get that space back, turn it around and produce a better product.”

The Bottom Line

Noted by panelists as an outlier and a Tier One market, Vancouver is seemingly insulated from the level of industry challenge faced by other communities. The nature of the market requires constant adaptation and flexibility, with a healthy amount of competition. So, while the press spreads that the office is dead, it’s alive, and well, and constantly evolving.

For additional NAIOP news and resources, follow along with the 2022 Webinar Series, and follow NAIOP on YouTube, LinkedIn, Twitter, and Instagram.

• Darrell Hurst, Colliers, Senior Managing Director
• Jason Kiselbach, CBRE Limited, Senior Vice President & Managing Director

Reflecting on 2021

Referencing 2021 and 2020 as challenging years, Tilbury asked Kiselbach and Hurst to reflect on the past two years. Kiselbach, quick to speak to Vancouver’s resiliency, felt that “we were able to get back to business sooner”. Potentially speaking to markets like Montreal and Toronto, Kiselbach felt geography and warmer climates helped us in getting outdoors faster. While referencing the impact of Covid-19, Kiselbach noted he “drastically underestimated what we were facing”. Although challenging, he went on to highlight professional and personal outcomes like, the adaptation of new technologies, a renewed focus on drawing employees back to work, diversifying the supply chain, and endless meaningful conversations. Summing up his outlook moving forward, “we’re positive”, he said.

Echoing many of Kiselbach’s comment, Hurst felt Canada, as a whole has been remarkably resilient. Pointing to the healthcare systems (provincially and federally) specifically, Hurst S
OMETHIGN, a job well done. Unable to predict it, Hurst shared that Colliers had their best year ever with their clients sharing similar success. “The financial crisis was short-lived”, he said. “The resilience of our market has been something to witness.  

Retail Moving Forward

Perhaps impacted the hardest by restricted capacity and mandated closures, Hurst shared that hospitality was hit the hardest, leaving businesses forced to reimagine themselves. “Covid accelerated change in retail”, he said. “A change that was already coming”. Responding to Tilbury asking if Covid ‘forced’ an e-commerce catch up, Kiselbach noted that those who’d never ordered online before had too. And, in response, he said, “those companies had to expedite e-commerce. Gathering ‘all hands on deck’ in the summer of 2020, Kiselbach said some e-commerce platform strategies were implemented in a mere 90 days. Although e-commerce grew quickly and is estimated to match the USA, Canada still lags behind the 
UK. Citing room for improvement when it comes to e-commerce, Kiselbach noted, “there’s still a little more runway there”.

Office Moving Forward

Outlining research reflecting historical trends of the office sector, Kiselbach was quick to point out that, “office is so much better than what you’re hearing in the news”. Highlighting some keys metrics, he went on to say that vacancy rates are declining with rental rates having held firm and continuing to increase. “From 2020 forward, we were delivering new supply with very limited absorption”, Kiselbach said, “but that changed in Q3 of 2021 and absorption started to match supply”. But now, resulting from increased absorption and reduced supply deliveries, office is seeing further reduced vacancy.

Outlning an interesting trend from last year, Kiselbach went on to share that for the first time ever suburban vacancy dipped lower than the downtown vacancy, a fact that elicited an obvious question - Will there be an increased demand, resulting from corporate decoupling or secondary locations, in the suburbs moving forward? Suggesting there’s little evidence as of yet, Kiselbach said that, “It’s a trend CBRE is monitoring closely”. 

Industrial Moving Forward

When considering e-commerce as it relates to industrial space, Hurst spoke to three key findings. First, as e-commerce continues to evolve, more space will be needed. E-commerce has nearly three times the space requirements of traditional retail because e-commerce involves single items being shipped to consumers where traditional retail involves pallets or cases being shipped to a retailer.  Second, with the USA and the UK showing higher e-commerce penetration rates, it's expected that Canada’s e-commerce space will continue to grow. And, lastly, according to Hurst, as younger generations grow up with e-commerce, another e-commerce tailwind is expected. 

Depicting another slide comparing industrial supply versus vacancy, Hurst illustrated that although industrial supply is continually added to the market, the vacancy rates, reflecting increasing demand, continue to decline with 2021 rates at less than 1%. Citing “the flight east”, Hurst highlighted operators relocating logistics out of necessity and suggested that Abbotsford, Chilliwack, Kelowna and Victoria will be the likely beneficiaries of Vancouver’s restricted supply.  

The Bottom Line

Rental rates continue to soar with vacancy rates trending downward. Although rates may seem unsustainable moving forward, demand in Vancouver remains steadfast, and businesses remain agile as they continually adapt to new challenges. 

For additional NAIOP news and resources, follow along with the 2022 Webinar Series, and follow NAIOP on YouTube, LinkedIn, Twitter, and Instagram.

• Maureen Neilly, Director of Leasing, Quadreal
• Tara Finnegan, Senior Vice President, CBRE
• Peter Jenkins, Director of Leasing, GWL Realty Advisors
• Matthew Carlson, Executive Vice President, Colliers International
  

Is The Office Dead?

With more and more employees working from home, Chambers opened discussions with a heavy-hitting question, “Is the office dead?”. Rather than relying on instinct or hearsay, some panellists monitor swipe card data to measure real-time office occupancy. Neilly is seeing a 30% increase, with professional services reflecting even higher numbers. “It is increasing,” she said. Jenkins, who is seeing an uptick as well, shared that swipe card data is monitored when the office is closed (as swipe cards are required for access), while no hard data is available during open hours. Looking beyond swipe cards, Carlson looks to major players in office space. “Businesses like Google are making sizable commitments for office space,” he said. “Perhaps it’s a sign that the big guys don’t think that office is dead.”

Forecasting the Return to the Office

Chambers asked the panellists to share behind-the-scenes talk in regards to office returns. “What,” he wanted to know, “are people saying behind the scenes? What are returns going to look like”? Carlson, sharing feedback from one of his clients, said of the company’s 150 employees, they were confident that 150 employees would return. But, after conducting a survey, couldn’t gather the data to support it with only 75, on paper, reflecting an interest in returning  “It’s challenging to gather the data to support it,” Chambers said, “You have to empathize with the finances leaders, the real estate leaders - it’s really challenging for them right now.” Finnegan, who feels “there’s just no formula for how it’s going to look,” said her clients are soliciting plenty of feedback through tools like Slack, from their employees. “I think that’s what’s needed right now,” she said, “open-minded, open feedback…that kind of thing”.

The Vancouver Advantage

With the lowest office vacancy in North America, Chambers asked panellists to share what they felt saved Vancouver’s market through the pandemic. Jenkins, who said GWL “lucked out” and “skated through this,” felt thankful that their lease expiries, by chance, just hadn’t popped up in the last two years. While some expiries popped up recently for GWL, thankfully, the market picked up too. Neilly, who considers Vancouver a “world-class city,” says the city will always be a hub of office space. According to Neilly, Eastern professional services and US companies will continue to come, and Vancouver will remain a tech hub.

The Bottom Line

Media headlines often shed a negative light on the future of the office, but swipe card data and sizable investments from companies like Google signal strength in the office sector. And, although office return is challenging to forecast, Vancouver is a hub that remains well-positioned compared to other communities. 

The industrial market is robust with soaring lease rates, availability outstripping demand and vacancy sitting at 0.6% - the lowest in North America. And, of 6.3 million square feet of industrial space under construction, 74% of it is already either pre-committed or in some phase of negotiation. Adding further insight into the state of the industrial market, NAIOP members were joined by an expert panel who weighed in on the future of pricing, maximizing lands, how to be competitive. 

Below are highlights from the webinar - to watch in its entirety, use this link.

The panel, moderated by Julie De Cotiis, Senior Director of Leasing for Triovest Realty Advisors, welcomed as panellists:

• Beth Berry, Beedie, Vice President of Industrial Development

• Baktash Kasraei, Leading Industrial Real Estate Advisor, JLL

• Drew Gilbertson, Director of Industrial Leasing, Oxford Properties

Is This the Top?

Opening the discussion with some keys industrial market stats, De Cotiis shared $15.37 per square foot as the current average lease rate, a figure that’s increased 41% since 2018. In response to whether pricing has reached the top, all panellists agree that no, likely not. Baktash illustrated the obvious supply chain issues contributing to pressure on pricing but affirmed his confidence in pricing simply due to Vancouver’s limited land and ever-increasing population. Gilbertson, who agreed that pricing hasn’t necessarily reached the top, reminded everyone that “It really depends on what the consumer is willing to pay”. Berry feels that a slow down in velocity could only come from some kind of government intervention (like an increase in interest rates), or economic growth pressures.

Maximizing Industrial Lands & Densification

With limited land, panellists were asked to share their thoughts on the best ways to maximize existing land and further densification. Berry stressed the importance of finding ways to better utilize the existing land supply. Along with finding new building form to take better advantage of, she also felt that reviewing site coverage ratios can help too. Using the City of Richmond as an example, Berry mentioned the city’s proactive strategy in reviewing their, in some cases, outdated bylaws. Bringing bylaws up to today’s standard, the city considered what parking is actually required onsite, what the heights need to be, or, by providing some flexibility on heights. The city’s proactive measure, according to Berry, helps eliminate or reduce ambiguity and time constraints including the necessity to go in for development variances. According to Berry, working with municipalities proactively may reduce delays in bringing new product to market.

Using Creativity to Get Competitive

In such a competitive market, panellists were asked for examples of creative strategies (beyond price) that they’ve used to secure a lease deal or an investment. When considering a pre-lease, according to Gilbertson, it’s necessary to “...take a stance on where the market is going. Then, you can lock in and provide the steps”. Baktash says, “There’s no secret bullet”. Instead, he says, “there’s a lot of pre-planning and educating the client”. Baktash pointed to being prepared, keeping deals terms tight, the importance of covenants, and doing due diligence upfront. In short, he says, “you really need to know what you’re doing”.

The Bottom Line

While the market might feel at its top, panellists agree that prices will continue to rise and limited land will be a perpetual challenge. Maximizing land and increasing densification may be best helped with a proactive approach. And, securing lease deals and investments is enhanced with careful diligence and expertise.

For additional COVID-19 resources, NAIOP encourages members to refer to the NAIOP Vancouver website, follow along with the 2021 Webinar Series, in addition to following NAIOP on YouTube, LinkedIn, Twitter, and Instagram.

With focus commonly placed on assets classes like Office, Industrial and Retail, NAIOP welcomed a professional panel to discuss other viable real estate investment opportunities. Exploring Seniors Housing/Health Care, Hotels, and Multi-Family, panellists, as experts in their field, shed light on the barriers to entry, the best ways to invest with limited knowledge, and impact of COVID-19.

Below we’ve outlined only some highlights from the lively webinar. You can watch the webinar in its entirety by following this link.  

The panel, moderated by Paula Wright, Director of Asset Management for Manulife Investment Management in Western Canada, welcomed as panellists:

• Hamir Bansal, President of Hotels for Colliers International

• Mathew Burnett, Senior Vice President of Healthcare Capital Markets for CBRE

• David Venance, Executive Vice President of Capital Markets - Investment Sales for Cushman and Wakefield

Barriers to Entry

All panellists, when considering hotels, seniors housing, and multi-family, expressed a lack of operational experience as a primary barrier to entry. Bansal, who shared that lenders not only require 40-45% as a downpayment but also want to see prior experience or the hiring of a reputable manager. “The banks,” he said, “don’t like giving money to people who don’t have experience running hotels”. Burnett echoed this sentiment by sharing that health care is, “highly operational” requiring a high knowledge base and a steep learning curve. 

It’s Possible to Invest, Even with Limited Knowledge

“We’ve seen an emergence in 3rd party operators,” said Burnett in discussing the outsourcing of Senior’s Housing Management. He shared that the ability to ‘hire knowledge’, pay a management fee of 4 to 5%, while still seeing a potential yield of 6% will help remove entry barriers for many investors. 

When considering multi-family and hotels though, it seems that size matters. Multi-family buildings with 30 units or less make it nonsensical when it comes to outsourcing management, meaning the investor also becomes the operator - a considerable risk for those with no experience. Venance suggests exploring joint ventures instead. “There’s no shortage of developers looking for financial partners.” Or, for private higher net worth individuals, Venance suggests wealth management funds like those offered by Nicola Wealth, giving an investor the chance to invest in all asset classes without such significant financial outlay and less knowledge required.

The Impact of COVID-19

All panellists acknowledged some level of impact (positive and negative) resulting from the pandemic. Bansal shared that hotels in downtown Vancouver are experiencing record vacancies, but that surprisingly resort markets, like Banff and the Okanagan, are thriving. Describing the hotel community as a small and close-knit group working to stay positive, Bansal shared that, “...we’re telling each other it’s gonna be good”.

To outline the changes in his market, Venance shared the fundamental pre-covid drivers of his market which include immigration, economic growth, the cost of homeownership, flight to urban living, and the low cost of debt. “Overall in terms of investment value,” he said, “there’s been no evidence of any Covid discount - if anything, it’s been enhanced. We’re anticipating being not just at pre-covid levels, but even stronger at the end of all this.”

Describing the negative media coverage of long-term care operators as “unfair”, Burnett said Covid offered the opportunity for long-term care owners and operators the chance to look inward as they worked to protect their residents and their staff. “Now that that demographic is vaccinated and safe,” Burnett said, “we’re seeing a really really strong resurgence in demand.” And, in the next 15-years Burnett reminds us, we’ll see a doubling of the senior population in Canada.

The Bottom Line

For investors giving thought to asset classes like hotels, health care, and multi-family, it seems that knowledge and experience are favoured. Thankfully, those with limited experience can outsource management, or consider joint ventures or wealth management opportunities. And, while COVID-19 has no doubt impacted all asset classes, the future looks bright in all sectors.

For additional COVID-19 resources, NAIOP encourages members to refer to the NAIOP Vancouver website, follow along with the 2021 Webinar Series, in addition to following NAIOP on YouTube, LinkedIn, Twitter, and Instagram.

• Maury Dubuque, Senior Managing Director of the Vancouver Brokerage at Colliers International
• Michael Keenan, Principal & Managing Director of the Vancouver Office of Avison Young
• Janet Patricelli, Vice President & Managing Director at Devencore
• Hendrik Zessel, Executive Managing Director & Western Canada Lead with Cushman & Wakefield

It’s a People Business First

The panel was unanimous in acknowledging the rapid embrace of technology over the past year, for better and worse. Boardroom and face-to-face meetings quickly moved to Zoom. Although the platform was needed and valuable, Zessel pointed out that while online business tools might’ve changed (perhaps temporarily), the business fundamentals remain steadfast. “It’s a people business,” he said, “You can’t get too caught up in the tech side. You still need face-to-face meetings. They’re the most impactful”.

A Shift in Accessibility

Acknowledging over accessibility in the virtual world, Patricelli and Dubuque noted some concerning shifts in expectations. “In my decades prior,” Patricelli said, “I’ve had very few calls at 7 o’clock at night. But I just think of this week, I had two calls at 7 o’clock at night, at home”, something she hopes will change moving forward. Dubuque echoed Patricelli’s thoughts, “the Vancouver workday was 8 to 5,” he said, “and now it seems to be 6 to 6. God forbid that’s a permanent change”.

