Viva Vancouver

Frank O’Brien
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FRANK O’BRIEN
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There is now more office construction underway in the suburbs of Vancouver, Calgary and Edmonton than there is downtown and – with the exception of a single downtown Calgary tower – more space is being leased in outlier areas than in the core of all three centres.

The suburban shift spreads further than Western Canada’s three largest cities: it is a national trend that has far-reaching implications, recent studies suggest.

“While frequently overshadowed by thriving downtown markets, the suburban office market should not be written off,” said John O’Bryan, chairman of CBRE Ltd. Vacancy rates remain higher in the suburbs, but these secondary markets have proved much more resilient than downtown “despite two challenging years.”

The proof is in the numbers. Canadian suburbs have seen annual office absorption reach 2.2 million square feet in 2011 and 2.4 million square feet in 2012. In comparison, downtown office absorption was cut in half from 5.7 million square feet in 2011 to 2.4 million square feet in 2012.

The movement to the suburbs is based on four key factors, realtors in all three cities say: lower leasing costs, lower-cost or even free parking, better transit access and “being closer to where workers are actually living.”

The average suburban office lease rate in Canada for Class A space is $17.68, compared with $25.84 in the downtown. Add in cheap parking and shorter commute times and suburban offices gain a definite edge.

In Vancouver, 465,000 square feet of suburban offices were leased up last year, while the downtown experienced negative leasing of 157,500 square feet. Edmonton’s suburban markets saw a take-up of 328,000 square feet, compared with just 245,000 square feet downtown.

In Calgary, two million square feet were leased downtown last year, but it was nearly all in the 1.8-million-square-foot Bow Tower, which opened in the fourth quarter. Take the Bow out and less office space was taken up downtown than in the suburbs, according to CBRE.

Vancouver

Avison Young calls the current churn in the office market “a fundamental shift” that will redefine future development in the region for decades.

Basically, Avison Young sees the epicentre of the downtown core moving eastward and into suburbs such as the widely defined Broadway Corridor, Burnaby and Richmond. Last year, Vancouver’s downtown had the lowest absorption level since 1997 while the Broadway area (virtually every Vancouver market outside of the core) had the highest leasing in six years as 229,000 square feet were taken up.

An example is the first tower of Rize Alliance’s Containers project on Terminal Avenue in East Vancouver. When the wraps are taken off the colourful landmark this spring, all 81,500 square feet will have been leased to Columbia College, which will then sub-lease about 10,000 square feet.

Bentall Kennedy has already pre-leased 75 per cent of its 176,000-square-foot Broadway Tech Centre 6 that won’t complete for two years.

Altogether, 600,000 square feet of new office space is coming to the Broadway area by 2016, but half it is already claimed, according to Avison Young.

Downtown

As a comparison, only two pre-leases were announced in the second half of last year for four major new downtown towers being built: a total of just 40,000 square feet at the 275,000-square-foot MNP tower by Oxford Properties, where about half the space remains unclaimed 18 months away from completion.

Telus Garden remains 60 per cent preleased, but Telus has taken half the 500,000 square feet. It opens in the second quarter of next year.

Bentall Kennedy’s 365,000-square-foot tower at 745 Thurlow is about 50 per cent preleased as it prepares to open in 2015.

Cadillac Fairview, which is making over the former Sears building into 292,000 square feet of office space, has no leases confirmed.

The potential overhang of prime office space could affect the entire downtown. “If developers of new inventory decide to stimulate leasing momentum by reducing [rent], landlords may need to adjust expectations,” Avison Young suggested.

While most analysts agree the new downtown towers – all Class AAA space, which now has a 0.7 per cent vacancy rate – will likely be leased by the time the doors open, there is some question of whether Class A and B tenants will stay in the core or head for the suburbs.

Some have apparently already made the decision. Burnaby experienced 250,000 square feet of absorption last year, the highest take-up in Metro Vancouver. Altogether, tenants snapped up 84,000 square feet of Class A space and 147,000 square feet of Class B space in Burnaby.

Even Richmond, which has suffered a near-20 per cent office vacancy rate for years, saw the highest level of leasing activity in four years in 2012, as tenants took over 110,000 square feet – 20 times more than was leased last year in all of downtown Vancouver.

Calgary

Calgary is seeing a similar churn. The pattern is most pronounced in Class A office leasing over the past eight quarters, which saw increased activity in the Beltline and suburbs while downtown leasing declined.

Calgary‘s overall downtown office vacancy rate is 3 per cent, up just 0.15 per cent from a year ago. The 1.8-million-square-foot Class AAA Bow building is fully leased, but downtown landlords holding older space have seen negative absorption over the past 12 months.

“The lack of quality space downtown is causing tenants to consider the Beltline and suburbs as viable options,” according to the Calgary office of Avison Young.

Price is a key lure. Class A space in the suburbs now leases for an average of $24.30 per square foot, net, compared with $40.58 downtown.

Calgary‘s suburban markets could get a boost this year as the U.S. economy improves, since American companies already have a significant presence in suburban Calgary.

