Avison Young: BC real estate investment at its lowest since 2015

Ephraim Vecina
Mortgage Broker News

Investment in British Columbia’s commercial real estate in the first half of 2020 declined to its lowest level since 2015, bringing an end to a strong four-year run, according to a new report by Avison Young.

A total of 84 deals valued at $1.5 billion were completed during the first six months of the year. This was far below the levels seen from 2016 to 2019, which saw first-half investment in office, retail, and industrial assets exceed $2.7 billion in each category.

Avison Young said that COVID-19, which was declared a global public health emergency in March, triggered this “partial pause” in the investment market, with private investors dominating the deals.

On a brighter note, however, “deal velocity in first-half 2020 remained comparable to previous years and actually marked the fourth highest number of completed deals on record,” Avison Young said in its study. “Only the first halves of 2019 (85), 2018 (102) and 2017 (109) recorded a greater number of transactions than 2020.”

By asset class, the largest dollar volume went to industrial investment ($644 million), followed by office ($629 million), multi-family ($620 million), and retail deals ($223 million).

The report said that this “marked the first time that industrial sales led all asset classes in terms of total dollar volume in a half since Avison Young started tracking the market in 1998.”

Industrial properties also represented the bulk of transactions completed (44 deals), amounting to 52% of total deal volume during the first half of 2020. Meanwhile, retail assets had their lowest first-half level (25 deals) since 2011.

“Investors and owner-occupiers remained focused on acquiring properties in what many consider as the most appealing and sought after commercial real estate asset class in 2020,” Avison Young said. “Industrial assets, particularly those related to logistics/distribution and last-mile warehousing, were already in high demand due to shoppers’ ongoing embrace of e-commerce, but the arrival of COVID-19 triggered an even more rapid shift in consumer shopping patterns in a matter of months (if not weeks), further driving demand for industrial assets.”

Copyright © 2020 Key Media

Royal LePage CEO: Supply shortage pushed home prices up 18.5%

Ephraim Vecina
Mortgage Broker News

Inventory shortages in major urban markets triggered an “unhealthy” spike in home prices in August, according to Phil Soper, chief executive officer of Royal LePage.

Latest figures from the Canadian Real Estate Association showed that at present, it would only take 2.6 months to sell all the residential listings in the national market. The national average home price shot up by 18.5% annually last month, exceeding $586,000.

“Both number of homes people are buying and the number of newly listed homes are rising significantly,” Soper told The Canadian Press. “This cannot hide the fact that August 2020 was the worst on record for available housing.”

To see the influence of the largest markets and their inventories, the national average will be approximately $122,000 lower if Greater Toronto and Greater Vancouver are not taken into account, CREA data indicated.

The largest price increases in August were seen in Ottawa, Montreal, and Moncton, while little to no movement was observed in Calgary, Edmonton, and St. John’s, CREA said.

Sales grew by 6.2% from July and by 33.5% year over year, with the strongest activity seen in the GTA and BC’s Lower Mainland area.

“One change in August is that some regional disparity is starting to show again, after all markets were rebounding in unison in recent months,” said Robert Kavcic, senior economist at BMO. “[Sales] were driven by gains in Toronto and surrounding markets, as well as Vancouver/Victoria, but others like Calgary and Regina have ebbed… We suspect this regional split will re-establish itself as the dust settles.”

Copyright © 2020 Key Media

Annual inflation rate unchanged in August

Ephraim Vecina
Mortgage Broker News

The Canadian annual inflation rate was static at 0.1% in August, with rising food prices counteracted by weakening gasoline costs, according to Statistics Canada.

An earlier poll by Reuters predicted that the rate would stay at 0.1%, essentially unchanged from the July reading. This was far below the Bank of Canada’s 2% target, and lower than even the modest 0.4% year-over-year increase projected by economists in a Refinitiv survey.

Meanwhile, the average of Canada’s measures for core inflation was at 1.7%.

Earlier this month, the BoC kept its key policy interest rate at its effective lower bound of 0.25%, and said that it will maintain this level until inflation reverts to the central bank’s target.

Among the goals of the policy is to stimulate more borrowing due to lower rates across the board. BoC Governor Tiff Macklem said that the financial system’s recovery hinges on Canadians getting back most of their purchasing power through stronger employment numbers.

“Incomes have been reasonably well-sustained, consumption has slowed, and so savings overall in the economy have gone up. That’s helpful in reducing vulnerabilities,” Macklem said. “Having said that, we’ve been very clear at the Bank of Canada, we’ve underlined the vulnerabilities caused by household indebtedness and too much reliance on the housing sector. Those have not entirely gone away, but when you look at our policy response, the best predictor of whether somebody is going to repay their mortgage is whether they have a job.”

Macklem said that this is largely due to COVID-19’s unprecedented economic impact, which will last far beyond the current crisis.

