No tenant, no problem as local office space market heats up

Garry Marr
The Vancouver Sun

There was nothing to buy in Vancouver’s increasingly hot office market, so GWL Realty Advisors and its partners did the next best thing — they decided to build their own tower.

That GWL, which has $2 billion in office, industrial, mixed-use, and multi-residential projects planned or underway across Canada, and its partner, the Healthcare of Ontario Pension Plan, didn’t have a tenant lined up didn’t bother them at all.

“The story is just limited supply. There are a lot of condominiums around here but not a lot of offices,” Paul Finkbeiner, president of GWL Realty, said about the 33-storey Vancouver Centre II project at 753 Seymour Street, which is a joint venture of HOOPP and two of GWL’s segregated funds. It broke ground Wednesday. “We are one of the first ones out of the ground.”

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The 371,000 square foot building is part of the AAA office tower complex known as Vancouver Centre, which is connected to two major transportation networks. “There is strong demand from tenants all around,” said Finkbeiner about the second tower which will open in 2021 next to the 480,000 square foot tower GWL already has on the site.

Ross Moore, a senior vice-president with Cresa Vancouver, calculates 12-plus buildings might hit the Vancouver market in the next two to four years and add as much as 3,665,000 square feet of space by 2022.

“You really have to go back to the last boom in 2015 when five buildings came in one year and then go back to 2012-2013 to see more,” said Moore. “We had all this new supply and it all got gobbled up. These (investors) can build on speculation. In the old days, developers just didn’t have the muscle but someone like GWL and HOOPP they can go on speculation.”

Space in Vancouver is getting leased up quickly. This month New York-based WeWork Inc. secured a deal with Amazon.com Inc. to rent most of the shared workspace provider’s first Vancouver office. The Seattle-based company had committed to rent space in a new building being constructed by Oxford Properties Inc. but because it won’t be ready until 2019 Amazon grabbed most of WeWork’s first foray into Vancouver at Burrard Station.

The domino effect was WeWork, a US$20 billion company which is expanding its shared space concept, went back into the market to get even more space to service its growing client list.

“What is shocking is that most of this speculative projects are going to go ahead. There might be one or two exceptions,” said Moore, who says developers just don’t see a potential problem like in Calgary where vacancy rates are near 30 per cent after a speculative building boom. “It’s … a much more diversified economy in Vancouver. Mining companies got slammed in Vancouver but tech picked up the slack and government services did too.”

Cresa says vacancy rates in downtown Vancouver are now about 6.4 per cent, down from about 8.4 per cent a year earlier. With that tightening, has come an increase in rent and Moore says some gross rents are almost $60 per square foot, unprecedented for the Vancouver market.

“The question is will they get the rents,” said Moore, who thinks landlords will be successful. “When you look at rents in San Francisco, it’s like US$90 (per square foot), so Vancouver is not that bad.”

Finkbeiner says pre-leasing a tower, normal practice for any type of development, is harder in Vancouver because the city is filled with smaller regional offices as opposed to head offices. But he doesn’t mind because leasing to one lead tenant usually means a considerable discount for that company and he expects overall rents will be higher with a series of smaller tenants.

“We like the whole office market here. We found it hard to find existing office buildings (to buy),” said Finkbeiner, noting Vancouver did see a couple of large transactions like the Bentall Centre move over the last couple of years but generally there is not much trading of assets in British Columbia’s largest city. “The (new building) is ideal for what we call the TAMI sector, technology, advertising, media and info.”

© 2017 Postmedia Network Inc.

Currents at Water’s Edge takes a serene riverfront location

Mary Frances Hill
The Province

Currents at Water’s Edge

Where: 3188 Riverwalk Avenue, Vancouver

What: 141 homes in two boutique concrete buildings; the sixth Polygon community at the River District

Residence sizes and prices: One to three bedrooms, 560 — 1,742 sq. ft., two-bedroom homes from the high $700,000s

Developer and builder: Polygon Currents Homes Ltd.