Best Methods for Adaptation

When asked how brokers have adapted to market shifts over the past year, the panellists quickly pointed out the adaptable and inherent nature of brokers themselves. Keenan spoke of veteran brokers, who previously would’ve handled larger, complex deals, began, instead, finding success (and volume) in smaller deals. “Then, they started to build that way,” he said. Zessel, identifying brokers as “deal-junkies,” outlined broker’s strength generally at identifying and following trends.

Coaching Junior Brokers

While seasoned brokers might’ve had record-breaking success during the last year, many junior brokers were challenged. The panellist shared insights as to how they set their junior brokers up for success. Keenan, who felt getting junior brokers on the right path should be “...the solemn duty of a managing director”, went on to acknowledge the numerous distractions plaguing newer brokers. According to him, those who ‘stay in their lane’ or ‘become experts in a given area’ will have the best chance of success. Zessel, who agreed with Keenan, said he works to get his junior brokers to develop a brand in hopes clients will call looking for intel, and part of that becomes “knowing their territory or knowing their discipline well.”

The Bottom Line

The commercial market and its brokers proved resilient over the last year. While technology offered (and continues to provide) the chance to facilitate meetings and transactions, all panellists seem to agree that the key to a long-lasting successful business is still through in-person business dealings. And, while junior brokers might struggle to find momentum at first, focus, in an otherwise distracting industry, will be crucial in the long run.

For additional COVID-19 resources, NAIOP encourages members to refer to the NAIOP Vancouver website, follow along with the 2021 Webinar Series, in addition to following NAIOP on YouTube, LinkedIn, Twitter, and Instagram.

• Jaclyn O’Neill, Vice President of Asset Management with BentallGreenOak
• Derick Fluker, Senior Vice Present of Leasing & Acquisitions with Wesgroup
• Mark Hao, Director of Office Leasing with Oxford Properties

Realigning Priorities

At the outset of the pandemic, headlines had the industry preparing for the worst. Now, nearly one year into Covid, O’Neill shared, “the perception that the sky is falling has ended and we can see a light at the end of the tunnel”. Statistics, like rent collection rates, now show signs of stabilization following initial deep dives. Recovery and stability are evident, perhaps largely resulting from Government initiatives, in industrial, office, multi-family, and retail. But O’Neill pointed out, rent collection graphs prove overly optimistic as they don’t necessarily account for restructured deals. With panic at bay and a little more breathing room though, market professionals like O’Neill have reprioritized. Looking primarily to support tenants and maintain their occupancy, O’Neill is able to look longer term, sharing, “We’re looking to those 5-year plans rather than just looking to the next rent collection date.”

The Tenant Perspective

When asked what his tenants are thinking, Fluker found it challenging to offer one broad statement. “Every tenant has a different outlook, he said. “Every conversation is a little bit different”. Government tenants, he shared, experience budget pressure and are giving consideration to their space requirements. But, by the nature of Fluker’s portfolio, the impact of Covid might not be as dramatic as a more typical downtown portfolio.

Vancouver on a Global Scale

When considering vacancy rates in Office and Industrial, Vancouver’s Q4 2020 rates, are among the lowest in North America. Hao (from Toronto), shared his perspective on Vancouver on a global and national stage. Referring to Vancouver as a “gateway city”, Hao said Oxford Properties is bullish on Vancouver but was quick to point out the lack of liquidity for scale - something he says proves to be both a pro and a con. Advantageous to cities like Toronto and Vancouver, was that pre and post-Covid, they were coming off a very low base (already having among the lowest vacancy rates). Considering other coastal markets like New York and San Francisco, Hao shared, “they’re not in the same admirable position”. Hao went on to say that Green Street in San Francisco experienced a historical low and a historic high, all within the same year. The small nature of Vancouver’s market potentially works to eliminates such wild swings. And, referring to Vancouver, Hao reminded us, “the quality of life is great, along with the potential for amazing tenants.”

The Bottom Line

While statistics like rent collection and office occupancy show promising signs of stabilization, the market isn’t necessarily out of the woods yet. Watching cap-backs and spending, along with supporting tenants will certainly aid long-term recovery while helping to maintain stability.

For additional COVID-19 resources, NAIOP encourages members to refer to the NAIOP Vancouver website, follow along with the 2021 Webinar Series, in addition to following NAIOP on YouTube, LinkedIn, Twitter, and Instagram.

• Sydney von Vegesack, Senior Manager, Leasing, Western Canada of Allied Properties
• Kevin Nelson, Executive Vice President of CBRE
• Ted Mildon, Director of Office Leasing of Oxford Properties

Below we’ve outlined only some of the webinar highlights. You can watch the webinar in its entirety by following this link.

The Future of Working From Home

Perhaps led by a honeymoon phase in the spring, many office workers (NAIOP members included) embraced working from home. Helping to eliminate cumbersome commutes, battles for parking and the need to get dressed and go, working from home seemed, at first glance, like it was the new norm. Offering a quick live poll, Moderator, Dan Jordan, asked the NAIOP audience whether they planned to continue to work from home. Surprisingly, roughly 80% of respondents noted (if given the choice) that they’d work from home only 0 - 2 days per week, a notion echoed by panelists. Citing challenges like Zoom fatigue, increased inefficiency and lost social capital, workers seem somewhat anxious to get back to the office.

The Occupancy Levels of Leased Office Space

Jordan asked panelists to share their current office employee/worker occupancy levels. In other words, just how occupied are currently leased buildings. By using keycard data, Mildon (Oxford Properties) reported a range of roughly 16 to 40% occupancy, where von Vegesack, whose portfolio includes walk-up buildings and low-rise spaces, cited occupancy levels edging on 50%. The higher occupancy suggests (according to von Vegesack), is a reflection of the type of office spaces they hold. Allied’s Vancouver spaces have less need for gathering at elevators (a circumstance that may keep workers away), and they additionally have workers who live within walking distance, leaving less need for mass transit. In stark contrast are Allied’s Calgary spaces that are experiencing 10-20% worker/employee occupancy, a direct result of necessary mass transit, and prohibitive parking rates.

Counteracting Low Employee/Worker Occupancy

Protecting social capital along with a competitive edge is crucial for most tenants. With so many employees working from home, Jordan asked panelists to share how their tenants plan to counteract this fact. Nelson, quoting an unnamed CEO, shared a potential risk when workers choose permanence in working from home, “If you plan to work from home forever, then why can’t I hire five of you from South East-Asia to replace you.” Highlighting the fear of lost opportunities like projects increased compensation or future promotions, Mildon pointed to FOMO (fear of missing out), from the employee/worker perspective. “The finance and legal industries are back to work but some industries don’t want to be the bully”, Nelson said. “The rhetoric is going to change.”

The Bottom Line

While at present, there is high office vacancy, the panel reflected overall positivity. Good quality space is being leased-up. The somewhat paralleled 2008 crash offers the potential for a similar 10-year bold run coming out of the pandemic. Workers, for the most part, seem anxious to get back to the office. And, looking to 2021, panelists shared they felt optimistic about the future of Vancouver’s office space.

For additional COVID-19 resources, NAIOP encourages members to refer to the NAIOP Vancouver website, follow along with the NAIOP Fall 2020 Webinar Recordings, in addition to following NAIOP on YouTube, LinkedIn, Twitter, and Instagram.

• Meghan Henselwood, Manager of Investments, Lotus Capital Corp.
• Mehdi Shokri, Principal, Capital Markets Group Investment Investment Sales, Avison Young
• Amanda Payne, Director, Corporate Development, Wesgroup Properties
• Luke Schmidt, Vice-President & Director, Real Estate Investments, TD Asset Management

The Vancouver Perspective

After being asked the perception of Vancouver across Canada and globally, Rouillard turned to Schmidt and Henselwood for their input. Schmidt, with his base in Saskatchewan, said he likes Vancouver, considering it a “global city”. Outlining how Canada’s population is really pulled into three major centres (Toronto, Montreal, and Vancouver), he went on to say that in terms of diversity, Vancouver and Toronto are ahead of major US cities like New York and San Franscico. 49% of those residing in Toronto, and 42.5% of those residing in Vancouver, are, by definition, foreign-born. “Those trends”, he said, “are going to continue. That’s why we like Vancouver”. Echoing Schmidt, Henselwood identifies Vancouver as a “safe city”. A city that’s moving from an 18-hour city towards a 24-hour city. Sharing her thoughts on changes following Covid, Henselwood said, “I think post-covid, we’ll see a push to reduce density”.

Who’s Leading the Charge When it Comes to Investment

When asked which segment of the market will lead the charge in the investment pool, Rouillard reminded panellists of the overallocation of real estate experienced by institutional investors in 2008 - a trend not necessarily seen right now. Henselwood, pointing to the importance of landlord creativity, also outlined prop tech as a big help moving forward. Identifying platforms like Nexii (a tool that helped facilitate the construction of a free-standing Starbucks in only 6-days), Henselwood said prop tech has the ability to save time, and money, allowing entities like Starbucks to realize gains two to three months faster. “In the longer term”, Henselwood said, “we, as a real estate community, need to focus on changing and moving forward with the real estate economy.”

The Opportunity for Distressed Assets

“Vendors are sticky, and still unwilling to budge on price” commented Payne, when asked about increasing opportunities for distressed assets. Believing that prices will eventually adjust, Payne did say that she’s seeing success with increased deal creativity, “Vendors are willing to be more creative, so it’s building more time into deals; it’s managing the risks in the deals”. Medhi, echoing Payne, said he’s not seeing many distressed assets being sold. “A lot of the assets have pressure to sell”, he said, “as they paid too much in the first place. They might sell, but just to break even - they’re dealing with house money (so-to-speak) at that point”.

The Bottom Line

While the global landscape is uncertain, cities like Vancouver provide some level of assurance to investors. Adaptation (through prop tech), along with creativity and the mitigation of risk is thought to help facilitate new deals. And, although prices won’t budge (at least for now), growing supply may challenge pricing in the long run.

For additional COVID-19 resources, NAIOP encourages members to refer to the NAIOP Vancouver website, follow along with the NAIOP Fall 2020 Webinar Recordings, in addition to following NAIOP on LinkedIn, Twitter, and Instagram.

• Alireza Harandi, Vice President, Investment Officer, Capital Deployment of PROLOGIS
• David Owen, Chief Operating Officer, PIRET
• Blake Asselstine, Vice President, Asset Management, Beedie
• Stuart Morrison, Executive Vice President, Colliers

Below we’ve outlined only some highlights. You can watch the webinar in its entirety by following this link.

Changing Roles in a Changing Market

When asked about whether their roles needed to adapt in these uncertain times, most panellists said no. Outlining more pressure on staff as they responded to the rapid increase in rent relief requests, Asselstine, when referring to his team, highlighted the importance of collaboration. Harandi, on the other hand, pointed to the shift in focus for his team as a whole, “I think it gave us more of an opportunity to focus on things other than the physical real estate and rent collection.” Citing the chance to turn their attention to research and development coupled with renewed customer focus, Harandi went on to say that, “...that’s where we really think the future will be, and that’s where we think the puck will go.”

What Exactly is a Healthy Vacancy Rate?

Morrison shared that vacancy rates sit, as of now, around 1.3%. Reflecting on 2001, he recalled vacancy rates when they stood at 5.1%. While low vacancy rates are certainly favourable from a landlord’s perspective, Morrison outlined the resulting constraints when looking to accommodate existing tenants within one’s portfolio, suggesting that a healthier rate is likely somewhere between 3 to 4%. Echoing this sentiment, while joking that really, “no vacancy is good vacancy,” Asselstine went on to say, “There’s nothing worse than losing a tenant when you can’t accommodate them within your portfolio.”

Will Other Markets Benefit from our Low Vacancy?

With limited vacancy challenging for some tenants, the moderator asked whether the panellists fear losing tenants to other markets like Calgary or Seattle. “Bigger companies can make the move,” said Asselstine, “but for smaller guys, it doesn’t really make sense.” Due to increased costs resulting from transport and labour, a move to places like Calgary, according to Morrison, “is too challenging for most locally owned businesses.”

What is the Ceiling for Industrial Real Estate?

With Toronto rentals in the neighbourhood of $11 to $12 and San Francisco seeing rates as high as $20 USD, MacCauley asked panellists their thoughts on the perceived tenant cost. In Toronto, according to Owen, the market is location dependent. “Rent,” he said, “is a true function of location and the proximity to transport and labour. Rent is small to a lot of these tenants. Access to the customer is what’s most important”. Harandi echoed this sentiment and shared that “rent is a small factor when compared to other costs in the supply chain. The number one pain point for our customer is labour.”

The Bottom Line

The industrial real estate asset class is healthy, with strong rental rates and incredibly low vacancy rates. Though low vacancy rates are favourable to landlords, proving challenging is the ability to accommodate existing tenants within a portfolio. So far, it seems that tenants will stay loyal to Vancouver, with transport and labour too big a challenge in other markets. And, while rents are high, the overall cost is seemingly small compared to other factors, like labour, in the supply chain.

For additional COVID-19 resources, NAIOP encourages members to refer to the NAIOP Vancouver website, follow along with the NAIOP Fall 2020 Webinar Recordings, in addition to following NAIOP on LinkedIn, Twitter, and Instagram.

As part of the Lunch with NAIOP’s webinars series, Tom Corsie, Vice President of Real Estate, and Katherine Bamford, Director of Trade Development, from the Port of Vancouver offer an enriching discussion. Providing an overview of the Port of Vancouver’s role as the largest landlord of industrial real estate in the Lower Mainland, Tom and Katherine touch on the port’s real estate and how it’s been impacted through the pandemic. Below are some key insights from the webinar.

To learn more, you can watch the webinar in its entirety by following this link.

The Role of the Port of Vancouver

Put simply, the Vancouver Fraser Port Authority is an arms-length federal agency responsible for stewarding the lands and water of the Port of Vancouver. Mandated to facilitate Canada’s trade objectives while ensuring goods are moved safely, the port authority additionally keeps its focus on protecting the environment while giving consideration to the impact on local communities. Able to lease federal lands to terminal operators, much of the revenue generated by the port come from tenant rent and user fees. With a vision to be the most sustainable port, the Port of Vancouver describes such sustainability as one that delivers economic prosperity through trade, maintains a healthy environment and enables thriving communities.

Canada’s Largest Port    

The Port of Vancouver is Canada’s largest - even larger than the combined size of Canada’s next 5 largest ports. An economic driver, the port contributes upwards of 115,000 jobs across Canada and supports trade with over 170 countries. A complex landscape, the port borders 16 municipalities (when other ports commonly border only one), and it intersects with traditional territories and treaty lands of several Coast Salish First Nations. Required to be entirely financially self-sufficient, the port relies on tenant rents and user fees that it then reinvests in port infrastructure projects.

