Surrey 14.2-acre industrial site sells for $111 million

Western Investor Staff
Western Investor

With frontage on 92 Avenue and an estimated two years to development, the land sold for $7.8 million per acre in the fourth quarter, 2022.

Colliers, Vancouver, for Western Investor

Property type: Industrial land

Location: 19469 92 Avenue, Surrey

Land size: 618,944.04 square feet

Land size in acres: 14.2 acres

Zoning: Light industrial

Date of sale: October 2, 2022

Buyer: Conwest Group, Vancouver.

Brokerage: Colliers, Vancouver

Brokers: Malcolm Earle, Josh Gaze and Randy Heed 

© 2023 Western Investor

Surrey two-acre industrial site sold for $14 million

Western Investor Staff
Western Investor

Two-lot assembly on 192 Street sold for $7 million per acre in the first quarter of 2022.

Colliers, Vancouver, for Western Investor

Property type: Industrial land

Location: 9714 and 9718, 192 Street, Surrey, B.C.

Land size: 87,120 square feet

Land size in acres: 2 acres

Date of sale: February 25, 2022

Price: $14 million

Seller: Private local investor

Buyer: Beedie Group, Burnaby

Brokerage: Colliers, Vancouver

Brokers: Darren Cannon and Josh Gaze 

© 2023 Western Investor

Update: Details released on foreign-home buyer ban

Western Investor Staff
Western Investor

Federal government says buyer ban will exempt many students, refugees, temporary workers multi-family rental property and vacation properties,

Foreign-home buyer ban comes with long list of exemptions. | File photo

Ahmed Hussen, Minister of Housing and Diversity and Inclusion, has put some meat on the bones of new regulations under the new Prohibition on the Purchase of Residential Property by Non-Canadians Act, which comes into force within days.

The  act will ban foreign investors from buying non-recreational residential property in Canada. The act will come into effect on January 1, 2023, for a period of two years.

As recently reported here, there was growing concern that few details had been announced for the looming ban. According to the December 22 statement (today), most recreational property and many non-Canadians will be exempt.

The Act prohibits foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada.

It establishes a $10,000 fine for non-Canadians who buy residential property in contravention of the prohibition. Exceptions are set out for some circumstances. Individuals with temporary work permits, refugee claimants, and international students may be exempt if they meet certain criteria.

International students, who meet other requirements, will be able to purchase a property valued at no more than $500,000.

Buildings containing more than three dwelling units, such as a fourplex or other multi-family rentals apartments, will also be exempt.

The regulations will be automatically repealed after two years.

“The prohibition is just one way that the government is working to make housing more accessible to Canadians. Through our National Housing Strategy, we’re investing in initiatives to increase the supply of rental housing, build more homes, and bring down the barriers that keep them from being built,” according to a government statement.

© 2023 Western Investor

How much are Canada home prices likely to drop next year?

Ephraim Vecina
CMP

Royal LePage provides latest market forecast

The aggregate price of a Canadian residential unit is likely to decline by around 1% on an annual basis during the fourth quarter of 2023 to settle at $765,171, according to a new forecast by Royal LePage.

This is despite an anticipated “modest improvement” during the second half of the year, a trajectory that is likely to see the market on an upward trend by the end of 2023.

Annual declines will be apparent through the whole of 2023. Royal LePage is expecting aggregate home prices nationally to drop by 12% year over year during the first quarter, decrease by 7.5% in Q2, and tick down by 2% inn Q3.

Fortunately for the market, the ongoing correction does not seem to follow historical patterns, said Phil Soper, president and CEO of Royal LePage.

“After nearly two years of record price appreciation, fuelled by a steep climb in household savings, very low borrowing costs, and an overwhelming desire for more space during the COVID-19 pandemic, the frenzied housing market overshot and the inevitable downward slide or market correction began, intensified by rapidly rising borrowing rates,” Soper said.

However, “while the volume of homes trading hands has dropped steeply, home prices have held on, with relatively modest declines,” he added. “We see this as a continuing trend.”

What is supporting Canada’s current price levels?

Royal LePage said that the market environment is characterized by “an acute, long-term housing supply shortage.” Current demand mostly stems from Canada’s substantial millennial and immigrant demographics, both of which are mainly comprised of smaller families.

“Smaller household sizes mean more housing units are needed per capita than in the past,” Royal LePage said. “Pent-up demand is growing from buyers who have the ability to transact but have chosen not to in these turbulent times.”