Sales centre: 3202 Riverwalk Avenue, Vancouver

Hours: noon — 6 p.m., Sat — Thurs

Even as the River District takes shape as a vibrant community of new homes and amenities on the Fraser River waterfront, the neighbourhood still maintains a sense of serenity and calm. So when Evan Coltart and the Polygon design team began work on the interiors of Currents at Water’s Edge, Polygon’s planned condominium project, they wanted to reflect that natural setting and quiet vibe.

“Evan has designed with the landscape in mind,” says Celia Dawson, who speaks on behalf of her team of designers as senior vice-president of interior design at Polygon Homes.

“Water, landscaped walking paths — [it’s] quiet, serene, the home you can’t wait to come home to.”

The decor schemes, named “terra” (earth) and “cielo” (sky) will seem appropriate to visitors to the display, who’ll see blue accents against white in the open-concept space.

 “The earth and sky theme is truly reflective of the calm and naturalistic oasis of the River District,” adds Dawson. To get inspired in his work, Coltart needed only to glance outside: the homes will be situated on the waterfront in a terraced building, and many will have spacious patios and decks with views of the river.

Like many designers, Coltart and Dawson balance the developer’s needs with personal tastes. At Currents, it’s clear Dawson favours Coltart’s choices of craftsmanship, colour and luxurious touches that lend themselves to that restful vibe. “I would die for the custom-coloured Martha Sturdy trays in the kitchen. I could melt away in the master bedroom bedding and headboard and I love the wall-mounted bedside lamps,” says Dawson.

The Polygon name is on six communities in the River District region, including Currents’ predecessors, Currents West and Currents East.  Since it’s a neighbourhood full of Polygon homeowners, many have provided their feedback on the interior touches they prefer. During the construction of the earlier Polygon homes, as now, with Currents at Water’s Edge, it’s the kitchens that capture the interest of visitors. “The integral counter-depth french door fridge, gas cooktop, slim-line concealed hood fan and white cabinets seem to have resonated with our purchasers.”

The design team is particularly good at selecting eye-catching artwork and sculptural pendant lights and dining room chandeliers that mirror the overall vision of the space and its surroundings. It wasn’t too difficult for the designers to find the right piece. In this case, the dining room hanging pendant resembles a slim bar of natural wood — simple and minimalist.

“Evan is really great at taking the time to search out the perfect item for all his displays. This light fixture is contemporary, but West Coast in its clean and simple lines. It’s a perfect match for the serene River District.”

© 2017 Postmedia Network Inc.

‘Mixed emotions’ over highrise plan

Joanne Lee-Young
The Province

Architects hired by the owners of a site at 1400 Alberni St. in the West End have posted a rezoning application that proposes two luxury residential towers that would showcase cutting-edge design and technology.

The plan, which includes buildings of 43 and 48 storeys, adheres to height allowances in the West End Community Plan. And the reported price of about $160 million paid by the developer for the land in early 2016 has always suggested a project of this scale.

But opposition has developed to the project, with some questioning it in light of rising rents and their affect on low income households. That’s because the project requires demolishing a 19-storey building with almost 130 “affordable” rental units where some tenants are paying lower-than-market rates and have been grandfathered for decades.

“I have mixed emotions,” says Spencer Chandra Herbert, MLA for Vancouver-West End. “The need for more affordable rental housing is really clear.”

This project aims to add a day care, which is badly needed in the area, said Chandra Herbert. “On the one side, we are adding more units and my hope had been that with more projects on Alberni Street and more supply, we would be adding to affordability.”

“But it hasn’t worked out that way so far,” he says.

There are at least four other new condo developments under way in the vicinity.

Tenants have been slowly moving out of the rental building since the developers announced in late 2015 that they plan to take down the building. Every month, more units become vacant as leases expire and are not renewed.

The developer’s general plans for the future were “telegraphed early,” says Chandra Herbert.