Real Estate at the Port of Vancouver

The port authority collects approximately 160 million dollars in rent annually, which accounts for roughly 60% of the port’s total revenue. As the largest landlord of industrial real estate in the lower mainland, their real estate portfolio includes land both above and below the water. Of the 3,700 acres above water, 2,800 acres are leased, and, of the 13,000 acres submerged, 3,300 acres are leased. With so much leased land, the port manages 1,400 property agreements at any given time. Contributing to 27% of jobs, and 40% of the GDP, the port is working hard to protect industrial land (currently only 4%) from being incrementally converted by local municipalities into non-industrial uses.

COVID-19’s Impact on the Port of Vancouver

The Port of Vancouver’s cargo mix offers resiliency in an otherwise challenging time. With primary cargo categories including bulk, containers, breakbulk (lumber, pulp, project cargo and steel), automobiles, and cruise, a downturn in one cargo type, has been buffered by an increase in another. The cruise industry as an example in down 100%, but, as of April 2020, bulk (including grain and coal exports) has risen 6%. As of April 2020 YTD, the total cargo was up 1% which may bode well for the remainder of the year.

For additional COVID-19 resources, NAIOP encourages members to refer to the NAIOP Vancouver website, follow along with the Lunch With NAIOP Webinar Events, and follow NAIOP on LinkedIn, Twitter, Instagram and YouTube.

As part of the Lunch with NAIOP’s webinars series, speaker, Sunny Ghataurah (of AES Engineering), offers trends and insights into tech as it pertains to our post-pandemic world. Helping to increase business efficiency, attract talent, and harness powerful data through analytics, Sunny shares his thoughts on how to embrace technology including several technological advancements. Below we’ve listed only some highlights from this interactive webinar which will help to uncover the potential for our ‘new normal’.  

You can learn more including watch the webinar in its entirety by following this link.

Technology in the Workplace

When it comes to Millenials, Sunny illustrated the importance of technology as employers look to attract talent. “What they’re looking for in the workplace is technology”, Sunny said, “and how we can add tech to places is being used as a driving factor as to whether they’d come to work at that place…”. Upon polling NAIOP’s audience, most respondents reflected this notion too when they reported that technology will be at the forefront, rather than an afterthought, of their future project design criteria. 

Moving Beyond Location, Location, Location

Location, location, location, the popular (and commonly accepted) mantra meant to reflect the most important consideration when procuring real estate, needs a little updating according to Sunny. Though still relevant, Sunny suggested three new real estate rules - location, analytics, and user experience. Identifying user experience as the most important, Sunny shared how a great experience allows a user to forget (or overlook) other potential downfalls - things like the elevators being too slow. 

The New Norm

Highlighting a graph containing data from IoT Analytics, Sunny outlined predictive research which suggests that connected buildings will be considered ‘the norm’, a standard similar to the acceptance of LEED Gold, by the year 2030. Technologies like 5G and Wi-Fi 6 are expected to eradicate bottlenecks like connectivity and battery issues. And, sensor technologies, will offer predictive maintenance, sending alerts in advance of mechanical failures. Rather than reacting to an ‘out of order’ elevator or heat pump, sensors will communicate parts needing replacement. “These predictive analytics,” Sunny said, “will help us in deploying our assets differently.”  

The Bottom Line

The rapid response to COVID-19, including work from home mandates, only highlighted the importance of workplace technology. Working to increase efficiency, preserve assets, and attract talent, technology must be top of mind as we evolve through the pandemic. To drive home this point, Sunny shared a relevant quote from his colleague, Andrew Elliott of Foleys Candies. “Businesses that wait for the return of yesterday will fail”.

As part of the Lunch with NAIOP’s webinar series, NAIOP Vancouver President, Jason Kiselbach hosts NAIOP’s Corporate President and CEO, Tom Bisacquino, and the 2020 Director, Larry Lance. Sharing insights from their perspective as leaders of our 20,000 member-strong organization, Tom and Larry shed light on the impact of the current pandemic, their predictions for the future, and the strength of the NAIOP membership. Below are only some of the highlights from this compelling webinar.

You can learn more in addition to watching the webinar in its entirety by following this link.

We’ll Persevere Together

Though it’s tough to argue the unique nature of the current pandemic, Larry, a 33-year NAIOP member, has endured four previous downturns, COVID-19 being his fifth. “While this is severe,” Larry said, “I’m calm compared to my early experiences.” His goal for the upcoming year, though he wished it to be face-to-face, is for NAIOP’s senior professionals to give back by mentoring and encouraging the younger members. Watching NAIOP’s memberships ebb and flow over the years (7,000 members when he joined, a dramatic drop to 3,800 in the early ’90s), Tom says topping 20,000 members reflects the strength in our chapter. 

A Forecast for the Future

Acknowledging the impact on the economy as swift and dramatic, Larry identified the material and economic effects in not only North America but the world. Doing nearly everything possible to provide economic stimulus, Larry recounted the efforts of the federal reserve (in the United States) as they cut interest rates to zero while injecting trillions of dollars into the economy. Providing a brief difference between the catastrophic economic shock of the 2008 rescission (a time where banks had only 4 billion in capital), Larry shared that supply is in check (pointing to the chance for greater resilience) with banks having roughly 1 trillion available in capital. Although transaction volume is down a staggering 70% (a stat from April 2020), Larry feels there may be growth experienced in the latter part of this year carrying through to 2024. 

Adjusting Priorities

Upon being asked how NAIOP has adjusted priorities in response to COVID-19, Tom said, “we are built for this type of crisis because content and information is king.” Previously selling 100 to 150,  approximate 16-hour on-demand events for anywhere between $295 to $695, over the last few months, NAIOP opted to offer these programs to members for free. Thrilled by the response, Tom recounted the 6,000 members who’ve signed up for these programs. “It’s incredible,” he said, “It really is.” In response to COVID-19, NAIOP pivoted, and they did it quickly. According to Tom, NAIOP is digging deep into content and research, working on learning what’s happening with members, their day-to-day issues, and what it is they want to know.

For additional COVID-19 resources, NAIOP encourages members to refer to the NAIOP Vancouver website, follow along with the Lunch With NAIOP Webinar Events, and follow NAIOP on LinkedIn, Twitter, Instagram and YouTube.

As part of Lunch with NAIOP’s webinars series, Moderator Rachel Hutton (from Stikeman Elliott) and James Clay (from JT Insurance) discussed insurance in the context of COVID-19. Rachel and James provided insight on what NAIOP members should be doing now and areas that may not yet be on our radar. Below we’ve listed only some highlights from the webinar which will help you to gain a deeper understanding of the current dynamic within the insurance industry.

You can watch the webinar in its entirety by following this link .

A Hard Market Amplified by COVID-19

Although COVID-19 has certainly amplified challenges to the insurance industry, James was quick to illustrate why the pandemic is far from the only reason the industry is facing challenges right now. In the last quarter of 2019, the market had already started to shift from what was considered a ‘soft’ market - one with competitive insurance premiums, lots of capacity, relaxed underwriter scrutiny and plenty of competition - to a ‘hard’ market. Factors like global losses (primarily weather) and construction costs (which aren’t increasing at the same pace) have challenged the industry. Perhaps the most ‘press-worthy’ struggle though has been the impact to residential realty. With strata corporations seeing 30 - 40% rise in premiums and deductibles rising from $250,000 to $500,000 and higher, underwriters are being more cautious. COVID-19 has only amplified the challenges faced by the industry.

The Application of Business Interruption Insurance

Typically insurable events include something with geographic limitations and/or defined timelines - something not necessarily present with the current pandemic. Pandemics as such are essentially uninsurable events which isn’t to say that pandemic coverages aren’t being offered. As an example, James pointed to Wimbleton, an organization that has paid 2 million dollars annually for the last 17 years (34 million dollars paid in premiums to date). Wimbledon will claim 141 million dollars for the cancellation of the tennis event this year. Although much of business interruption might be uninsurable, James suggests to his clients to report all claims for all lines of business regardless of their likelihood to collect.  The reason? Some relief programs, the federal relief program being one example, state that the landlord or tenant sought to receive any insurance proceeds available to it. In this case, James says, it’s important to have and keep denial letters from the insurer to maximize the chances of benefiting from other relief programs.

Common Types of Claims

Business interruption is the insurance getting the most attention in conversation as it relates to COVID-19, but coverages like Third Party Liability and Directors and Officers; Cyber Risk; and Vacant and Unoccupied Locations are important too. While it could be challenging to entirely prevent COVID-19 in your business or your building, proving that you have developed and implemented appropriate protocols and procedures is crucial in mitigating liability. Also at risk in this sense are claims against directors and officers seen to show an inadequate response to COVID-19 along with failing to accommodate ill or affected employees. Training and procedures that help with cybersecurity are an important focus as so many employees transition to home-office. James suggests reminding employees to be hyper-vigilant in watching for cyber threats like phishing scams and zoom bombing.

The Bottom Line

With such a dynamic challenging market, it’s never been so important to leverage the help of an insurance broker. Helping a broker to understand your business, will help you in mitigating risk wherever you can. Rather than using your insurance broker transactionally, use them as part of your overall risk mitigation strategy.

As part of NAIOP’s webinars series, Moderator Loren Bergmann (of Workplace Strategies & CBRE) hosts an engaging and interactive discussion with Bill Tucker (of Omicron). Gleaning insight from Tucker with polling from the live webinar audience, Bergmann poses timely questions that help to reveal construction’s current COVID impacted status along with its potential outcome. Outlining refined systems, agility, and strong management as the key to success in these difficult times, below are only some of the highlights from this May 21st webinar.

You can watch the webinar in its entirety by following this link.

What’s The Impact of COVID on Omicron

Describing the initial COVID period as the ‘honeymoon’, Tucker identified Omicron’s ability to remain fluid in helping to navigate the lockdown’s initial impact. With each construction site functioning like individual businesses, Tucker saw quickly that setting standards across sites will enable the industry to thrive. “If you’re going to thrive, you really need to set a standard - you need everyone signing off the same song sheet. As a general contractor or the developer on a particular project, we have to set that standard, we have to set that bar.”  While things have been manageable thus far, Tucker sees difficulties in the weeks and months ahead, “We will start to see challenges like trade failures and supplier issues. We’ll start to see companies really getting stretched.”

Where is Construction Pricing Headed?

According to Tucker, pricing is likely to decrease over the short period (the next six months). Downward pressure on construction pricing will result from the Canadian Dollar as its been negatively impacted by oil; imports being impacted between Canada and the US; and, overall delays in the supply chain. Over the longer term though, Tucker says “...the whole industry is going to fight to get prices back up because we want to pay our people, we want to keep our people. People need to earn a living wage in many parts of this province.”

Will Project Scheduling Lengthen, Shorten or Stay the Same?

When polled, NAIOP’s webinar audience generally felt that scheduling was most likely to lengthen with COVID challenges, an opinion echoed by Tucker. Referring to the need for continuous adaptations to minimize schedule slippage, Tucker says scheduling will be an ongoing challenge. “The quicker we complete a project, the more profitable that project is.  I think we’re going to see no more than a 10% slip if we’re really careful, but it’s going to be management-intensive and it’s going to rely on cities being timely with permits, with approvals, with reviews, inspections etc. - that’s an externality that we haven’t really explored. We’ll need the whole market working together to meet those timelines.”

Should the Industry Expect Future Lockdowns?

Omicron anticipates future lockdowns and will work to embrace them. “If sites shut down, we’ll try and use that to our advantage”, Tucker said. “We’ll be more nimble to adapt to the new normal.” With a globally integrated supply chain, a light fixture could be purchased somewhere like Toronto or Chicago, but the parts that make up the light fixture could include components sourced from other parts of the world, creating a delay in the entire system. Omicron looks to pre-order materials, acknowledging that things won’t be moving at a usual pace. Tucker pointed additionally to Canadian alternate products in helping to maintain Omicron’s scheduling, “We’re working to have as many Canadian alternates products available as possible,” he said. 

For additional COVID-19 resources, NAIOP encourages members to refer to the NAIOP Vancouver website, follow along with the Lunch With NAIOP Webinar Events, and follow NAIOP on LinkedIn, Twitter, and Instagram.

NAIOP welcomed two active local lenders (representing two prominent Canadian lending institutions) to discuss COVID-19’s impact on the lending landscape. Moderator James Paleologos (of Realtech Capital) posed timely and relevant questions to panellists, A.J. Delisle (of RBC) and Martin Matusiak (of Coast Capital) where these uncovered many realities of lending during these uncertain times. Below are only some highlights from the lively discussion featured during NAIOP’s May 14th webinar.

The Evolution of Lending Amid COVID-19

RBC and Coast Capital have a similar focus during these uncertain times. Rather than chasing new business - moving from a perceptibly ‘aggressive’ approach - these lenders have become increasingly offensive. Turning inward, both institutions have highlighted their client-focused approach - working to see first, that their existing customers are supported as best they can. “Rather than chasing deals”, Delisle said, “we’re working to help our existing clients.” Matusiak shared a similar sentiment, “...we want to ensure our existing clients are taken care of.”

Of course, the focus of business is only one shifting aspect of lending amid COVID-19. The manner in which transactions are processed has faced a rapid evolution too. From face to face meetings all but abolished, and roadblocks like ‘original signatures only’, both Coast Capital and RBC have made (and are making) rapid adaptations. Although fairly mobile-ready, Matusiak shares that Coast Capital placed added focus on their ‘back office’ embracing new technologies which includes the use of e-signature software in addition to implementing new policies too.

Shifts in Underwriting

Formal underwriting and qualification requirements remain unchanged, according to Delisle and Matusiak, but even so, both lenders are increasingly conservative. Matusiak is giving special consideration to debt service coverages where he looks for a bigger buffer on income, evaluating the sensitivity analysis, reviewing the direction of cap rates and the possible pattern of the income. Additionally, he’s structuring deals with creative outcomes. For example, properties with limited rental capacity (now) might be structured with multiple tranches to existing borrowers providing increasing assurance that credit will be available in the future.

In regards to pre-sale deals, Delisle spoke to additional structures to help with qualification. Qualification is encouraged through lower pre-sale requirements paired with higher equity structures. As sales happen, the equity position is reduced. “What’s changed during COVID,” according to Delisle, “is that people aren’t really coming in with pre-sale deals anymore”.

Fixing Rates

With market factors shifting so quickly, “A quote today may not be good by tomorrow,” said Delise. Increased communication between teams is important in delivering accurate and timely numbers. Matusiak pointed to quick communication which results in “...having a finger on the pulse of the pricing of the market. Matusiak saw a rush of rate-fixing at the beginning of the pandemic with many borrowers holding off now. ” Although forward fixing options are available, according to Delisle, “we don’t fix until the loan application is approved.”

You can watch the webinar by following this link.

For additional COVID-19 resources, NAIOP encourages members to refer to the NAIOP Vancouver website, follow along with the Lunch With NAIOP Webinar Events, and follow NAIOP on LinkedIn, Twitter, and Instagram.

Welcome to the First Edition of the Lunch with NAIOP Webinar Series!

In this webinar, NAIOP welcomed an expert panel to discuss best practices for screening as businesses begin to reopen in BC. With Chuck We (of Hudson Pacific Properties) acting as moderator, Peter Tolensky and Ryan Berger of Lawson Lundell offer insights into relevant COVID guidelines along with screening considerations for both tenants and landlords.