As in other markets, the suburbs may present the only option for some Calgary tenants to expand or sign new leases in the near term, noted Ross Moore, CBRE’s director of research.

Calgary‘s hottest office market now appears to be south Calgary, which has both a healthy inventory of space – Class A vacancy is 6.2 per cent – and new product coming on stream. In the fourth quarter of last year, 265,000 square feet of new space was added and 235,000 square feet was leased up.

“Both Class B and C witnessed decreases in vacancy rates, supporting the trend of [downtown] tenants relocating to suburban areas,” Avison Young noted.

This year, more than 1.1 million square feet of new office space will open in south Calgary, including 350,000 square feet that is being built on spec.

More ominous for downtown, Imperial Oil is moving its headquarters from downtown to a 20-acre site at Remington Development Corp.’s Quarry Park in the southeast. The new space will allow Imperial to consolidate its operations from several downtown Calgary buildings.

The Beltline is also feeling competition from lower-cost suburbs, with the overall office vacancy rate up marginally this year to around 5.9 per cent.

However, 723,000 square feet of high-quality space will be added this year in projects that are expected to lure more tenants out of the central business district.

Edmonton

Melcor Development’s Village at Blackmud Creek office project in south Edmonton will deliver 741,486 square feet of Class A space in a campus-like, 35-acre development. Now under construction, it is an indication of the competition that downtown landlords are facing.

Suburban Edmonton has about half the office space as the downtown, but more space was leased and built in the suburbs last year than in the central core – and the trend is accelerating.

In the fourth quarter of 2012, the downtown actually saw negative absorption of office space, while 103,000 square feet were snapped up in the suburbs.

Mainly due to a pullback by government – which posted negative leasing of 42,800 square feet last year – the downtown office vacancy rate is now 7 per cent, but 9 per cent in the Class A sector. Suburban office vacancies for Class A is 8.8 per cent. Last year, more than a quarter-million square feet of offices were built in Alberta’s capital, compared with zero downtown.

from Western Investor March 2013

Cheryl Rossi
Van. Courier

A new urban school is slated to open across from Andy Livingstone Park in September 2015. The Ministry of Education has hired Francl Architecture to lead the design team.

The International Village elementary school will be integrated into the Firenze development, at Expo Boulevard and Abbott Street. Firenze includes two residential towers, commercial space and a childcare centre. The school will accommodate 60 full-day kindergarten and 450 students in grades 1 to 7.

The school will be constructed at grade above an existing parkade. The preliminary proposal envisions a multi-storey building with the main entrance on Expo Boulevard and space for before- and after-school care. Andy Livingstone Park will serve as the school’s outdoor play area. The school will serve the downtown core and Northeast False Creek.

“It opens more area for the local community to have their child educated locally,” says Kelly Isford-Saxon, the board’s facilities project manager. “That whole area appears to be growing dramatically in terms of families moving in that area and continuing to raise children. At one time they would move downtown but once a child got to school age, it seemed to be more common practice for them to move out of the urban core to find a house… Now more families are electing to stay downtown and now we’re really looking at and dealing with those requirements of having children in a very urban population.”

Even though four classrooms for 100 additional students opened at Elsie Roy elementary in Yaletown last September, 39 families were turned away for lack of space, the board’s director of facilities, Jim Meschino, told the Courier last week.

Lord Strathcona elementary is serving as the “home” school for students residing within the International Village school’s attendance area until the new school opens. The future catchment area for International Village will be bound by Burrard Inlet, Main and Burrard streets, and run down Davie Street, north on Homer and down Nelson Street.

The design team will focus on how to integrate a school with a largely residential development.

“We’re talking about neighbours coming together,” Isford-Saxon said. “We’re a different neighbour and the requirements of our residents in the tower and their needs maintaining views, privacy and those kinds of things [will be considered], and, of course, our needs of operating a school during the day and having spaces available, hopefully for the community, in the evenings and weekends.”

© Copyright (c) Vancouver Courier

Connie Adair
Other

he real estate market in Cabo is hot, and you can get involved by referring clients, or enjoy the locale yourself and sell real estate in the Mexican state of Baja California Sur. Century 21 Paradise Properties managing partner Terry Curtis says, “The door is open. Any Canadian citizen who has an active real estate licence qualifies to work for me. Getting a work visa takes about three weeks.”

Those who prefer to refer clients can expect a 30-per-cent referral fee.

Century 21 Paradise Properties sells in Los Cabos, including Cabo San Lucas, San Jose del Cabo, Tados Santos and the East Cape, Curtis says. “Fifty per cent of our clients are Canadians. The majority of Canadian buyers buy with the idea to use the property as a holiday home and rent it out the rest of the year for now, with the intention of using it as a permanent home down the road.”

There are many reasons Canadian buyers are attracted to Cabo instead of the U.S. or other parts of Mexico, he says. “We have lots of Canadians, and Canadians like Canadians. We also have a fantastic climate. Expect one month with lows of 55 F and lows of 75 F for the other 11 months. It’s also not super expensive, and it’s clean and safe.”