Coupled with the market’s fundamental robustness, Soper said that housing affordability remains elusive.

“We have a tightly managed national mortgage portfolio, with historically low default rates, supported by homeowners who have been required to qualify for a loan under the strict federal stress test for the last five years,” Soper said. “And, we can’t forget that Canada has been grappling with an acute shortage of homes overall. We simply don’t see the factors at play that would result in a large drop in home values.”

Copyright © 1996-2022 KM Business Information Canada Ltd.

How much are Canada home prices likely to drop next year?

Ephraim Vecina
CMP

BoC’s latest statement a positive one for housing market, says CEO

Fergal McAlinden
CMP

Could the central bank be nearing an end to its series of rate jumps?

The Bank of Canada’s final announcement of 2022 is a welcome one that presents “stability and clarity” for the national housing market after months of uncertainty, according to the co-CEO of a leading mortgage brokerage.

James Laird (pictured), co-founder of RateHub.ca, told Canadian Mortgage Professional that the language used by the central bank – which indicated its Governing Council “will be considering whether the policy interest rate needs to rise further” – signalled that its series of rate hikes throughout the year to date could be at or nearing an end.

“It was a significant announcement, certainly,” he said. “The way I read it, they remain concerned about most things: inflation, [whether] it’s entrenched, supply chain. But then they finished the announcement by saying, ‘But what we’ve done so far might be enough to take care of all these things that we are unhappy with.’”

The Bank’s 50-basis-point hike means that its benchmark rate has now risen by a full four percentage points in 2022, and while Laird emphasized that a further jump in January is still possible, he said it had struck a much less aggressive tone than previous announcements.

“Every other announcement this year has said, ‘We will raise rates further,’” he said. “I think it’s possible there’s a hold on January 25. Obviously, there’ll be more data between now and then, but it’s a significant change from ‘More rate hikes are coming,’ to, ‘We might be done – at least, done for now.’”

What does the hike mean for the mortgage market?

Factors that are set to influence the Bank’s thinking on whether it will hit pause in January include whether a currently tight labour market will begin to ease and, of course, whether inflation will continue ticking downwards between now and its next announcement.

One or two of those variables proving more stubborn than expected could cause a further hike to become likely, according to Laird – but its program of rate hikes throughout the year has at least moved it closer to its end point than it otherwise might have been if it had decided to move in slower jumps.

“I said for months that I’d like them to get to where they want to go quickly, and not drag this out,” Laird said. “And they’ve done that with 50-, 75-, and 100-basis-point increases. They’ve moved 4% in seven months. They’re using the ‘rip the Band-Aid off’ approach here, and I think that’s a good one.”

A recent Canada Mortgage and Housing Corporation (CMHC) report showed that Canadians are increasingly opting for fixed-rate options over their variable counterparts, with the latter having ticked steadily upwards in recent months alongside the Bank of Canada rate.

The bond market’s positive reaction to the central bank’s December announcement, then, is further good news for fixed rates, with five-year bonds having recently dropped below 3% for the first time after spending a period in the high threes.

“The fixed rates move first because the bond [market] immediately interprets this outlook, and that transfers into lower fixed rates,” Laird said. “So we’ve actually seen downward pressure on fixed rates with this announcement and in anticipation of the Bank being where they want it to get to.”

Is the Bank of Canada going to hold or hike rates in January?

In a speech to business leaders in Vancouver on December 12, Bank of Canada governor Tiff Macklem said that pushing interest rates above a certain level could risk triggering an “unnecessarily painful recession,” although he also noted the possibility that inflation expectations could become entrenched if the central bank moved too slowly.

“With inflation running well above target this is the greater risk. If high inflation sticks, much higher interest rates will be required to restore price stability, and the economy will have to slow even more sharply,” he said.

Two reports on consumer price index (CPI) inflation between now and the central bank’s next announcement are expected to play a critical role in its thinking on whether to hike or hold rates in January: the first will arrive on December 21, with the second coming on January 17, 2023 – just a week before the Bank’s first policy rate decision of next year.

Copyright © 1996-2022 KM Business Information Canada Ltd.