You can listen to the webinar audio by following this link.

Protocols, Guidelines, & Orders

Moving forward, the new business norm will include adherence to protocols, guidelines and orders from the Province of BC, various ministries, and WorkSafe BC. The BC Restart Plan, as an example, offers guidance to individuals and businesses using a four-phased approach meant to mitigate the impacts of COVID-19. While orders like Ministerial Order No. M120 help in the avoidance of civil liability for those operating essential services (protection offered so long as the business is operating in accordance with all applicable emergency and public health guidance).  

Ministerial Order No. M120

Tolensky and Berger pointed out that Ministerial Order No. M120 does not name landlords as being a landlord doesn’t fall within the realm of being an ‘essential service’. Tolensky and Berger felt that the assumption could be made that landlords working to ensure overall compliance of their buildings - operating (and hopefully exceeding) compliance with public health and safety guidelines - have the best chance of being protected by M120. 

With M120 offering civil protection, WorkSafe BC provides tenants and landlords with a baseline (or minimum) requirements for COVID-19 exposure prevention. COVID-19 is now potentially considered a workplace injury. An outbreak in the workplace may result in an increase to WorkSafe BC premiums. 

Exceed the Minimum Requirements

Although WorkSafe BC provides baseline requirements, it’s best that tenants and landlords move beyond that which is minimally required. Screening measures are encouraged with careful consideration. Certainly unusual for most businesses to collect health data, such collection will be deemed reasonable (with special data collection considerations) up to the point the province shifts into Phase 4 of the BC Restart Plan.

Even though some level of health collection is reasonable, there’s still much to be considered here. Business operators must address privacy concerns by limiting their collection to that which is absolutely necessary, and they must ensure the security of the information they collect. The collection must be minimally intrusive and it’s additionally important to give thought to Human Rights issues too. For example, if it’s necessary to deny entry to an employee or patron due to a failed screening, it’s important to communicate such denial sensitively.

Screening

Landlords and tenants have employed (or are exploring) self-reporting, questionnaires, immunity certificates, and digital contact tracing. Temperature screening though seems to be increasingly popular. From handheld one-to-one devices to cameras (preventing entry bottlenecks) that are able to identify the temperature of 30 people at one time. As the reasonable collection of such health data is time-specific (likely expiring once the pandemic ends), landlords and tenants must give thought to the cost of screening along with the length such collection will be permitted.  

Best Practices

Tolensky and Lawson suggest the following Best Practices when it comes to temperature screening:

• Implement a reliable system

• Ensure appropriate staff training

• Use precautions for front-line staff

• Ensure clear notice/consent

• Prepare procedures for ‘failed’ screening

• When possible, screen in private

• Limit collection and use: e.g. no names, entry/exit and delete

• Individuals above 37.8℃ (100℉) return home

At the NAIOP RE Challenge, the UBC team made excellent showing of The Aeda, a mixed-use development, an investment proposal for a well-located development site in the Bellevue CBD. The competition was held remotely due to public health concerns, but teams were able to present their proposals via video conference to a panel of judges from varying sectors of the western Washington (USA) commercial real estate industry.

NAIOP congratulates the UBC Team for their upcoming graduations! NAIOP Vancouver has its doors open for all of you, and we know that you will lead with professionalism and excellence the projects of the future. 

·         Graduating May 2020

o   Nic Economae  

o   Winnie Fang

·         Graduating Dec 2020

o   Evan Tong

o   Nabi Sarhadi

o   Iana Shakirova

·         Graduating May 2021

o   Bryce Young

Questions posed by Sheamus Murphy are answered by Justin To who is currently assisting Finance Canada with the COVID-19 crisis, including the CECRA. 

Question 1

Having heard this week that the 70% revenue threshold will be based on a 3-month average, can we apply for a tenant for only one or two months instead of 3 months?

• This 3-month average provision will now likely disqualify many tenants across the country.
  • This will incentivize some business to remain closed for longer, so that they can ensure their revenues are below the appropriate threshold required for CECRA eligibility.
• We and our tenants are now having to guess whether or not tenants are eligible
  • The majority of retailers will be unable to reasonably forecast what their June revenues look like given that most are in re-opening stage and consumer patterns are still highly unpredictable.
  • No Commercial Property Owner wants to willingly put themselves in a position to somehow default on the program. Many would rather wait for greater certainty. Meanwhile, the public message of the provincial premiers is that if a landlord doesn’t apply right away they are somehow being a poor corporate citizen. Commercial Property Owners are trapped in between the premiers and their tenants, while most are supporting their tenants while the CECRA details continue to unfold. It is perfectly reasonable for a property owner to wait to know the June results before applying for CECRA, which would take them into mid-to-late July before they apply. At the same time, this behaviour is being punished by many provincial premiers at the same time.
• Recommendation: allow Commercial Property Owners to apply for only one or two months instead of only being able to apply based on the 3-month revenue average. Also allow up to 2 applications if June revenue end up being under the revenue threshold amounts.

Answer

It applies to all three months, cannot go month by month. The Tenant Attestation says that the Tenant must simply estimate “to the best of their knowledge” whether they are down an average 70% for the three months, including a projection on June. If they are wrong, they are wrong and CMHC will not come down hard on those who have made reasonable efforts to estimate the loss in revenue to the best of their knowledge. (as an example of that, a business that was shut 100% in April and May but even had 90% sales in June, would still be on average down 70%)

To be clear the Property Owners should be trusting their tenants and their attestations unless they have reason to believe the tenant is attesting to a falsehood. But they are not expected to, nor should they be undertaking investigations on their tenants. Specifically in the landlord attestation is the following language (underlined for emphasis), “The Property Owner has no knowledge, acting reasonably and without investigation, of any falsehood or misrepresentation contained in the Tenant Attestation(s) submitted by Impacted Tenant(s) in connection with the Agreement.”

Also, in the Loan Agreement it does say this, but it is within the context of “without investigation” – “If prior to any advance under the Loan, the Property Owner becomes aware that the Attestation of any Impacted Tenant is false or misleading in any material respect, the Property Owner must promptly report the same in reasonable detail to the Administrator and provide the Administrator with an updated Application removing such Impacted Tenant from the Loan Amount calculation”).

Should a tenant every be found to have falsely attested to the 70% decline, CMHC would work with the landlord so both the landlord and CMHC make reasonable efforts to recover the forgiven rent from the tenant – the 25% owed to the landlord and the 50% owed to GoC. We would not hold the landlord responsible for the 50%.

In my view, if the property owner wants to help their impacted tenants, then this should not be a material concern – they do not face a liability if their tenant is telling the truth to the best of their knowledge.

Question 2

Where a property has a mortgage, does the property owner’s lender need to approve our CECRA application per building? Our house banker (one of big 6 Schedule I banks) suggested this week that they have to sign off on every CECRA application, unbeknownst to us.

Answer

I can’t answer this question as it may be a covenant between a property owner and their bank. As far as I understand, there is no requirement by CMHC that a property owner must also provide a waiver from their financial institution as participation in the program.

Question 3

Further clarification and details on what the eligibility process looks like for subtenants would be appreciated.

Answer

I’m not sure I understand this question as subtenants are fully eligible for the program. In fact the Tenant Attestation is actually titled “Tenant’s and Sub-Tenant’s Attestation”

From the website:

Impacted small business tenants are businesses — including non-profit and charitable organizations — that:

• pay no more than $50,000 in monthly gross rent per location (as defined by a valid and enforceable lease agreement)
• generate no more than $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level)
• have experienced at least a 70% decline in pre-COVID-19 revenues

NOTE: Eligible small business tenants who are in sub-tenancy arrangements are also eligible, if these lease structures meet program criteria.

Question 4

# 9 of the Rental Reduction Agreement states that if the 2020 CAM & Tax reconciliation of the actual hard, fixed maintenance costs results in a credit owing to the Landlord, the Landlord must allow a full 75% reduction of such credit, yet there is currently no mechanism for the Landlord to recover the 50% government commitment in the original arrangement at the time the 2020 reconciliation is completed (early 2021). Is this something that could be addressed? In other words, where a credit is found to be owing to the Landlord, and it is reduced by 75%, can the Landlord submit to the government for 50% of that credit owing? Alternatively, can the credit only be reduced by the 25% loss committed by the Landlord when agreeing to participate in the program? Also, there is no mention of what happens with a credit to the tenant – it should be adjusted the same way, reduced by 25%

Answer

Not sure how to answer this question other than to state it should all be reflected in section #4 of the Rental Reduction Agreement when the property owner submits the value of the “gross rent” submitted within the application. If the gross rent is accurate then this should be addressed. I’m not sure how any reconciliation would be corrected in the property owner or the tenant’s favour if an adjustment should occur. You’d have to talk to CMHC officials on that one.

Question 5

Whether the sales figures used to determine qualification are for the Tenant’s whole business (multiple locations), or just the sales for the location being applied for (our property)?

Answer

Sales for the location only, not consolidated business

Question 6

Omission in #11 of Tenant attestation the $20 million revenue max): should add “on a consolidated basis at the ultimate parent company level” which is what the portal indicates is the qualifier. 

Answer

I’ll check into that

Question 7

What if as part of a multi-tenant building application with multiple tenants applying for assistance one or more of the tenants is deemed not to qualify, how does that impact the balance of the application?   Would the loan still be approved for those that qualify in the same building or does that building owner need to re-apply?

Answer

The property owner should only be applying on behalf of their tenants that qualify, meaning there may be some tenants, the ones that do not qualify, are left out of the application. If the property owner applied for let's say 3 of its tenants in one building but one was later found to not qualify, then, as per the Property Owner Attestation and the Loan Agreement, the property owner should contact CMHC, the loan will be adjusted and reasonable efforts should be made to recover the rent from the tenant that did not qualify.

Question 8

Does the application need to be on behalf of the bare trustee given they will be reflected on title or can the beneficial owner make the application?

Answer

As I understand it, the application should be filed by the entity listed on the lease agreement.

The Panelists

Graham Horton, Vice President at Shape Properties.

Chris Wood, Executive Vice-President at JLL.

David Knight, Vice-President in Colliers Vancouver Office.

The Importance of Agility

Agility, the ability to adapt quickly to the ever-evolving retail market, is cited as a critical characteristic of successful landlords and tenants. Helping to illustrate this point, Wood explained the shift in strategy by one big box retailer, Target. Where previously acting solely as a retail space, Target has spent a glut of money on not just their online presence but blending their retail space with their online fulfillment centre. And, outlining shorter lease terms, something offering tenants increased adaptation, Horton spoke of H&M. Where historically H&M might’ve written 10-year deals with 5-year options, they’re now writing 5-year contracts with 3-year options and looking to (in the not so distant future) writing 2-year deals with 1-year options. “Agility for companies like H&M,” Horton says, “is absolutely everything.”

When it Comes to Clauses, Let’s Get Back to Basics

The increase of restrictive clauses adds additional complexity to retail negotiations. Wood spoke of a cinema client who doesn’t allow other tenants to compete with the sale of pop, popcorn, or soda. Where large anchor tenants like T.J. Maxx (as an example) don’t necessarily compete with the tenant’s primary business, they do sell food. Instead of the need for numerous waivers, we should agree not to put a competitor in there. “I’m hoping,” Wood said, “we can just get back to the basics.”

While some retailers lean heavily on restrictive clauses--preventing duplication and unnecessary competition--Gates suggested that others welcome it. Capitalizing on increased traffic and ‘allowing the best man to win,’ some tenants intentionally source space near their direct competitors.

The Lesser Told Story: Online Retailers Looking for Physical Space

Discussed frequently is the notion that online retail is reducing the need for physical retail space. Less told though and increasingly common, are online retailers (like Casper, and Warby Parker) wanting to add a physical presence to their online strategy. Allowing them to interact with brand ambassadors, their incredible market-driven data leaves these online retailers with a high chance of success. Best tested in broader markets like New York and L.A., the panellists identified the double-edged nature of pop-ups. Allowing both the retailer and the landlord the chance to ‘prove the market,’ the landlord has the opportunity of a short-term commitment evolving into a longer-term, more lucrative commitment. Though beneficial for landlord and tenant, the pop-up often leaves the consumer confused. Where a consumer might purchase items at a Lululemon pop-up over the winter, they come back in January to facilitate a return, only to discover the pop-up is gone. 

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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. 

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.

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 

Technology for Building and Infrastructure

The Bottom Line

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.”

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.”

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.  

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.”

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.

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.”

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.”

“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.”

“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.”

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.”

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.”

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.

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.

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.

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.

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.

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.

“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.”

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.

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.”

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.”

“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.

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.”

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.

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.”

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.

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.

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.

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. 

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.

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.

“Retail has always been about adaptation versus adoption,” said David Ian Gray, Founder of DIG360, which helps retail executives navigating this difficult time of change. “It’s a form of Darwinism. Some people win, some people lose.”

We all know that technology has been the pivotal disruptor that’s shifted foot traffic to mouse clicks, but Gray explains that tech has always changed the retail landscape.

“Refrigeration allowed for grocers to sell perishable items. The automobile meant that people could travel farther than their corner store and shop in malls. Credit cards, bar codes, I really could go on and on. Technology has always changed the way retailers operate.” 

So if technology has always been prevalent, what’s the real reason behind so many bankruptcies and ‘for lease’ signs strewn across storefronts? According to our June 22nd panel, it all comes down to Millennials, who are controlling the marketplace.

“Never before has the industry had a more digitally native, price-oriented, and global customer,” said Rick Kohn, Deloitte’s BC retail and consumer products leader, and partner in the Deloitte Private Audit and Advisory Practice. “This group is highly experience-oriented, heavy on lifestyle, and favours sharing assets over heavy asset consumption, like Uber and AirBNB.”

It’s clear that Millennials don’t need the in-store experience in order to make a purchasing decision. Retailers are spending millions of dollars trying to connect to the needs of this dynamic consumer base, with even premium retailers getting on board. It wasn’t until recently that fashion houses like Prada and Chanel began to offer online shopping, finally realizing that the younger generation shops both discounted retailers and high luxury items all in one day.

From artificial intelligence to omnichannel integration, according to Joel Turner, Senior Manager at Deloitte’s Retail Industry Consulting practice, “Nobody’s doing it right. Price and experience are what bring people in stores, and I don’t think there’s one retailer who has mastered the perfect combination of both.”

“If tenants want a large space by 2018, there are very, very few options. If you don't want to spend money on tenant improvements the list is even shorter,” said Mark Trepp, Senior Vice President at JLL. “Otherwise, they’ll have to look at short term fixes. Co-working, small packages if you can find it, or have more than one location.”

With companies like Regis, WeWork, and The Profile, co-working spaces in Vancouver have become a popular alternative. With relatively lower rents than private offices and a collaborative design concept that emphasizes teamwork, it’s been an attractive option for all types of organizations. From independent contractors to flourishing startups, some of the benefits of co-working spaces are that they bring together a variety of industries that promote networking, offer lease flexibility, and allow tenants to work in a higher quality office or location that would be otherwise beyond their budget.