The housing selection is good, he says. “We have 50 months of inventory and prices are stabilizing. A year ago, a $100,000 property would go for $85,000 to $89,000. Now owners are holding out for more money and $100,000 properties are going for $95,000 or $98,000. Prices are good but it’s still a buyers’ market,” Curtis says.

Century 21 Paradise Properties sold 10 properties in the first month of this year, and average 35 to 40 in a year. The average house sells for $350,000. Condos sell for $90,000 and homes can go for in excess of $5 million.

Los Cabos, comprised of the towns of San Jose del Cabo and Cabo San Lucas and connected by a 20-mile corridor of resort properties and beaches, offers a range of activities, including golfing, fishing, sailing, scuba diving, horse back riding and swimming with the dolphins. Off-road vehicles, cruises and zip lines are other activities.

Curtis is originally from Corpus Christie, Texas. When he first arrived in 1989, the population was 10,000. It’s been booming since and the population is now between 250,000 and 300,000 people between here and San Jose, he says.

When he first arrived, he had a water sports company that employed 45, but says the market became flooded with similar companies. He decided to sell real estate, buying the franchise in 2009 with co-owner Ari Kreiss.

When the partners purchased it, the office was doing less than $5 million in sales annually. “Now we’re up to $16 million a year,” Curtis says. The company currently has 90 listings valued at $60 million.

The brokerage guides buyers through the paperwork. “We’ve lived here so long and understand the system. We help buyers. It’s part of the service.” Curtis has lived in Cabo San Lucas since 1989 and bought and sold property in Los Cabos since 1995. He has also operated several businesses and says he knows about working in Mexico as an American. He has been a Mexican citizen since 2005 and lives with his wife and four children in the community.

Century 21 Paradise Properties has 12 sales reps in two offices, in Cabo San Lucas and San Jose del Cabo.

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View the 60 Minutes broadcast here: http://www.youtube.com/watch?feature=endscreen&v=KjOuDmy1ybE&NR=1

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Garry Marr
The Vancouver Sun

Foreign buyers are trying to move their money to a safer spot for capital preservation. They are looking for hard assets and the condo sector has a track record of increasing prices

The bad news for China’s real estate market could be good news for Canada’s condominium market.

A crackdown on real estate ownership in the world’s most populous county might translate into Chinese citizens looking to move more of their money abroad, with Canada a leading destination.

“Absolutely it will have a positive impact [on the condo sector],” said Benjamin Tal, deputy chief economist with CIBC World Markets. “If it’s softening now, it will soften less rapidly than otherwise. This is a positive move because some of the money will find its way to Canada.”

Related

• China’s move to tighten housing market rattles markets
• Unsold condos in Toronto steadily rising, but market strong
• Flaherty’s mortgage rate warning doesn’t do consumer any favours

The Shanghai Stock Exchange Property Index was off as much as 9.3% following news of the crackdown Monday, which will include increasing down payment requirements on second-home mortgages and tougher implementation of a 20% capital gains tax on property sales.

The country’s two largest condo markets – Vancouver and Toronto – can probably use a boost. RealNet Canada Inc. reported last month that new home high-rise sales across the Greater Toronto Area dropped to 686 in January from 744 a year earlier and 1099 in 2011. There has been less pressure on values with the group’s index showing only a 2% increases in condo prices from a year ago on a square foot basis.

In Vancouver, the real estate board for the metro area said Monday that sales for existing apartment properties were down 25.5% in February from a year earlier. Prices were also down 3% in that asset class from a year ago.

Ben Myers, vice-president of Urbanation Inc., which does research on the condo sector in Toronto, said the impact of foreign investors remains unclear.

“A lot of foreign investment comes through a subsidiary so there is no way to figure it exactly out,” said Mr. Myers.

By his firm’s estimates, only about 10% to 15% of investors come from abroad and only about 5% of those people have their name on the direct purchase of sale.

“It’s a small amount,” said Mr. Myers about the number of people who might come from China to invest.

Even at a small amount, those people would be welcome in the condo sector, given sales are not quite as robust as past years.

Realtor and developer Brad Lamb says every time there is a crackdown abroad, it’s good for the Canadian market.

“Foreign buyers are trying to move their money to a safer spot for capital preservation. We see that a lot from more politically risky countries,” said Mr. Lamb. “They are looking for hard assets and the condo sector has a track record of increasing prices.”

While Mr. Myers speculated that tighter rules out of China could be bad for the Canadian real estate market if the Chinese government restricts money leaving the country, Mr. Lamb said that might mean foreign buyers are unlikely to sell here.

“There is no way in the world they are going to bring the money back,” said Mr. Lamb. “They’ve done that as a safe haven. You have money in Toronto, you leave it here.”

He said one of the methods of bringing cash into Canada via real estate is to have a student going to school here. Other times, the money is transferred to relatives.

“What makes it attractive is the scale here. We are talking $300,000 to $400,000 condos. There are few places in world you can buy that in that price range and have someone run it,” said Mr. Lamb. “It’s much harder to bring money into other countries. We have a very easy and open pipeline of Chinese money.”

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