“The recovery will likely be prolonged and bumpy, with the potential for setbacks along the way,” Macklem said. “If, as we expect, supply is restored more quickly than demand, this could lead to a large gap between the two, putting a lot of downward pressure on inflation.”

A recent Finder survey has found that 95% of economists believe that the BoC rate will stay at 0.25% for longer than a year. Around 75% of those polled also said that the rate will not begin moving again until late 2022 or even well into 2023.

Copyright © 2020 Key Mediia

As COVID-19 drags on, what should Canada’s snowbirds do with their U.S. properties?

Clayton Jarvis
Mortgage Broker News

Abbotsford lot sells $400K over assessed value at $1.4 million

London Pacific Property Agents Inc.
Western Investor

First tri-mix building underway in False Creek Flats

WI Staff
Western Investor

 Vancouver’s first real estate development considered a ‘tri-mix,’ combining residential apartments with offices and industrial space has launched in the False Creek Flats.

Hungerford Properties and QuadReal Property Group say the new, ultra-mixed-use project at the corner of Main and East 1st Avenue offers a model for future developments as it combines purpose-built rental housing with a variety of commercial uses in what was formerly an industrial zone.

False Creek Flats is a 450-acre parcel bounded by Main Street to the west, Prior and Venables streets to the north, Clark Drive to the east, and Great Northern Way to the south. It is home to the National Works Yard and an array of businesses, ranging from food wholesalers to manufacturing and big-box retailers.

Rezoning of the Flats more than two years ago encouraged development of work places rather than market strata housing. Today the Flats is home to the Emily Carr University of Art + Design, a number of office and retail buildings and is the site for the new $1.9 billion St. Paul’s Hospital, which is expected to start construction this year.

The new development, Archetype, designed by GBL Architects, will include 35,000 square feet of light industrial strata, 69,000 square feet of office strata and 200 rental homes. It will be anchored on the east and west by two mid-rise commercial towers bridged by an eight-storey residential building, with ground-level industrial space wrapping around the entire development.

Pilot marketing of the commercial and industrial space is underway and the project is scheduled for completion in the first quarter of 2023. Commercial strata prices have not yet been released.

“Archetype is the first of its kind under the new local area plan for the False Creek Flats and a model for true mixed-use future developments in Vancouver and across North America,” said Michael Hungerford, partner with Hungerford Properties.

Vancouver’s FC-2 zoning under the False Creek Flats plan supports a variety of creative uses, including food and beverage production, fashion, product design, retail and manufacturing. Archetype’s industrial strata units, from 1,175 square feet to 11,000 square feet, have street exposure with mezzanines, full-height sliding glass doors and laneway units with glass overhead doors, and are aimed at “creative designers and manufacturers.”

The AAA-class office spaces are offered in floor plates from 8,850 square feet to 9,650 square feet and feature 11 -foot ceilings. Spaces can be expanded into 20,000 square feet or more for multi-level offices, and each of the units can be subdivided, according to real estate brokers Cushman & Wakefield.

The residential rentals range from one to three bedrooms and come with balconies and a private rooftop garden.

B.C. economic recovery plan misses Main street: CFIB

WI Staff
Western Investor

Province’s $1.5 billion pitch falls short on the immediate needs of many small businesses, says Canadian Federation of Independent Business

any B.C. retailers forced to close during pandemic: Chung Chow

The B.C. Economic Recovery Plan, introduced September 17, includes $1.5 billion in new spending, $660 million in new tax incentives and $500 million for a new strategic investment fund. But critics say it fails to offer short-term help for many small business struggling with the pandemic crisis.

The money could start to flow right away, according to Premier John Horgan, who added that government ministers need not be involved in coordinating the spending because that work will be done by the civil service.

Among the big direct-spending priorities for the province is a $300-million recovery grant for small and medium-sized businesses that includes what the province describes as an “enhanced amount for tourism operators.”

A separate $50 million is being allocated to a new tourism taskforce charged with boosting an industry hit harder than most by travel restrictions.

That particular funding is expected to roll out this year and is part of $100 million being earmarked specifically for the tourism sector, with grants for local governments and tourism development initiatives also on the table.

The tourism industry had been seeking $680 million in support.

“We appreciate the funding announcement and assembly of the task force,” Science World CEO Tracy Redies told BIV after the province’s announcement.

“It’s much less than the tourism industry needs to recover, but it’s a start. Science World cannot wait much longer to receive government funding as the results of shutting down and low visitor attendance have already had serious, negative impacts on our organization,” Redies said.

Tourism Industry Association of British Columbia CEO Walt Judas sounded a stone of appreciation while being clear that more support is needed. 

“It’s a very good start,” he said. “We appreciate that the province recognized the needs of the tourism and hospitality sector with specific measures to help address major challenges including liquidity. We are also counting on additional funding to help our industry as part of Budget 2021.”