Given the lower price tags, more square footage, and availability to accommodate move-in dates, some wonder whether co-working spaces will outperform private office leases, especially in the tech industry

“Seattle has over 24 co-working spaces in that city, and it’s only made a material impact for tenants under 2,000 square feet,” said Kevin Nelson, Senior Vice Presidents at CBRE. “The large guys aren’t biting on it at all. Doing head leases when you’re under 2,000 square feet may impact that zone, but it’s not going to attract a large Amazon-style requirement or anything like that.”

Jeff Rank, Senior Vice President at Quadreal, shared how co-working is targeting a different market than large tenants, in particular smaller startups who want flexibility in terms and sizing.                                       

“There’s a place for the Regis and the WeWork’s; however, how deep that market is and who that market is going to cater to may be in the short term. If there’s no other options for 2018 or 2019, [companies may opt for co-working spaces] but that’s not going to the end game. These companies will be planning for their own space eventually. To say there’s no room for co-working spaces isn’t quite accurate, but we’re not seeing the beginning of something much bigger in my opinion.”

“Tech has found us in a lot of ways, given the type of people here. The lifestyle, the city itself is certainly attractive, and has lot of similarities to tech cities in the States. A lot of that has come our way as a result,” said NAIOP panelist Jeff Rank, Senior Vice President at Quadreal, at our May Breakfast event.

“Most recently I’d say that I wasn’t a fan of Donald Trump when he was first elected, but some of the things he’s done and the instability he’s caused has certainly benefited this region when it comes to bringing talent to Canada versus the United States. So for that I’m grateful.”

New Builds vs. Existing Product. What Do Tech Tenants Want?

With a reputation for wanting innovative office spaces, developers are creating buildings that are thought to attract tech giants like Microsoft, Facebook, and Sony. However, Rank notes that new shiny buildings are actually not what these tenants want. New may not always mean better, as more tech companies are gravitating towards retro interiors.  

“The war for talent is being fought with space right now,” notes Kevin Nelson, Senior Vice President at CBRE. “In fact, HR has a bigger role at touring real estate right now than the real estate department, because if you don’t have space for new hires, what’s the point? I agree with Jeff; new is cool, but that’s not everything. It’s about geography and proximity, and quite frankly we have a lot of steps to learn from our markets down the coast from us.”

Move Over Tech…

Despite the hype around this sector, some experts say there are signs that other industries will start to compete for square footage in Metro Vancouver, including a very strong resurgence from natural resources.

“I’m not convinced that we’re a one-trick pony,” said Mark Trepp, Senior Vice President at JLL. “I am convinced that the other sectors that have been more traditional to Vancouver are on the verge of a resurgence. Services, real estate, lawyers; everyone is doing better and expanding, it’s not just one opportunity or industry.”

Now home to some of the biggest names in the business, it’s little wonder why Vancouver has been coined the ‘Silicon Valley of the North’. Hootsuite, Microsoft, Sony Pictures Imageworks, and Vision Critical are some of the largest employers in the city with a global reputation, and thanks to the current Trump administration, more could be on the way to set up shop on the west coast.

News 1130 recently reported that a number of large tech companies are looking at opening satellite offices here due to the current United States President, who is challenging H-1B visas. This would limit the number of foreign talent being able to work in the U.S. in favour of domestic hires. However, as 43% of tech company founders in Silicon Valley were not born in the States, relocation could become obligatory, rather than volunteered.

As Microsoft Canada President Janet Kennedy said, “We could have gone anywhere in the world, and we picked Vancouver.” With its ideal position closest to California, Vancouver would be the most logical place for these companies to move to over Toronto. Drawn to the mountains, ocean, and great outdoors, and the fact that they’d be surrounded by an existing tech community, demand for more office space could grow significantly in the near future. Ranked as the third most livable city in the world by The Economist, the fifth most tax competitive by KPMG, and one of the top 20 startup ecosystems in the world, it’s a natural choice for those who don’t shy away from expensive real estate.

Developers are trying to keep up with the pace, with the total potential office construction in the next two years spanning 4,144,000 square feet, which is 16.3% of the current downtown inventory and 27.2% of the current downtown A Class inventory. This surge of construction will create 27,2625 jobs, or 19.1% of the current jobs. But will it be enough?

“We’ve had a great ride, and whether the ride is over is still up for debate. We’ve got to make sure we’re keeping our minds open, and looking in other pond to fish for tenants,” said Jeff Rank, Senior Vice President at Quadreal, who oversees all leasing activity for BC office and industrial assets as well as pre-leasing activity for new developments.

Since the controversy hit the press, the ad has been taken down. However, it raises attention to whether Bitcoin is the way of future, and whether this will soon become an accepted, maybe even preferred, form of transactions for foreign investors in the commercial real estate industry.

Bitcoin gained a lot of attention back in 2009 as the first digital payment system. One of the major selling features was the freedom and speed of the transactions, meaning you never had to wait for bank hours to send a transaction and could bypass all banking fees. The ease of Bitcoins means you can send and get money anywhere in the world at any given time.

Despite these pros, Bitcoin hasn’t been adopted on a mass scale, and until this article, did little to roam the headlines. While some businesses are accepting Bitcoins, it’s far from widespread. This is mainly due to a lack of awareness and understanding over of how it works.

With fewer fees, the commercial real estate industry could cut considerable costs and increase efficiency by enabling secure, peer-to-peer payments. This makes it easier for people to invest - however, as we saw this week, would have to be better monitored so investors wouldn’t violate the governing laws of their country and of Canada’s.  

For now, it will be a considerable amount of time until Bitcoin is accepted as a form of payment for the real estate industry. In Canada, real estate agents are not allowed to accept digital currency because it hides the purchaser. As Western Investor explains,  “Under Canada’s Proceeds of Crime and Terrorist Financing Act, a realtor must be able to positively identity the people involved before a transaction can complete.” To date, Australia has the only real estate company that’s accepting Bitcoins from foreign buyers.

Recently reported in The Vancouver Sun, UniverCity is expected to double to 10,000 residents over the next five years. With its secluded location, commercial retailers are currently in demand to accommodate the growing needs of this emerging town centre. Comprised of mid-rise and low-rise condos, townhomes, and commercial buildings, Simon Fraser University is looking for more diverse retailers and services to join the neighbourhood and accommodate the future residents.

Earlier this month, the Beedie Development Group broke ground on the highly anticipated Delta Link Business Park, one of Western Canada’s largest private industrial projects currently under development.

"Without question, the current industrial market is the strongest Beedie has experienced in its 63-year history," said Ryan Beedie, the company's president. "Delta Link Business Park is already 70% sold or preleased, which is an unprecedented level of commitment. We are excited to be creating hundreds of job spaces on a site that has been largely vacant for 20 years."

Jason Kiselbach, an associate vice president with CBRE, shared how Surrey and Delta have attracted 64% of the industrial demand in the region. This is partly due to the location, as Delta is the hub of transportation networks, making it perfectly situated for companies that need to be centrally located in Metro Vancouver.

With more residents leaving Vancouver for a more affordable yet central option, New Westminster is poised for a real estate investment boom over the next 10 years. Also reported in The Vancouver Sun, its attractiveness lies in its relatively affordable housing costs, SkyTrain connections, and its comparatively low commercial development fees.

But as award-winning journalist and political columnist Vaughn Palmer explained, “Christie Clark is a formidable campaigner. And from what we’ve learned from that election, no one is going to mess with her again.” And those nine points? Turns out they were incorrectly accounted for, which meant the NDP was really only 4 points ahead of the Liberal Party; information that came too little too late. As Vaughn pointed out, people didn’t show up to vote for the NDP because they believed they didn't have to. It was a sure thing.

As we now learned, Clark and the Liberal party did win that election, and with the next one just days away, Palmer shared the current issues that will decide who will reign for the next four years at our latest Breakfast Event.

Voter Turnout

“There’s a reason politicians campaign more for lower fees on hip replacements and less about rising student debt. It’s because people who are 60 years of age and older actually turn out to vote. Young people don’t.”

Four years ago, 45% of the province didn’t vote, and the majority of this demographic was under the age of 40. However, during the federal election just two years later, it was a much different outcome. Half a million more people in this age group did turn out and vote to place Trudeau as Prime Minister.

This show just how volatile a time we are in. People are calling for a change. So if just 100,000 Millennials turn up for this upcoming election, it could drastically change the seats across the province.

Trump and Trade Issues

The current trade issues between the US and Canada have recently become front-page news, as Trump has blasted Canada for recent regulations that could bankrupt Wisconsin’s dairy farmers, as well as continuous issues over softwood. This has created “a wrinkle into the election that Premier Clark can now cling to, which was apparent in the latest debate”. 

Liberal Ad Campaigning

Though the Liberal Party has much more financial support, Palmer noted that they’ve spent about the same amount of campaign dollars as the NDP. However, the parties opted for a much different strategy. Whereas the NDP came out strong with their ads at the beginning of the campaign, the Liberals are waiting for these last few days to push their messaging. How or if this will affect the voters will soon be revealed.

Vote Splitting

The NDP has never won an election without vote splitting. This is when the distribution of votes among parties reduces the chance of winning for any of the similar candidates, and increases the chance of winning for a dissimilar candidate. If the parties experience a similar outcome, a new leader could emerge.

Palmer’s Prediction

“The NDP has to pick-up 10 seats to be the majority, and that’s no easy task. Unless there’s a huge shift in opinion or a vote splitting with the Green Party, the odds are stacked against them. I think there will be a reduced majority for the Liberals, but otherwise they’ll voted in for another four years.”

An upcoming project by Hong Kong-based Brilliant Circle Group (BCG) is spearheading this new wave with their 232-acre development on the Port Moody-Anmore border. Recently featured in The Westender, BCG hired Peter Busby of Perkins + Will to bring an environmentally aware element to the project. For many, Busby needs no introductions, as he’s renowned for introducing the Leadership in Energy and Environmental Design (LEED) system to Canada and founded the Canada Green Building Council as well as the Sustainable Design Initiative. Taking a progressive and holistic approach, Busby plans to incorporate storm water capture, a district energy system, and a range of density and housing types into the development.

Another local developer making the headlines for a sustainable acquisition is Vancouver-based Concert Properties. Reported in Western Investor, Concert will be managing the country’s largest sustainable warehouse, receiving the first LEED Gold Certification for a property of its size. Located near The Toronto Pearson Airport, Concert may be setting the tone for similar facilities here on the West Coast.

With new projects like Port Moody on the horizon, Vancouver is making a name for itself as a global leader in green building practices. At a previous Breakfast Event, architect and mechanical engineer Martin Nielson of DIALOG spoke about UBC’s Centre of Interactive Research on Sustainability (CIRS) as a prime example. Known as the most innovative and highest performing building in North America, its primary design goal was reach zero carbon emissions, be water self-sufficient, and create net-positive energy performance.

This concept, known as regenerative design, creates systems that restore, renew, and revitalize their own sources of energy and materials, essentially incorporating a zero waste infrastructure that includes the needs of the both the community and of nature. Now with consumer demand and new eco standards like, it may not be long before we see more of these types of regenerative designed buildings take precedent in the commercial real estate industry.

Ironworks by Conwest

Developed by Conwest, Ironworks will be a stacked industrial and office project spanning 2.3-acres. Located at 200 Victoria Drive just north of East Hastings Street, it’s expected to complete in 2019 and will comprise of two buildings, both offering ground floor light industrial and warehouse space, 26-foot-high ceilings and loading docks, and showrooms with offices above.

Given the high demand for industrial properties, the project has garnered a lot of interest, as units have already sold at $330 to $600 per square foot. Visit Western Investor for more details.

Burrard Place Tower by Pattison Group and Reliance Properties

Bringing approximately 250,000 square feet of office space to downtown, Burrard Place will be a welcomed addition in a market with notoriously high demand and very low supply. The $500 million development by Pattison Group and Reliance Properties will be a four-tower complex with two mixed-use residential and office buildings, incorporating strata and leasable spaces. It will also include a 13-storey rental office building, a multi-level Toyota dealership, and a 25-storey rental apartment tower. For more information, read the interview in The Vancouver Sun.

Spaces by Regus

With the growing rate of freelancers and startups in the city, coworking spaces have become a popular alternative to expensive office leases and working from home. Regus, one of the largest providers of office space in the world, is clearly hopping on this trend. Working under their brand ‘Spaces’, they’ll be launching a new co-working building in Gastown at 151 West Hastings. Amenities include team rooms, a business club, and a large rooftop patio that will be available for access 24-7 for all members. Check out The Province for further details.

Short Land Supply

Cities in the Lower Mainland are seeing just as much demand as Vancouver’s downtown core. Surrounding municipalities like Richmond and Burnaby are becoming increasingly sought-after due to their close proximity to the city centre and infrastructure. The Vancouver Sun reported earlier this year that “Richmond’s office vacancy has been on a steady decline since cresting above 20% in 2012.” As of January 31st, 2017, this fell to 9.5%; down 12.6% in the first quarter of the year.

Vacancies are especially low in the industrial sector. “I’ve never seen vacancy as low as it is, and I don’t see it changing anytime soon,” said Lee Hester, Senior Vice President of Industrial Sales & Lasing at JLL. “Vacancy is declining in all areas of industrial, as spaces that are 2,000 to 25,000 square feet are in extremely high demand.”

Economic Growth

Coined the ‘Silicon Valley of the North’, Vancouver is becoming well known as a burgeoning tech scene. With Microsoft, Hootsuite, and Slack all calling YVR home, office spaces have quickly become difficult to come by. This is also true for the retail sector, as six Metro Vancouver malls were named the top producing shopping centres in Canada. Both office and retail sales hit record numbers, reaching $3.6 billion in 2016, which is $2.5 billion more than the previous year.

Foreign Investors?

Unlike the 15% foreign buyers tax on residential, commercial properties do not have a similar levy; however, the jury is still out on whether foreign ownership has anything to do with the sudden shortage of supply available. It’s thought that economic growth is mostly responsible for the sudden increase in demand.

Partnering with TransLink, the Challenge launched back in January, garnering media attention from Global News, The Vancouver Sun, The Province, Metro News, and the Tri-City News, among others. For many of the students competing, this was the first time they had ever seen the site or the new Evergreen Line extension.

“We wanted the students to create a place that people want to be, while at the same time be sustainable and financially rewarding,” said Guy Akester, Director of Real Estate Programs and Partnerships at TransLink. “From Impark to the West Coast Express to the bus loop to the Skytrain, this 14 acre site has a lot of variables that the students had to carefully consider.”

Calling the site “Chrono”, UBC’s winning proposal focused on health, fitness, and entertainment. Taking inspiration from Whistler Village, they drafted a plan that would create a pedestrian focused hub that would integrate residential and commercial opportunities without compromising the multiple types of transit who need in and out of the space.

So far, the results of the competition have been featured on The Vancouver Sun, The Province, and 24 Hours, as well as an upcoming interview on Roundhouse Radio. To view more information about the site, watch this video!