“The city’s tenant relocation plan is supposed to help,” says Chandra Herbert, adding that some tenants have also been in touch with his office seeking assistance in finding new places to rent, but they have been choosing to do so anonymously because they don’t want to be seen as troublemakers in a market where it is so difficult to find a unit.

Postmedia has also spoken to several current and former tenants who say any resistance to to the developers’ plans, is muted because many residents feel vulnerable and are focused on where they will move next.

In a statement, the developers said: “Landa Global Properties and Asia Standard Americas are both committed to replacing one-for-one the 129 purpose-built rental homes that will be demolished as part of the redevelopment. There will be no loss of rental housing stock as a result of our development.

“The development will also include 314 market condo units that some owners may choose to rent out. In addition, we will be providing a new diversity of units to the area, with 35 per cent of rental units or 44 homes, being two or more bedrooms.”

They added that they to assist “long-term tenants with relocation, we are paying to secure rental stock in the area. Our property manager is responsible for several buildings in the West End and we are continually engaging our tenants and providing them with information about available, nearby units at comparable prices.”

“The proposed program has been carefully developed in conjunction with the city, and offers above average compensation and timelines to existing tenants.”

Now that the rezoning application has revealed details of what the developer intends to build, “folks have been surprised at how big the new buildings will be, and that there is no guaranteed ‘affordable’ housing in the project,” says Chandra Herbert.

“This does seem to be a problem given that new market rental units will not address the loss of existing rental units that are probably much lower rents than what the new market units will be renting for, and without assurances of secured rental units that are fixed at below market.,” says Penny Gurstein, a professor at the University of B.C.’s school of community and regional planning, who specializes in socio-cultural aspects of affordable housing, especially for marginalized groups.

The developers said on Wednesday they “will be offering a 20 per cent discount to market rents for existing tenants wanting to return to our new rentals. They will have the first right of refusal for the units when they are complete.”

The city did not comment by deadline.

© 2017 Postmedia Network Inc.

BCREA

The British Columbia Real Estate Association (BCREA) reports that a total of 8,340 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in September, an increase of 9.9 per cent from the same period last year. Total sales dollar volume was $5.8 billion, up 30.2 per cent from September 2016. The average MLS® residential price in the province was $693,774, up 18.5 per cent from September 2016.

“BC home sales rose nearly 5 per cent from August on a seasonally adjusted basis,” said Cameron Muir, BCREA Chief Economist. “Total active listings on the market continue to trend at ten-year lows in most BC regions, limiting unit sales and pushing home prices higher. While the economic fundamentals support elevated housing demand, rising home prices are eroding affordability, particularly for first-time buyers.”

Year-to-date, BC residential sales dollar volume was down 12.8 per cent to $57.6 billion, when compared with the same period in 2016. Residential unit sales declined 13 per cent to 81,608 units, while the average MLS® residential price was down 0.2 per cent to $705,501.

Copyright ©2017 BCREA

China has relaxed its capital controls for the first time this year, scrapping two rules meant to bolster the renminbi (RMB)

other

The People’s Bank of China (PBoC) – China’s central bank – recently abolished a rule to reserve a 20% deposit on forward sales of foreign exchange, which was originally set in 2015 to curb capital outflows and stabilise the Chinese yuan.²

Additionally, the PBoC also ditched a requirement for banks to hold reserves against RMB deposits held in Hong Kong and other offshore centres.^{1, 2}

This means the RMB exchange rate will be more flexible, and with further loosening expected in the near future as China steps up plans to further liberalise capital controls, that’s good news for Chinese investors looking to invest in the global property market.

 

Plans for new reforms after the 19^th National Congress

Already, China’s State Administration of Foreign Exchange is seeking approval for a plan to let Chinese invest in securities traded overseas, and the plan looks set to be approved after the upcoming 19th National Congress in Beijing on 18 October 2017.^{3, 4}

This is part of an emerging campaign on the part of government ministries to find ways to push for further reforms to China’s financial system and open up China’s capital account, thus making it easier for individuals and companies to invest overseas.