However, Muriel Protzer, senior policy analyst for B.C. at the Canadian Federation of Independent Business (CFIB) said “CFIB is very concerned that these [spending announcements] will not likely have an immediate impact on the ground, and an immediate impact is really what we need right here.”

Business activity remains far below normal, she added in an email to Western Investor.

“Small businesses are in no position to create additional jobs or expand their operations. In summary, the Economic Recovery Plan falls short on the immediate needs of Main street today.”

Highlights of the Economic Recovery Plan include:

• A 15 per cent tax credit on new payroll for low to medium-income jobs; 

• A 100 per cent property sales tax rebate on machinery and equipment for businesses expanding operations. The program runs until September 2021;

• A $30,000 small and medium-sized business recovery grant program. Eligible businesses must have 50 per cent revenue loss and can demonstrate a viable path forward;

• A $10,000 additional loan top-up for tourism businesses; and 

• $100 million in funding to support the tourism industry .

CFIB survey data shows 22 per cent of small and medium-sized businesses in B.C. are making 50 per cent or less in revenues than usual this September. However, Protzer said the plan’s loan structure will exclude an additional 24 per cent of businesses who are making 50 to 75 per cent of normal revenues.

“CFIB strongly encourages the BC government to rethink the design of its loan program. Expanding eligibility could help thousands of more businesses who desperately need help. Even as mandated business shut-downs are lifted, small business owners are struggling to pay off debts and piling bills,” Protzer said.

© Copyright 2020 Western Investor

Landlords squeezed as insurance premiums skyrocket

Frank O’Brien
Mortgage Broker News

Palihapitiya finds next ?10x idea? with $4.8 billion SPAC deal for real estate start-up Opendoor

Leslie Picker
other

 Chamath Palihapitiya pioneered taking private unicorns public by reverse merging them into special purpose acquisition companies — an idea he’s called “IPO 2.0.” 

After his first iteration of doing so last year with space-tourism company Virgin Galactic, he’s found his next target: Opendoor, an online marketplace for buying and selling houses. 

“These guys are my next 10x idea,” Palihapitiya said in an interview with CNBC, noting the prospect of generating returns worth 10 times the original investment. 

The investment, announced Tuesday, amounts to more than $1 billion. Opendoor will receive $414 million from the capital generated from the April initial public offering of his SPAC, Social Capital Hedosophia II. Additionally, a group of investors, including Palihapitiya and funds managed by BlackRock, agreed to infuse another $600 million through a PIPE, or a private investment in public equity. 

The deal values Opendoor at $4.8 billion — nearly equal to its 2019 revenue. The company’s earlier investors include General Atlantic, SoftBank’s Vision Fund and Lennar Corp. 

 “This is one of many milestones towards our mission and will help us accelerate the path towards building the digital one-stop-shop to move,” Eric Wu, who founded Opendoor six years ago, said in a statement. Wu will continue to lead the company, while Adam Bain, former chief operating officer at Twitter and director at Social Capital Hedosophia II, will join the board after the transaction is completed. 

How Opendoor works

Here’s how Opendoor often works: Homeowners get a quote, through an algorithm, and can sell their houses directly to the company. Opendoor may make some fixes and then put the house on the market to sell. The spread between what the home is bought for and sold is a part of how Opendoor generates revenue. Opendoor, which operates in 21 markets, says it sold more than 18,000 homes last year. 

It also provides services, such as a mortgage product, home repair and home warranty that users can purchase. (Opendoor ranked No. 35 on last year’s CNBC Disruptor 50 list.)

 “The company is transforming the $1.6 trillion residential real estate market by combining superior user experience, streamlined operations and machine learning to create a seamless digital experience,” said Palihapitiya, CEO of Social Capital Hedosophia II. 

The move is a bet on two secular tailwinds — greater homeownership in America and the digitization of commerce. 

Sales of existing homes jumped nearly 25 percent in July from June, according to the latest National Association of Realtors report. That’s the strongest monthly gain in the history of the survey, going back more than half a century.

But earlier this year, the pandemic and shutdown of the economy took its toll on the housing market. The company in April laid off 600 employees or roughly a third of its staff as the uncertainty caused many Americans to pause housing-related transactions. 

Around that same time, Palihapitiya was getting his SPAC off the ground. Virgin Galactic, which he took public through a separate vehicle, has produced returns of nearly 70 percent over the last year.  

Social Capital Hedosophia II used that momentum in its search for a new target. Shares surged 34.5% on Tuesday following the announcement.

The deal for Opendoor came together somewhat quickly, a person close to the process said. Two months ago, the two sides started talking. 

And much like Opendoor’s digitized tenor, so too was its own sale, with the bulk of the negotiations taking place over the internet. 

© 2020 CNBC LLC. All Rights Reserved. 

Bank of Canada’s 4.79% benchmark rate expected to increase home buyers’ purchasing power

Duffie Osental
Mortgage Broker News