“Canadians despise America for their attitude of superiority, smugness, and condescension. As a famously polite nation, we think that we could never elect someone like President Trump into power. But are things that different here? Not really,” said Crowley to a crowd of NAIOP members on Thursday, February 23rd.

According to Crowley, zoning regulations directly affect affordability. And because the economic future of countries lies in cities, as that’s where the jobs and infrastructure reside, urban policies that block affordable housing supply means that blue collar workers can’t afford to move. In Canada, that’s Toronto and Vancouver.

“According to a Merrill Lynch Report, blue collars jobs are on the decline. Construction, manufacturing, and natural resources are all down. In fact, 30% of Canadian men over the age of 20 do not have jobs, and more than 40% of Canadians are afraid of losing their jobs to automation and technology. When workers are shut out of the labour force, they want a political leader that doesn’t dismiss their fears or tells them to get a university degree in order to get back in the job market.”

Despite that the US has an unemployment rate of less than 5%, the lowest it’s been in 30 years, Crowley shared show Trump’s supporters were mostly comprised of people who felt shut out of the labour market and discouraged due to the lack of opportunities. Nine out of ten states with the lowest labour participation rate (meaning they were looking for a job) voted for Trump. Thirty-two percent of men over the age of 20 were unemployed -- figures similar to Canada -- and despite that America has made more things than ever before, the products just don’t require low-skilled workers. Crowley referred to this as “product efficiency elimination”.

“We must have policies that remove barriers and create housing affordability. If we don’t, the public will buy in to a leader that shares Trump’s values. We need to restore the social and economical balance that we’ve lost.”

To learn more about Crowley’s thoughts on the future of Canada and how urban policies and real estate could dictate a new future, read the latest article in The Vancouver Sun by reporter Evan Duggan.

1.Oakridge Shopping Centre

Just behind Yorkdale Shopping Centre, Oakridge is the second in Canada to produce the most sales per square foot in Canada, at an average of $1,537. Managed by Ivanhoe Cambridge, the retail component totals 574,000 square feet and consists of upscale fashion and convenience shopping. Flagship stores include Crate and Barrel, Apple, Harry Rosen, LEGO, and Tiffany & Co.

2. CF Pacific Centre

Stretching three city blocks from Pender to Robson, Cadillac Fairview’s Pacific Centre took the third spot in Canada, with $1,523 per square foot. What makes this site so unique is that it’s directly connected to six office towers as well as the Four Seasons Hotel, and hosts the only Holt Renfrew and Nordstrom in Vancouver. Other flagship stores include H&M, Aritzia, and Sephora.

3. Metropolis at Metrotown

Located in Burnaby, Metropolis at Metrotown has nearly 400 stores and services, and is another centre managed by Ivanhoe Cambridge. With a direct connection to the Skytrain and major TransLink bus loop, it’s an easy destination for visitors. It comes in at eighth place on the list, with $1,035 sales per square foot.

4. CF Richmond Centre

Another mall managed by Cadillac Fairview, Richmond Centre offers 250 stores and services, and is anchored by Hudson’s Bay, Sport Chek, and Old Navy. It’s number 13 on the list, with $928 of sales per square foot.

5. Guildford Town Centre

With eight renovations over 50 years in business, Guildford Town Centre is managed by Ivanhoe Cambridge in BC’s fastest growing city. Walmart, Hudson’s Bay, London Drugs, and Sport Chek are some of the biggest retailers, contributing to achieve $844 in sales per square foot and marking it at number 21 in Canada.

6. Coquitlam Centre

Situated on 57 acres of land in the heart of the Tri-Cities, Coquitlam Centre is managed by Morguard Investments Limited and features 910,000 square feet of retail, including T&T Supermarket, Sephora, Lululemon, Walmart, and Aritzia. It takes the 27th spot on the list, with $785 of sales per square foot.

The study found that expansions and major renovations were important factors that helped these shopping centres maintain growth in spite of competition from e-commerce. With Tsawwassen Mills having just opened their doors in October, it will be interesting to see how one of Canada’s largest outlet malls will rank in its first year in business. 

Industrial buildings have always been single level, as it’s believed to be the most functional and efficient. But as land mass has become scarce, developers in countries such as Japan and Singapore have turned to multi-storey warehouses to handle the demand.

Back in 2013, Site Economics Ltd. and Omicron released a High Density Multi-Level Industrial Feasibility study, which explored the idea of introducing these types of developments to Vancouver.

“An example of a multi-level industrial building is the Asia Airfreight Terminal (AAT) in Hong Kong. The warehouse occupies 166,000 m2 (1.8 million sq.ft.) across 4 levels with each level designed and equipped with advanced facilities for handling different types of cargo. To increase working efficiency, the terminal has truck docks in every level for quick loading of cargo. The building construction cost was more than $200 per sq.ft. due to its innovative architectural design which allows for advanced material handling systems and pioneering IT applications. AAT is one of the world’s leading air cargo terminals handling 1.5 million tons per annum.”

And it’s not just Europe and Asia that multi-levels are becoming commonplace. The Wall Street Journal recently announced that Prologis, the world’s biggest warehouse owner, will construct America’s first three-floor, 580,000-square-foot warehouse just outside downtown Seattle. It is scheduled to be completed in 2018.

We asked Canadian industry leaders whether they thought multi-level industrials could be a way of the future, or if our city just simply wasn’t equipped to handle this type of format.

“It’s certainly a possibility, but we’re in the early stages,” said Jeff Miller, Vice President of Industrial in Oxford Properties Group. “Multi-levels have no flexibility and are complicated buildings. I think we’re still a way away.”

Beth Berry, Director of Industrial Development at Beedie Group, shared that Vancouver still has some choices available in the market, and we’re not in the position yet to have to consider these types of alternatives.

For Lee Hester, Senior Vice President of Industrial Sales and Leasing at JLL, only a handful of industries could benefit from multi-level industrial development. These include engineering, film, technology, and specific types of manufacturing businesses.

“Multi-tenant warehousing can play a role, but it must be very specific to the end user. Traditional industrial requires forklifts, semi-trucks, and major transportation. Areas like Strathcona and North Vancouver could not accommodate industrial traffic with the amount of residential in the region. Flex industrial won’t help true industrial needs.” 

“The strata market is alive and well, but I’m personally not a fan because it limits tenants,” said Jeff Miller, Vice President of Industrial in Oxford Properties Group. “Strata is uniquely Vancouver. It’s not as ingrained or important anywhere else.”

However, not everyone shares Miller’s point of view. For Lee Hester, Senior Vice President of Industrial Sales and Leasing at JLL and Beth Berry, Director of Industrial Development at Beedie Development Group, strata ownership allows small and medium sized business to grow, and creates a more stable market.

“Strata is good thing for the industrial market,” said Lee. “We are an owner based city, we all want to own. It’s a Vancouver phenomenon.”

According to Lee, 90% of industrial buyers are businesses with less than 10 employees who prefer to live within 20 minutes of their property.

“I love strata,” said Berry. “Strata buyers are typically private and family owned companies with a succession plan, not big distribution companies who need flexibility to grow. These types of buyers make the market steady and strong.”

So while turnover rates stay low, so too do the vacancy levels. In 2016, Vancouver’s industrial real estate market saw an average 2.4% vacancy rate and a $9 per square foot asking price. As we head into 2017, demand continues to remain strong, as Miller notes that for every one property a realtor has five buyers. Consequently municipalities like Pitt Meadows, Richmond, and Delta have become sought-after areas of development. In addition, new infrastructure such as the Port Mann Bridge has eased previous transportation issues for trucks to travel to and from the warehouses. 

“Let’s just say it’s a good time to be a landlord in Vancouver,” said Jeff Miller, Vice President of Industrial in Oxford Properties Group. “The industrial real estate market has performed extremely well. It’s so unique because of how fragmented it is. It’s a subset of individual markets spread across bridges and rivers, and more importantly there’s a high percentage here of capable landlords and private owners.”

CBRE’s Q4 market review of Metro Vancouver’s industrial real estate sector showed that sales reached a record $1.2 billion in 2016, up 9% from the previous year. The region also saw industrial leasing space vacancy rates drop to 2.4% - the lowest level since 2007.

“I’ve never seen vacancy as low as it is, and I don’t see it changing anytime soon,” said Lee Hester, Senior Vice President of Industrial Sales & Lasing at JLL. “Vacancy is declining in all areas of industrial, as spaces that are 2,000 to 25,000 square feet are in extremely high demand.”

“If you want to grow, you have to move east,” explained Beth Berry, Director of Industrial Development at Beedie Development Group. “Richmond is changing more into residential and commercial, ie industrial, which was once dominant in the region, is becoming less and less.”

Former NAIOP Vancouver President Chris MacCauley, CBRE’s Senior Vice President of Industrial and Logistics, was recently quoted in The Province, sharing that “It’s definitely been the trend in the last three years that [industrial] demand has outpaced supply almost two-to-one. It’s something that has no easy fix; it will take some long-term planning throughout Metro Vancouver to find out what are the right places for industrial land of various uses.”

MacCauley also added that approximately 50% of the supply coming on this year in Metro Vancouver is already spoken for, less than one month into 2017. As a result, more companies have been forced to go to Surrey and Delta because of lack of availability. 

The competition kicked off on Saturday, January 14th with presentations at the Douglas College David Lam Campus, followed by a site tour. For most of the students, this was the first time they had ever viewed the site.

“One of the key things that the Challenge hopefully does for the students is help them understand the complexity of development, the variety of expertise that is required, and the stakeholders that need to be engaged in order to see it through properly,” said Jarvis Rouillard, President of NAIOP Vancouver.  

The students will propose their ideas on March 1^st, followed by oral presentations on March 8^th and 9^th in front of a panel of judges. The winning team will be awarded the coveted Bob Filley Cup as well as have the potential to have their plans implemented by TransLink. 

This exciting Challenge has been featured in news outlets across Metro Vancouver. From Global News to The Province!

Office

Thanks to the sales of Bentall Centre, the Royal Centre, and the United Kingdom building, office sales experienced the highest increase amongst all other sectors compared to 2015. The city’s growing technology industry is also said to spur the demand, as more companies are opting for Vancouver over Silicon Valley and need innovative workspaces that attract top talent. Even with the additional two million square feet of office space added over the past 18 months, Vancouver’s vacancy has fallen to the second lowest in Canada at 6.9%.

Industrial

Called one of “the hottest stories of 2016” by The Vancouver Sun, the industrial market represented nearly 20% of total commercial real estate transactions over the first half of 2016, totaling nearly $756 million. Vacancy rates remain the lowest in Canada at just 1.4%, fuelled by demand by the film industry and tech sector. An interesting development to watch is the Strathcona Village project, which is the first to mix industrial with residential, developed by Wall Financial.

Retail

Retail investment in Metro Vancouver reached $1.1 billion, which is nearly double the amount from the same period in 2015. The most notable new addition is Canada’s largest indoor shopping mall, Tsawwassen Mills by Ivanhoe Cambridge. Yet despite such growth, Business in Vancouver reports that Metro Vancouver remains under-supplied with retail compared to the rest of the country.

With low vacancies and high demand, experts predict that 2017 will only see more record-setting numbers over the next twelve months.

An area that is seeing this revival is Surrey. As Bisnow reported, the low-interest environment means that many businesses are seeing the value of owning a piece of a larger project. For developers, this also holds benefits, as the price per square foot for unfinished space versus condos is extremely competitive.

The City of Surrey has a number of developments under construction this year, which includes the 3 Civic Plaza by Century Group, Kwantlen Polytechnic University, and Evolve at West Village by WestStone Group.

With units as small as 309 sqft, the Maskeen Business Centre, Surrey’s first micro-office strata development, has been attracting interest from groups that previously wouldn’t have been able to buy into a strata project. This includes small businesses, boutique investment firms, accountants, lawyers and notaries.

In Vancouver, it was recently announced that PC Urban is launching the first new industrial strata development in five years with the three-building IntraUrban Business Park. Currently a 20,000-square-foot building on a 4.6-acre site in South Vancouver, IntraUrban will transform into 170,000 square feet of new commercial space that’s just three blocks away from a SkyTrain stop and a 15-minute drive to downtown.

As reported in Property Biz Canada, PC Urban believes this new development will appeal to businesses and entrepreneurs who want to forego leasing to build equity, and opt for a city location as opposed to the suburbs. Engineering, architecture, construction and wholesale businesses are all expected to move-in.

In the past four decades, Vancouver saw a 30% decline in its supply of industrially zoned land. Over the past 10 years, the average price of industrial strata increased by 90%. With this increasingly competitive market, business owners may continually drive the growing trend of strata offices in our city. 

Sean Ungemach, Senior Vice President of Cushman and Wakefield, explained that these impressive numbers are not a fluke, but rather an indicator of consumer demands and outside factors that have contributed to a changing market. Having personally leased 2.5 million square feet of industrial space in a three-month period last Spring, he and our panel credit factors like low gasoline prices, rising housing valuations, and accommodative borrowing conditions to a successful year.

Darren Cannon, Executive Vice President at Colliers, also attributed the falling oil prices to making trucking costs more affordable to go to-and-from Vancouver. In addition, our city has more workers available for businesses to employ compared to five years ago. Plus, e-commerce has driven the need for warehouse space to accommodate the surge of online shopping.

Over the past year, demand for industrial land, strata units, and stand-alone buildings remained very strong. And despite a fewer amount of deals, sales set record highs as the average price per square foot increased significantly, achieving rates close to $200 psf for strata sales.  

So what do these next 12 months have in store? According to our expert panel, only more demand. With more companies looking for 100,000 square feet or more, the continuing lack of properties available is expected to drive price increases. Darren Cannon, Executive Vice President at Colliers International Canada, further predicts that capitalization rates will continue to compress, expecting a 4.5% rate for AAA properties.

There are additional external factors that, if they continue at their current rate, will also add to the price per square foot. One of these is the cost of construction, which has also increased. The rising U.S. dollar has become a concern for some of B.C.’s largest occupiers, such as furniture and e-commerce tenants. As their wholesale and shipping costs have significantly increased due to the exchange rate, they’ll have to increase the price of their products, which affects their customers and possibly jeopardizes sales.

Much like last year, 2016 is expected to see only two markets for industrial development and leasing: the Greater Toronto and Vancouver areas. However, our expert panel feels this could change if we can no longer produce the properties needed, forcing us to miss out to more land-abundant regions such as Calgary. To avoid this, Sean Ungemach, Senior Vice President Cushman & Wakefield, shared that there needs to be more political pressure on the MLAs to release industrial reserve lands, otherwise it could affect B.C.’s economy.

As for the tenants that need to grow, well, “there’s not a lot of options”, according to Blake Asselstine, Director of Leasing Beedie Development Group. However, there is some development in the works, as more than 4.6 million square feet of inventory is coming to the market within the next 18 months (although 60% is already pre-leased).  

According to Business in Vancouver, “The [industrial real estate] market is considered a safe bet” – for now. The overall outlook is that land rates will increase, cap rates will decrease, and available property will be a pressing issue. Meanwhile factors like price of oil, terrorism threats, and Chinese investments are all affecting the future of the industrial real estate market, which could quickly change the current record-breaking sales. To protect themselves and stay competitive, Ungemach suggests that developers and landlords diversify, looking to industries like technology to replace lost business from the oil and gas.