That’s why the PBoC is reported to have drawn up a list of new reforms, including allowing higher stakes for foreign investors in domestic financial firms and offering card-clearing functions for foreign banks, to further open up China’s financial sector to foreign businesses and promote cross-border investment.⁵

 

Reforms indicate a subtle, but significant change in attitude

The shifting focus toward new reforms represents a change in the Chinese government’s tone from earlier in 2017, whereby the government was focused on introducing a series of new directives to impose extra scrutiny on overseas deals after Chinese firms channeled a record-breaking $219.3 billion into outbound deals in 2016.⁶

However, while such measures were effective in placing further scrutiny on huge investments overseas, they have not stemmed the flow of Chinese capital being invested in overseas assets.

Chinese companies put $48.19 billion into overseas investments in H1 2017, compared with $70.2 billion in H1 2016.⁷

Still, we see the early 2017 moves as a short-term pause rather than a total clampdown on outbound investment. The latest news about pending reforms to China’s financial system, plus proposals to allow Chinese to invest in a wider range of products, show that the leadership is focused now on its long-term goal of easing capital controls further.  

Concrete moves toward this goal will also likely speed up after China’s National Congress meeting, which will see a raft of personnel changes in China’s senior government, as well as likely see Chinese President Xi Jinping build a strong team to push through reforms.

With a stronger power base emanating from the meeting, many observers – including the Economist Intelligence Unit⁸ – are expecting President Xi Jinping’s government to release a steady stream of economic reforms that will lay the foundation for China’s growth in the coming years.

 

Chinese buyer demand to see a boost

With these processes in play, we see a strong outlook for continued Chinese demand for overseas real estate, augmented by the government’s gradual approach to a more relaxed approach to overseas investment.

Despite the early-2017 rule changes, Chinese buyers have remained active in overseas markets, with Bloomberg reporting that buyers have adapted to the rule changes by focusing on lower-priced properties and using mortgage financing.⁹

Having said that, we foresee this new, concerted push toward financial reform will amplify Chinese property investments abroad, and bode for a stronger flow of deals in the coming years.

After all, China will soon be home to 1.87 million Chinese high net worth individuals (HNWIs) – most who are keen to broaden their investment horizons overseas – so agents and developers worldwide would do well to pay heed to this.

 

Sources: 1. Your Investment Property: China’s central bank relaxes capital controls; 2. China Daily: State to relax RMB exchange rate rules; 3. Bloomberg: China may be set to loosen outbound investment; 4. NPR Parallels: China has set Oct. 18 for its Communist Party Congress. Here’s what to expect; 5. SCMP: Chinese Central Bank said to be drafting fresh package of reforms for more financial market opening; 6. SCMP: Chinese outbound M&A activity set to cool this year after record 2016; 7. CNBC: China H1 outbound investment plummets as capital outflow controls bite; 8. EIU: Strong leader, tough decisions: What China’s party congress means for economic policy; 9. The National: Crackdown on overseas real estate buys force Chinese buyers to smaller cities;

017 © Juwai.

More on dual agency

Ross Wilson
REM

People have expressed concern that a sales rep cannot honestly represent the interests of two or more rival parties simultaneously. There may be some truth to this, for the risk of conflict of interest is certainly a possibility. But it all boils down to how the situation is handled. In any case, you’re not a secret agent acting for one side or the other. The objective of both parties to the proposed contract is the same – an agreement.

If a dual agent can successfully negotiate mutually agreeable terms with full and appropriate disclosure, why should they not be rewarded for their efforts by receiving both commissions – one for representing each of the two sides? After all, for all intents and purposes, there are two deals involved, a sale and a purchase. When you’re doing double duty, what’s wrong with a double commission? You’re worth every penny. Both parties want to reach an agreement, maybe one more than the other. And the one who wants it the most will do the most bending.

But if you feel you must reduce, at least wait until you’re dealing with real money, when you’re working with an offer – not when you first accept a listing. As I’ve said, when you take the listing, it’s intangible. It’s merely a percentage of nothing. If you await a sale, you’ll have a better idea of the extent of your time, effort and expense required to achieve the sale. Then, when the finish line is within sight, you can make an informed decision regarding your value.

