With a mission to inform, empower, celebrate and advocate for British Columbia's current and aspiring business leaders, BCBusiness go behind the headlines and bring readers face to face with the key issues and people driving business in B.C.
Issue link: http://digital.canadawide.com/i/1406705
SOURCE: COLLIERS CANADA *WEIGHTED AVERAGE SEPTEMBER/OCTOBER 2021 BCBUSINESS 39 In many towns and cities besides Van- derhoof, outside the hot spots of Vancou- ver and Victoria, housing shortages that were chronic for years in the North and the Interior have morphed into more serious crises, with community leaders ransack- ing the policy world for solutions. That's just one of the tectonic shifts happening. Some are shared by major cities in North America. People from Toronto to Austin, from Kelowna to Miami, are wondering how remote work will change both office and housing patterns. They're also seeing that a boom in online shopping has turned industrial land into a prized commodity. Other real estate patterns are unique to B.C., like the fact that Indigenous bands and nations are now, collectively, the largest private developers in the Lower Mainland. I N D U S T R I A L L A N D I S T H E N E W H O T P R O P E R T Y C L A S S Malls, condos, rental apartments, office towers. Those used to be the prime types of real estate that people with money looked at first. Then malls started to struggle as retail began shifting to the virtual world. The apartment market in the larger B.C. cities and in Vancouver, especially, wob- bled the past few years with the addition of vacancy taxes, speculation taxes and then COVID impacts. Offices started to see change with a low-key shift that had been happening with some employers, as com- panies found it cheaper and more practical to have some staff work other places than traditional downtown premises. That silent trend exploded during pandemic times. " COVID exposed the f laws," says Todd Yuen, manager of i ndu st r ia l development for Burnaby-based Beedie, B.C.'s larg- est company in that sector. "Apartments had rental freezes, a moratorium. Office buildings became vacant. COVID propelled industrial to be the premier asset class." Industrial space, it turns out, is a key asset in a digital world. It's what everyone trying to sell you something online must have in order to store huge piles of prod- ucts near where people live and get them to you quickly in the impossible delivery times promised. As well, says Jeff Miller, Toronto-based head of industrial devel- opment for Oxford Properties Group, the breakdown of supply chains during COVID drove that demand even higher, because companies felt like they couldn't count on just-in-time delivery from container ships anymore. So they needed more space to store the furniture, laptops, ring lights, sports equipment, shoes, food and every other thing people were ordering from a website. In Metro Vancouver, where the amount of industrial proper t y is restricted because of the geographical constraints that limit every other type of land use here, as well as the fact that it's the third- largest port in North America, the pres- sure has been intense. As a result, industrial lease rates in the Lower Mainland have increased faster than at any time in the recent past, and space is ever harder to come by. Amazon is signing contracts for buildings before they're even built. The vacancy rate in Port Moody, New Westminster and Tsawwassen First Nation was zero for the second quarter of 2021, accord- ing to a report from Colliers, while other communities ranged from 0.3 per- cent (Maple Ridge, Chilliwack) to 2.2 per cent (North Vancouver). Vancouver, at 2.3 percent, was slightly above that, mainly because the Molson brewery property near the Burrard Bridge sits empty. That squeeze, which has created the tightest supply in North America, has pro- duced secondary repercussions. Investors have started to show up in the market, outbidding end users. In a report from Colliers on six recent industrial land sales in the region, just two buyers—a window manufacturing operation and a producer of vegan nutritional gummies—were end users, while the other four were develop- ers or investors. Only 14 percent of indus- trial space was bought by actual users in all of 2020, compared to 31 percent the year before, according to numbers from Ray Wong, vice-president of data operations at Vancouver-based Altus Group. The intense demand for room has had one positive effect. Industrial land devel- opers in the region have started planning a new kind of project—multistorey buildings. For a couple of decades, in spite of urging from Metro Vancouver planners to make better use of the region's scarce supply of industrial land, developers hadn't wanted to move from the model of single-storey buildings surrounded by a sea of parking. Now Oxford Properties and Wesbild Holdings, a Vancouver company that was an offshoot of Future Shop, have projects R E A L E S TAT E R E P O R T 2 0 2 1 I N D U S T R I A L S T R E N G T H Although the COVID e-commerce boom gave B.C. industrial property a bigger boost, the local office market is holding its own despite rising vacancies 0.7% Metro Vancouver's industrial vacancy rate in the second quarter of 2021 L100 basis points YoY $14.88*/sf Asking net industrial rent J13.2% YoY 5.3 million/ 1.0 million sf Under construction vs. new supply $441/sf Average sale price J16.4% YoY 6.5% Metro Vancouver's office vacancy rate in the second quarter of 2021 J100 basis points YoY $29.04*/sf Asking net office rent J13.3% YoY 5.8 million/ 235,000 sf Under construction vs. new supply $744/sf Average sale price J5.1% YoY