Naturally, a healthy economy means businesses are in need of office space to accommodate their growing staff. And though the natural resources market has fallen, “tech bailed us out”, according to Paula Wright, Leasing Director of Manulife Real Estate. Currently leasing close to 800,000 square feet of office space in Metro Vancouver, the technology and digital media sector are leading all other industries considerably. At a distant second place are consumer goods followed by

Other factors that have contributed to the current office market include positive migration and population growth. With more potential staff to employ, companies are drawn to this corner of Canada to monopolize on west coast talent. The rising American dollar has also made Vancouver an attractive choice, particularly to tech companies.  

And with our picturesque backdrop, world-renowned mountains, and laidback lifestyle, it’s no wonder that companies from the U.S. are enticed to relocate up north. Location is one of the most important factors to tenants, and Paula explains that companies need to attract the largest demographic of the workforce, millennials, by offering impressive office spaces in buildings close to transit.

Matt Walker, a Principal at Avison Young, also notes that flexibility has become a major factor in a tenant’s decision-making process. Because tech companies are always changing, they could rapidly grow or fold in just a few months. This means they can’t predict whether they’ll need more office space within six months, a year, or three. Therefore, they need shorter contracts and flexibility to accommodate the fast-paced lifestyle.

While leading experts agree that Vancouver’s office market is currently healthy, balanced, and normalized, there are some concerns that could affect the future of this dynamic market. Stay tuned, as we’ll cover these issues in our next blog post!

Lack of Supply

The fundamental concern for any branch of real estate in Vancouver remains the same: availability. Land is limited, which means every square foot comes at a premium. As industries like technology and consumer goods continue to lead the market, so too are their demands for more space with high-end finishes in a prime location. This means that those who require 50,000 sqft or more may have to seek offices outside our city or province altogether.

Flexibility

Speaking of our technology sector, it’s no secret this industry has experienced rapid growth over the past five years. And because this industry moves faster than any other, their potential to grow – or fail – can seemingly happen overnight. That’s why flexible contracts are key to hone in this sector, which remains a challenge to landlords who traditionally opt for 3, 5, or 10-year contracts.

Competition

Twenty years ago, a few key owners controlled the office market. Now, foreign investment has disrupted all facets of real estate, resulting in more competition for both developers and tenants. 

Millennial Demands

As the largest demographic in the Canadian workforce, employers have to cater their workspace to attract talent. From proximity to transit to brand new gyms, more and more companies are seeking state-of-the-art facilities to entice the next wave of professionals. This means lower grade buildings are no longer desirable, yet AAA buildings are becoming harder to find. 

Virtual and Co-Working Spaces

The traditional workplace has changed dramatically, as the internet has allowed employees to work both remotely and virtually. Replacing cubicles for coffee shops, companies are more inclined to cut the expense of office rents in favour of a co-working or cloud-sharing set-up. 

Residential
Gavin Reynolds, Senior Vice President of JLL, explained there are currently 6,000 students on the waitlist for housing at the University of British Columbia. This is just one example of how our residential market affects all branches of real estate. Although the Canadian dollar is attractive for American companies, our condo and housing prices are not. Finding places for employees to live has become a major deterrent, as demand and prices continue to skyrocket.

So what can landlords of these buildings do to compete? Paula Wright, Leasing Director of Manulife Real Estate, suggests there are three initiatives that should be undertaken:

1. Renovate. To attract top tier clients, renovations are essential. She notes that "If you can put $3 million in marble, do it. You’re going to get it back.” This includes refining the lobby, upgrading gym equipment, and providing a more contemporary look and feel to the interiors.
2. Work with what you have. In other words, if you’re in the B class, be the best of the B. Accept that you’ll never be AAA or demand those types of lease rates. Instead, strive to attract the kind of clients that are in your market and price range.
3. Play up location. If the building is situated near a Skytrain, bus route, or within waterfront views, these assets are highly attractive to Millennials. And as many have foregone car ownership, try installing secure bike storage as well as offer electric charging stations for those who do venture in with hybrid or electric vehicles. 

While these initiatives will help to improve your vacancy rates and increase your rents, Maury Dubuque, Managing Director Colliers International, predicts in the next 15 years the entire city will be AAA buildings. He foresees that the current lower A, B, and C grades will be converted into residential, because in his words, “you can only use so much lipstick.”

However, blending two types of real estate into one has its set of challenges. Peter Odegaard, Principal Architect at MCM Partners, says that mixed-use buildings are by far one of the most difficult to design. 

“Compromise is the key word with mixed-used,” says Odegaard. “When approaching a project, we always start with designing retail before residential because it’s easier to make changes to homes. But in the commercial spaces, once you’ve made the decision, it’s much harder to fix – if you’re able to fix it at all.”

For developers, having the tenants already secured is essential before architects can design the project. From ceiling heights to plumbing needs, some retailers, in particular restaurants, have very specific requirements in order to operate. 

“Twelve foot ceilings eliminates 80% of retail,” says Daniel Lee, Principal at Northwest Atlantic. “Tenants need high ceilings for things like equipment and lighting. That’s why education is key, especially for the City of Vancouver, who often doesn’t understand that height caps limit economic development.”

Unlike a residential tower, there are a number of factors that architects need to consider when designing mixed-use. This includes loading access for suppliers delivering products as well as ample parking for customers. Plumbing is also a big concern, as is lot size, sustainability, and exposure for retailers.

In terms of environmental responsibility, mixed-use facilities use the land more efficiently compared to separate commercial and residential towers. However, additional problems often arise, including trash, smells, and noise, which ideally are mitigated in the design.

Parking

As mixed-used buildings are becoming more concentrated in urban centers, the ratio of square feet to stalls decreases dramatically. This alone can be a deal breaker for many retailers – in particular, American companies that are used to freestanding buildings with large lots. Therefore, design becomes an integral component to creating efficient parking lots, as it will have to accommodate higher traffic compared to strictly residential towers.

But as Daniel Lee, Principal at Northwest Atlantic shared at last month’s NAIOP Breakfast Event, "The perception of parking is more important than it actually is. It’s less about the actual number of parking stalls, and more about functionality. Parents need to be able to park their minivans and have enough space to take out their strollers." For tenants, a negative parking experience could deter customers from visiting in the future.

"Giving residents control through strata is always a deal breaker for tenants, especially those from the U.S.," says Lee. With strata councils, businesses are often limited to when and how they operate. In some buildings, tenants are restricted to the hours of 9am to 6pm as a means to reduce noise, parking, and traffic for residents. For restaurants, patio seating is often a concern. Amanda Vissia, Real Estate Development Manager from Earls Restaurants, says that in concentrated locations such as Yaletown, Earls isn’t allowed to play music or have people on the patio past 10pm, after receiving complaints from residents.

When considering a mixed-use building, retailers should note that the operational costs are considerably higher than stand-alone structures. Vissia shared that Earls has to pay for pollution mechanisms to cover the odors from their kitchen and bar. In addition, they’re typically much more labour intensive, as staff have to follow organic recycling protocol from the city, get rid of grease so the smells won’t disturb the residents, and walk five minutes away to take the garbage out. Loading is also a concern, as everyone has to share the same space.

Despite these challenges and higher cost of operation, Vissia says Toronto’s location in a mixed-use building is one of the highest grossing stores, and that 50% of the restaurants they plan on opening will be of this same format.

“In the mid 2000’s, it took a long time to convince Whole Foods to go into the Cambie/Broadway location,” says Tim Grant, Vice President of PCI Developments. “Now it’s one the busiest locations, and since then the retailer has opened more mix-use locations throughout Greater Vancouver.”

As the city’s notoriously expensive residential market continues to reach well past the $1 million mark, suburban municipalities have become in high-demand, and many of which are transforming into their own busy metropolis. To accommodate this growing population, mix-use developments are thought to embody all of the elements a community needs to counteract the rise in congestion. These cities have become highly attractive to developers; not only do they offer less caps than Vancouver, but they also have bigger lot sizes and high density.

One of these is the City of Burnaby. Now connected with the Evergreen Line, many of the province’s biggest developers are quickly adding to the once-bare skyline, including the Onni Group, Beedie, and Bosa. In the past year, a new Whole Foods location has opened as the anchor tenant in the SOLO District by Jim Bosa’s Appia Development.

Surrey is also becoming a mix-use hub, with communities like the 10-acre Morgan Crossing in South Surrey offering a wide variety of tenants, including Suki’s Salon and The Gap Outlet, with residential units on top. 

Meanwhile The Hub at King George Station by PCI Developments Corp. is designed to transform the evolving downtown core of Surrey. Adjacent to the Expo Line’s King George Station, the second phase will be a 750,000 square foot mix-use retail and entertainment tower with additional office and residences. 

Though Tim Grant and Daniel Lee, Principal from Northwest Atlantic, still believe Vancouver remains the most desirable destination to develop these types of buildings, mix-use is quickly rising in the GVA suburbs. However, Grant notes that developers will have to still adapt to the mix of urban/suburban, nothing that pay parking will not be accepted by the city councils – a very different attitude compared to Vancouver. 

The cause of this real estate bubble leads many to point the finger at foreign ownership. Chinese investors are said to be buying up homes and commercial properties, only to leave them empty and vacant. Meanwhile, residents are being pushed out further and further into the suburbs. Municipalities such as Burnaby, New Westminster, Maple Ridge and Pitt Meadows are experiencing record setting listing prices. Most recently, Abbotsford has garnered attention as the newest suburb to enter bidding wars.

Brian Lee Crowley, Managing Director of Macdonald-Laurier Institute and Political and Economic Commentator, has a different explanation as to what’s driving prices. A native of North Vancouver, Crowley is a serial think tank entrepreneur and national thought leader. He is the founder of the only independent national think tank in Ottawa, the Macdonald-Laurier Institute (MLI), recently ranked one of the top three new think tanks in the world. In addition, he’s a columnist in both the Globe and Mail and Ottawa Citizen, a best-selling and award-winning author, an advisor to governments, industry and international organizations and frequent commentator across all media.

As the speaker at our May Breakfast Event, he shared insights on what he feels is really causing the problem.

“We simply don’t know enough to say for sure that foreign investment is the cause of the affordability crisis,” said Crowley. “The balance of probability tells us that Chinese appetite for expensive properties in the downtown core and the million dollar two-bedroom home in East Van is highly improbable. These issues are not because of Chinese carpetbaggers.”

Instead, Crowley said it comes down to systemic failures, blaming poor governance over public policy that’s “controlled by urban elites who force their ideals on Canadians.” He continues that these policies are restricting supply to create demand and using Chinese investors as a means to distract us from what’s really going on.

Crowley believes that policy makers restrict land supply, which only increases commercial and residential prices. Half of the cost of a home is attributed to the restrictive land use regulation, which in turn drives up rates like never before.

Reducing the number of cars on the road and increasing the number of people on transit has always been linked to personal, environmental, and societal benefits. Besides less air pollution, fewer deaths and injuries from crashes, and less stress caused by commuting, taking public transit also leads to financial gains. Costly fees such as parking, insurance, and maintenance are just a few of the costs associated with driving. According to a recent article in The Vancouver Sun, Metro Vancouver’s transportation plan will end up making 70%, or 1.75 million residents, healthier people overall.

For commercial real estate, having accessible transit has major impacts on the price per square foot, pedestrian traffic, and attractiveness to tenants. And with residential prices forcing many working professionals to move outside the city, nearly 90% of new office construction outside of Vancouver will be within 500 meters of a transit station to accommodate commuters. This further exemplifies the dramatic shift of a car culture to a transit culture, affecting the way we live, work, and develop new properties.

Yet despite the societal and economic benefits public transit is said to have, Vancouverites still voted no to the 0.5% sales-tax hike for the transit plebiscite, an increase that would help pay for $7.5 billion worth of new transportation. And according to Brian Crowley, this was the right call.

“It’s become unfashionable to become pro-car,” said Crowley. “But the truth is, the car builds the economy. Places like Ikea and Costco would not be in existence had it not been for the car.”

Crowley believes there is an incorrect assumption that urban centers have more jobs. He further states that mass transit is poorly designed and very expensive, suggesting that “we’re better off buying people cars and fixing more roads” than building another Skytrain route.

An example of how the car culture has actually led to less traffic and more efficiency is in Phoenix, Arizona, which was the 10^th worst place for congestion in the U.S. Now it’s dropped 27 places, sitting at #37, all due to a major road-building program. Therefore, the future of Vancouver’s congestion lies in better road planning and driverless cars, giving residents the benefits of stress-free driving on their commute to work.

Why? Because of redevelopment. Many of the older stores are being torn down and restructured for more modern spaces or mixed-use buildings. As a result, the once affordable rents will be far out of reach. In addition, it could take years for the project to be completed, which means owners would be forced to temporarily shut down while construction took place. As a result, many smaller operators seeking to relocate. The only problem is, where?

Many are going east. Main Street is still reasonable for smaller businesses, ranging from $40 to $60 per square foot. As for Kitsilano, Jane McFadden, the executive director of the Kitsilano 4^th Avenue Business Association, shared in The Vancouver Sun that while their motto is “Shop local, shop West 4^th”, many in the 2300-block are getting pushed out.

For years, Robson Street has been Vancouver’s most sought-after location for retail. Fashion-focused with high-traffic, it demands an average of $200 per square foot. Independent stores simply can’t compete with those rates, which are why these popular blocks are filled with chains like Forever 21, Zara, Banana Republic, and Aritzia.

And while many may blame redevelopment, new construction has also provided opportunity. Many developers are introducing mixed-use buildings, which offer direct traffic from the residents who share the building. The City of Vancouver has also placed restrictions on the size of retail to encourage an active streetscape in an effort to prevent large box stores from overtaking smaller retailers.

According to a study by LOCO BC, small businesses are incredibly important for the BC economy. When residents shop local, 33% of the revenue directly recirculates into the province, compared to 17% for multinational counterparts. This represents a 77%-100% economic advantage. In addition, every one-percent increase in local shopping translates into more than 3,000 new jobs and $94 million in wages.

The Open Concept Office

“A true disruptor, Frank Lloyd Wright was the first to introduce the open plan concept,” says Nielsen. Prior to the 1950’s, open-plan offices were mostly consisting of rows of desks for clerical work. Arguably one of the best architects of all-time, Wright based design principles on humanity and their environment. Pictured above is the SC Johnson headquarters in 1939, which was designed by Wright. The columns resemble a lily pad and are meant to draw in natural light, creating an airy and spacious outdoor feel.

The Action Office

In 1964, designer Robert Propst was working in the office-furniture firm Herman Miller when he introduced the cubicle: a flexible, semi-enclosed workspace. These were thought to increase productivity, privacy, and maximize efficiency of space. The Action Office design quickly became popular because it was flexible and movable, saving companies money on construction and development costs. Yet despite his intentions, “cubicle farms” grew far from their original purpose, and soon became a dreaded concept for working professionals who were secluded from their peers.