As you’re probably aware, a double-ending agent can discuss every aspect of the APS with both parties – except for price and motivation. Confidentiality is critical in this regard, but to a limited degree, you must remain dutiful to each of your clients. However, in such a multiple agency scenario, your role effectively changes from one of advocate for one party to mediator between two. All parties know and expect you’ll essentially be mediating because you obtain their informed, written consent. If either party refuses consent, then one of the parties (usually the buyer) would have to seek the services of another brokerage. There’s no “Chinese wall” in a real estate brokerage.

Sometimes, it’s collectively advantageous for the seller and buyer to acquire the agency services of the same expert agent. A mediator handling the negotiation process can sometimes more effectively arrange a meeting of the minds than two aggressive, adversarial agents trying to out-negotiate the other. While trying to get the best terms for their respective clients, combative agents can sometimes blow the sale simply because their own egos get involved. Everybody wants to be a hero. Mediation has worked effectively and successfully in many other industries, such as family law, for a very long time. And it can and does work well, albeit informally, in our business. Maybe it’s time we officially embraced the concept in our industry.

In the realty world of ever-rising expenses and falling revenue, where will our industry end up? If we survive at all in any recognizable form, I suggest we’ll likely evolve into one that may offer a menu from which a seller or buyer can acquire specific services for prescribed fees, possibly paid in advance, maybe set by our associations. Standard procedures could change to reflect a new protocol reality. Maybe homeowners would complete and submit the requisite forms to the brokerage and perform all other services typically provided by a full-service brokerage, with fees varying accordingly.

There would probably be fewer real estate salespeople and brokerages in this brave new world. In any given market, there’s just so much revenue to be generated. To limit the number of salespeople in any particular region, maybe a cap on applicant registrations could be imposed. With fewer participants, the remaining professionals might generally earn a comfortable living. There’d be no more superstars. Maybe a university degree requirement will facilitate a significant transformation. In any case, there’s no doubt in my mind that our industry is evolving.

I mean, think about how we did business not that long ago, before the introduction of computers, the internet, smart phones, flexible commission rates, franchises, independent contractors and government meddling. It was a different era and the future will be too. And consumers will collectively get what they pay for.

If the public continues to demand lower and lower fees, then it must accept more of the burden of responsibility for risk and marketing expense. In the meantime, you decide what your own services are worth and charge accordingly. It’s your money.

© 2017 REM Real Estate Magazine

Ephraim Vecina
Mortgage Broker News

After successfully bringing the companies behind Vancouver’s Marine Gateway and the Residences at West to court last July, the Canada Revenue Agency has obtained court orders against Westbank of the Telus Garden development and Concord Pacific of the One Pacific project.

The cases are part of the CRA’s pursuit for more comprehensive information on pre-sale condo buyers who have allegedly assigned their purchase contracts before completion of a residential building’s construction.

According to court documents, the CRA’s Business Intelligence and Quality Assurance (BIQA) division is now taking a far closer look on assignment agreements after identifying “a potential area of non-compliance” over failing to declare profits from flipping units to other buyers before a condo project has finished.

“BIQA has identified developments in Vancouver … in respect of which it is likely that assignments have occurred,” the CRA’s Amandeep Sandhu stated in an affidavit, as quoted by Business in Vancouver.

The CRA built its cases on “websites such as www.vancouverpresales.com, which provide online advertising services for these assignments,” along with copies of assignments agreements and developers’ disclosure statements regarding contract assignments.

“Assignment listings can also be found on online classified websites such as www.craigslist.ca,” Sandhu’s affidavit stated. “Once the CRA has obtained the identities of the Assignors and related documents, BIQA will conduct a risk assessment… Where the CRA determines that an Assignor has not complied with their duties and obligations under the [Income Tax Act] and/or [Excise Tax Act], CRA will take appropriate action which may include making a (re)assessment of the Assignor’s Income Tax and/or GST/HST returns.”

Westbank public relations consultant Jill Killeen told Business in Vancouver that the developer would comply with the CRA’s request.

On the other hand, Concord Pacific senior vice-president of planning Matt Meehan assured that while the company supports the CRA’s initiative, the “request for information is related to our customers. We understand that a number of projects have received a request-for-information letter from CRA. To protect our customers’ information and ensure any release will be compliant with the law, we have asked CRA to obtain a court order which we will adhere to.”

Copyright © 2017 Key Media

Natalie Obiko Pearson? With assistance by Tiffany Kary, and Erik Hertzberg
REP

Vancouver’s million-dollar home prices aren’t just straining buyers, they’re holding back investment and businesses, said British Columbia’s finance minister, vowing to look at every option on the table to cool the market.

“It’s become a bigger issue — it’s become an economic issue for companies that can’t find opportunities to retain and attract employees,” Carole James, whose New Democratic Party-led government took power in July, said in an interview Tuesday at Bloomberg’s headquarters in New York. “That’s critical to companies looking to invest.”

Vancouver is ranked among global cities most at risk of a housing bubble for the second time this year as the cost of a typical single-family home surged to a record $1.6 million ($1.3 million), about 20 times the median household income. The seemingly relentless run-up has defied attempts to cool it, including a 15 percent tax on foreign buyers imposed by the previous, Liberal-led government last year.

“One tax in place isn’t going to fix the challenges that are there,” James said. “We’re looking at all options. All ideas are on the table to address both demand and supply.”

Short-Term Rentals
The province’s government expects to have a more comprehensive policy by February, when it presents its budget. James said potential options include tax reform to discourage short-term speculation on housing, and to close a loophole involving so-called bare trusts, which allow owners to cash out and new investors to buy in without paying property-transfer taxes. Province-wide rules for short-term rental operators such as Airbnb Inc. and Expedia Inc.’s HomeAway unit also may be in the works.

Vancouver introduced tighter restrictions on short-term rentals in July, including requiring hosts to obtain a business license and banning rentals of investment properties and basements. In a meeting with regional municipalities recently, a province-wide regulation was one of the biggest requests, James said.

“If not the top, it was one of the top issues that’s been raised by municipalities,” said James, who is also British Columbia’s deputy premier. “They want it.”

The government has merged municipal affairs, housing and transit under one ministry because “it just makes economic sense,” James said. Higher housing density needs to be promoted along transit lines, and municipalities should be encouraged to free up land for rezoning, she said. “It’s a good tool to have those three pieces linked.”

Affordability Crunch
Premier John Horgan’s NDP had campaigned to make life more affordable for the average British Columbian — pledges that helped end the 16-year rule of the Liberal Party, whose tenure coincided with surging property prices and stagnant incomes.

James acknowledged that the biggest pressure the administration faces from voters is to act immediately on housing. But with prices so far out of reach for most buyers, that won’t be easy.
“No one expects you can get to affordability within a year,” she said. “We want to develop a comprehensive plan that is long term and doesn’t create unintended consequences.”

Copyright Bloomberg 2017

Steve Randall
REP

There was a decline in Canada’s housing starts in September, following eight months of trending upwards.

CMHC reports that the six-month trend of starts slipped to 214,821 last month from 220,573 in August.

“Housing starts are trending lower in September after increasing for eight consecutive months,” said Bob Dugan, CMHC’s chief economist. “Nevertheless, new home construction remains very strong as the seasonally adjusted number of starts was above 200,000 units for four straight months.”

There was a 7% decline in the Toronto CMA led by apartment starts and the multi-family sector also led the decline in Vancouver. Saskatoon’s starts were also lower although single-family and multi-family sectors both decline.

Quebec and London posted stronger results.

The standalone monthly SAAR of housing starts for all areas in Canada was 217,118 units in September, down from 225,918 units in August.

Copyright © 2017 Key Media Pty Ltd