The Googleplex

The emergency of technology has dramatically altered office design to become much more than a place to work, but rather a venue to live and play. Sprawling across 3.1 million square feet, the isolated solar-powered Google headquarters offers endless perks for their employees. This includes soccer fields, tennis and volleyball courts, free campus bikes to get around the facility, valet, public art, and two organic gardens that grow the vegetables and herbs for the restaurants. You can also find nap pods, multiple fitness centers, and massage rooms. This growing trend towards creating a lifestyle rather than just an office space is how many tech companies are attracting staff in the competitive race for talent.

The Satellite Office

For entrepreneurs and growing businesses, companies like WeWorks have introduced a collaborative and affordable alternative to the modern office. Typically there are four options to choose from: We Membership, a Hot Desk, a Dedicated Desk, and the Private Office. With prices varying from $45/month to $450, co-working spaces have been emerging in Vancouver over the past few years. This includes HiVE Vancouver, Suite Genius, and The Network Hub, which have become popular office alternatives for startups and freelancers.

Nielsen explains that office space design is a reflection of the culture and values of society, and as Millennials are now the majority of working professionals, companies have to incorporate certain elements into their office design. As this generation values sustainability, work-life balance, and collaboration, we’ve circled back to Wright’s ideas of the open concept in order to become more productive and efficient professionals.

From Hootsuite to MEC, Vancouver has become a hub for innovative office design.

Bill Dowzer, a Principal of BVN, an award-winning Australian architectural practice, is a leader in workplace design and a champion of BVN's "collective creation" approach. According to Dowzer, there are two reasons why designing the right office space is important: it creates a sense of belonging, and it builds a community. These two components are not only important for an organization to succeed but to grow, as text messages and Skype meetings can never replace human interaction.

“When conceptualizing the design, we work with the human resources team. Why? Because we base our design on the people,” said Dowzer at last month’s Breakfast Event. “How do you connect people in vertical buildings? How do you create a space that brings in the environment and promotes health and wellness? These are the foundations we need to know before we start drafting. Our goal is to create what we call “sticky” buildings; in other words, places where people want to be.”

Dowzer views higher density as a tool to bring people together. And as more people hide behind a screen, his goal is to force human interaction. He does this through open floor plans and transparency.

“In vertical buildings, we think of creative ways to get people to interact. For example, we’ll make the stairs thinner so people have to bump into each other. A five foot wide stair means people don’t have to say hello; however, if we bring that down to four feet, you’ll have to acknowledge the other person. This starts to build community.”

As food has always been a means to socialize and connect, Dowzer explains that more and more companies need to include shared kitchens and eating areas for staff.

Integrating nature is also an important factor, as research proves that access to outdoor views, fresh air and plants improve employee well being.

Dowzer feels it’s important to remove the hierarchical barriers like private offices and cubicles so that CEO’s and assistants all work together in an open concept, open space approach.

“Office design should be based on the democratization of the workforce. The most effective tool you can give employees is choice. When they can create an environment where people actually enjoy their job, you’ve accomplished a sticky building.”

These contemporary ideas are paving a new era of office design, a path that continues to develop as our work culture demands modern changes and inclusive features.

Recently, Nat was honoured at the NAIOP Annual Icon Lunch at the Four Season’s Hotel, where we learned about his journey that brought him to where he is today. Though he’s had many accomplishments, there are three in particular that he is the most proud of.

Citygate

“This project really was the gate to the city,” said Bosa. “At the time, Mount Pleasant was a bad part of town. But with the construction of Citygate, we were able to turn it around.”

On the former lands of Expo ’86, Bosa developed 9.5 acres of residential homes and dedicated 20% of the project to social housing. With stunning views of downtown, access to public transportation, and walking distance to Vancouver’s top attractions, Citygate expanded the perimeter of downtown and offered a new community in the growing urban center.

San Diego

“The work we did really made a significant change to the city. It’s not about the money, it’s not about Nat Bosa, it’s about ‘let’s do it for the city’.”

For the City of San Diego, Nat Bosa needs no introduction. Revitalizing the downtown core, he built over 1,600 new homes overlooking San Diego Bay in just eight years. From job creation to community building, he’s made it into one of the most sought-after areas to live in Southern California.

The Empress Hotel

“The Empress Hotel is like an old mistress. She’s going to give me good times, she’s going to give me a headache, and she’s going to cost me a piss pot of money. She’s been true to the T.”

Putting it in his signature way, The Empress Hotel in Victoria has been a challenging project for Bosa, but also a rewarding one. Paying $50 million for the property, he’s spent more than the purchase price on the iconic restoration project. However, to him “it’s undoubtedly a privilege to own something like that. We wanted to do this project for the City of Victoria. It‘s our gift to them.”

We’ll be sharing more about the iconic developer in our upcoming blogs, follow us on Twitter for updates!

“This is a thrilling ride. The thrill is to survive the close calls and come back on top,” he said at the NAIOP Annual Icon Lunch earlier this month. And given what he says were the hardest times in the business, it’s no wonder he’s earned the reputation as a resilient visionary that’s had a major impact on communities across North America.

Admitting he was too impatient and anxious to buy something, Bosa purchased 240 units in Seattle for $6.1 million dollars in 1976. However, what he didn’t realize is that he needed takeout financing from a U.S. bank, which at the time was incredibly difficult to receive. Bank after bank, they continued to deny him of an account. He was growing more worried as time was quickly running out. It wasn’t until his accountant called one bank’s head office, who said all they had to do was open an account and put $50,000 in it in order to receive the loan. Bosa did it that day, and was able to receive the loan – just in the nick of time.

In the early 80s, the Canadian government was waging a war on inflation. In an effort to counter it, the central bank drove interest rates higher. As a result, interest rates reached record highs of 24%. Bosa admits pleading with banks not to pull the plug on him as he struggled to make payments on his current projects. He notes that it was through constant communication and staying true to his word that they never did close him down. Many developers were not so lucky.

When Lehman Brothers announced they were declaring bankruptcy in 2008, it affected millions people across the globe, and real estate was no exception. With a strong presence in San Diego, Bosa said that during The Great Recession they went without a sale for a very long time, having to stop all projects. While these were eventually re-launched, they lost hundreds of millions of dollars during this economic downturn.

Though he faced professional challenges throughout his career, Nat Bosa always trusted his instincts. When asked what it takes to succeed in business, he listed the following attributes: courage, vision, integrity, the ability to move quickly, and flexibility. However, he said the most important thing is that every decision “has to feel good”.

“Chinese investors head south flee to B.C.’s Foreign Buyers Tax”

With the introduction of the new Foreign Buyers Tax, The Vancouver Sun reported Chinese buyers are fleeing to Seattle to avoid the newly imposed 15% property-transfer tax on foreign nationals buying real estate in Metro Vancouver.

Bosa: “I would have to say that Christy Clark had to do something. The election is coming. I think I would not be far off if I say that 90% of the people in this room would vote for her. Was it the perfect thing to do? No, but there is no perfect thing to do, and she had to do something.

In this industry, we’re all kind of hogs. We don’t want you to touch what’s great for us. I think by doing what she did, she was able to cool the fire but she is not killing the fire. The fire is still there; it’s the best thing that could happen to our market right now. It was getting stupid. I think the market is going to be fine. The Chinese are not going to stop buying here - this is their number one hive.

By doing what she did, she is showing the masses that she’s not in the pockets of the developers, and that’s good. The developers should be just thrilled that she’s doing a great job.”

“Snitch-and-audit enforcement part of Vancouver's proposed empty-homes tax”

Mayor Gregor Robertson announced that Vancouver will have a levy on empty homes in time for the 2017 tax season, and neighbours will be leaned on to help enforce it.

Bosa: “This is going to be complicated. It’s going to be hard to enforce. I heard recently there’s one guy in West Vancouver that bought 37 homes, and I wouldn’t be surprised if they’re all empty. I bet there are some streets in West Van where you can’t find neighbours. That’s what’s wrong. There should be a rule that you have to put people inside of the homes at least and rent the place out.

This is a repeat of the of late 80’s from Hong Kong. They were buying the homes as an insurance policy. We have to force them to at least rent the place out. I don’t disagree with what Greg Robertson is trying to do, but how you are going to implement it is another question.”

“New tariff driving up the price of drywall by up to 276%”

The Canadian government imposed duties of up to 276% on drywall imported from the U.S. in an effort to help Canadian producers. It’s said that these tariffs could add an additional $2,500 to $3,000 to construction costs of a home.

Bosa: “Here we go talking about governments again. We had a government that was ‘Steady Eddie’. Dull, getting arrogant, but Harper was doing his job. Then it was time for a colourful change – well, we got Vanity Fair. Here we are talking about Trump, but no one is talking about what this guy [Trudeau] is doing here?

Am I surprised he’s bringing in this tax? Of course not. Is it good? Of course it’s not good.”

A recent article in The Vancouver Sunshared how local offices are changing -- literally. Cubicles, corner offices, and segmented hierarchies are not only considered archaic, but often deal-breakers by Millennial professionals.

So if you’re looking to attract talent or retain your current employees, here are a few guiding design principles for the office space.

Open and Flexible Environments

This past summer we were joined by Bill Dowzer, a Principal at an award winning Australian architectural firm called BVN, at the NAIOP Breakfast Event. Dowzer shared how when conceptualizing design, he removes hierarchical barriers like private office and cubicles so that everyone from CEOs to assistants can work together in an open-concept, open-space approach. Millennials want a “democratization of the workforce”, creating an environment that people can actually enjoy the space and collaborate.

This eco-conscious demographic cares about recycling, zero waste, and food composting to reduce their footprint. They want their employer to also share the same ideals, and take a sustainable approach in both the design and operation. Millennials also want buildings that stand out for their sustainable materials and LEED certification.

Work/Life Balance

Healthier offices lead to healthier employees, and Millennials know this. From meditation rooms to fully equipped gyms to ping pong tables, businesses are having to provide amenities to attract top talent.

Location, Location

Beyond just the interior of the buildings, organizations have to think about the exteriors as well. Are you located next to a park or courtyard so staff can spend time outside? And as this generation is increasingly foregoing cars, how close are you to transit? These are all important factors that developers and businesses have to consider in the building process.

According to recent reports, the tax is working. The total value of purchases by foreigners dropped to $17 million for the month of August -- a major decrease from the $2.1 billion over the previous six weeks.

At a recent NAIOP Breakfast Event, we asked our panelists how they felt the tax would affect the future of foreign ownership in Vancouver.

Kevin Meikle, Vice President, Executive Director, Investment Sales & Capital Market at Cushman & Wakefield

“The market needed to be cooled but maybe the tax was too heavy handed – you don't want to cut butter with a chainsaw. The [Foreign Buyers] tax has caused the market to pause, and I think it just normalized the market. Year over year, we were experiencing increases in the market that just didn’t make sense. Since the tax, it’s been back to business as usual. In terms of the commercial market, it’s almost had zero effect.

We’ve recently had complete sell-outs in our Vancouver and Burnaby projects, which were completed even after the tax was in placed. This tax will have no impact on the condo and commercial market, and just slowed down million dollar single homes.”

Ashley Powell, Senior Vice President, Head of Transactions, Western U.S. Bentall Kennedy U.S.

“If the intent is to slow down fire breathing market, I wonder if it will have the opposite effect?

Compared to San Francisco, Vancouver’s taxes are on par. What I’ve learned is that taxes don’t drive value.”

Foreseeing little impact on Vancouver’s real estate market is a view shared by others as well. In a Globe and Mail article, reporter Gary Mason shared that offshore investment from China will continue to put their money into cities that have introduced a similar tax, like Australia.

“Simply put, the Chinese feel comfortable here and consequently will continue to buy property here.”

What do you think? Tweet @naiopvancouver and let us know!

In the last five years, Canada’s real estate market has completely changed, reaching prices and demand like never before. Greater Vancouver and Greater Toronto have become the most active and expensive housing markets. With beautiful surroundings, a high standard of living, and limited land, plus a dropping dollar, foreign investors have flocked to the east and west coasts of the country, purchasing homes, condos, industrial, and commercial buildings. Bidding wars with no subjects have become the norm, with many sellers cashing in on their properties that they paid significantly less for only a few years beforehand.

According to MacLeans, inquiries on Juwai.com, an online listing service where Chinese buyers can look for international real estate, rose 143% in Ontario alone last year, with the total value of those homes hitting $11.2 billion. Chinese buyers shelled out nearly $12 billion in real estate in Vancouver, accounting for 33% of the city’s sales. For Toronto, it was $8.4 billion, representing 14% of total sales.

“I tell my clients not to invest in other markets. Only invest in Vancouver. Investing in the downtown core will give you higher equity, liquidity, and high yields,” said Kevin Meikle, Vice President, Executive Director, Investment Sales & Capital Market at Cushman & Wakefield. “We don’t have tertiary options like the States. For example, after the Big 5 [Chicago, New York, Los Angeles, San Francisco, Washington DC] you can invest in Austin or Seattle. Here we have Kelowna.”

Of course, it’s not just Chinese buyers that make up foreign ownership.

Ashley Powell, Senior Vice President, Head of Transactions, Western U.S. Bentall Kennedy U.S., shared that “Bentall Kennedy invests in urban areas that attract Millennials and talent. So yes, we’ll continue to invest in areas like this -- and this is Vancouver.”

As we shared in our last blog post, Premier Christy Clark has enacted the Foreign Buyers Tax in order to simmer the hot market and prevent more homes from sitting vacant. However, compared to cities like Calgary and Montreal, Toronto and Vancouver continue to attract much more attention than their neighbouring counterparts.

Do you foresee other Canadian cities that will become attractive to foreign buyers? Tweet @naiopvancouver and let us know!

After our immigration website crashed during election night, many are predicting that Trump’s presidential win will lead to an influx of Americans heading North. And while this may let some home sellers cash in, it may put even greater pressure on the affordability crisis.

The new President’s plan to invest $1 trillion on infrastructure has led many financial markets to worry about inflation. As a result, investors are dumping bonds and causing certain interest rates to rise. Mortgage rates could be affected at any time, according to a recent article in The Globe and Mail.

Trump also said he would like to renegotiate the North American Free Trade Agreement (NAFTA). As America’s closest and largest trading partner, 31.5% of Canada’s GDP based on exports, and 74% of our exports go directly to the US. If this has a less favourable outcome for Canada, it could cause serious economic issues for our country.

However, opposition to free trade deals would also hurt the American economy, forcing their interest rates to stay low for longer. And since U.S. interest rates affect Canadian interest rates, it would mean lower mortgage payments in Canada.

After a record number of Google searches on “How to move to Canada”, the housing outlook is more uncertain than ever. The general consensus from RBC and other economists is that Trump’s policies have a strong potential to accelerate inflation at a much higher rate than is being predicted. Partnered with deep tax cuts and fiscal spending, inflation could be the likely outcome.

Only time will tell whether or not his claims had any merit, but despite the varying perspectives, there is one thing certain: the world is watching anxiously. Though some remain hopeful, others are merely bracing themselves for hard times ahead.

Will Trump affect inflation rates and Canada’s economic future? Tweet @naiopvancouver and let us know!