Calgary’s rental market soaring into a record year

Frank O’Brien
Western Investor

Average rents are hitting $2.57 per square foot, the highest recorded rent per square foot in the last five years, while per-door sale prices are about half that of Vancouver

Bosa’s new Arris luxury tower in Calgary, which was converted mid-stream from condos to rentals, will open this year in the East Village. | Bosa Developments

Calgary’s multi-family rental market is firing on all cylinders coming into 2023, which is shaping up to be a banner year due to an influx of new workers and students. Despite a record level of development, the rental vacancy continues to fall in the face of high demand, according to a third-quarter 2022 report from NAI Advent, Calgary.

As of the third quarter, construction has begun on nearly 2,800 new rental apartment units in Calgary in 2022. That’s the highest number on record, though 2021 was another banner year with 2,572 rental apartment starts, reports Canada Mortgage and Housing Corporation (CMHC).

“Vacancy has reached its all-time low in Calgary sitting at 1 per cent to 2 per cent in some areas. This is great for landlords but has made the rental market more competitive for renters, especially those looking for affordable rent,” NAI Advent noted.

Landlord investors, particularly from Vancouver, where per-door prices for existing apartment buildings are much higher, are looking towards both Calgary and Edmonton, agents say.

Older apartment buildings in Calgary built prior to 1970, which like Vancouver, make up the majority of the market, sell in Calgary for an average of $150,000 per door, or less than half the price as in Vancouver.

The average per-door price in Calgary for all multi-family rental sales in the third-quarter 2022 was $170,000. In Metro Vancouver it was $403,915, reports Marcus & Millichap.

The typical capitalization rate for a Vancouver apartment rental building is 2.8 per cent; in Calgary it is around 5 per cent, data shows.

And, as sales of apartment buildings in Q3 2022 fell to a seven-year low in Metro Vancouver, they were hitting fresh highs in Calgary, where rental construction is booming.

B.C.-based Bosa Developments, one of the builders active in Calgary’s East Village, is completing the 42-storey, 337-unit Arris residential tower that will open at the end of 2023.

A joint project with RioCan Real Estate Investment Trust, the entire luxury tower has been converted from condos to rentals.

The move appears to be paying off. Within days, 25 per cent of the Arris tower was rented out, Bosa claims.

“With a few banners on the building and a few social media posts, our phone started ringing and we leased 45 out of 190 homes before official marketing started,” said Robert Marchand, vice -president of marketing at Bosa Development.

That success persuaded Bosa to launch a second East Village rental tower, which started construction this summer.

Kendall Brown, market and rental analyst at Urban Analytics, said the Arris’ larger-than-normal units and upscale amenities likely attracted Calgary renters.

“A lot of younger professionals are choosing buildings based on the amenity offering,” Brown said. “Arris differs from the competition by offering larger floorplans than what are typically found in downtown Calgary, plus it offers comprehensive, upscale amenities that are becoming a trend among rental building.”

Rents at the Arris start at $1,674 for a one-bedroom, compared to an average Calgary rent of $1,491 per month.

On the demand side, seven interest rate hikes in 2022 have driven more people to rent rather than own.

Alberta is also seeing a significant uptick in people moving to the province, with more than 50,000 coming to the province to live in the first half of 2022 alone, according to Statistics Canada data compiled by NAI Advent.

According to the latest numbers from Rentals.ca, the average Canadian rental apartment was $1,810 a month in Q3 2022, up about 12 per cent from the previous year.

In Calgary, the average one-bedroom rental as of the Q3 2022 increased from 20 per cent to 25 per cent from a year earlier, NAI Advent reports.

“Average rents are hitting $2.57 per square foot, the highest recorded rent per square foot in the last five years,” according to NAI Advents Calgary Q3 2022 multi-family report.

A City of Calgary program also provides grants for converting empty office space into residential buildings, but it is proving expensive.

Three buildings were recently named as receiving incentives for conversion to residential, including 909 Fifth Avenue SW, recently purchased by Peoplefirst Developments with an eye to redevelopment. The others include Palliser One at 125 Ninth Avenue SE and 205 Ninth Avenue SE. Each will require $10 million in city incentives.

In announcing the first office conversion, Calgary Mayor Jyoti Gondek, referenced the extent of the city’s office glut, in estimating about six million square feet of office space should be converted to other uses or removed.

© 2022 Western Investor

False Creek Flats leads Vancouver CRE development into 2023

Frank O’Brien
Western Investor

New $2.1 billion hospital, office and industrial buildings anchor 450-acre site in East Vancouver

When Keltic Canada Developments Ltd. laid out plans last year for a new 10-storey medical office next to the under-construction new St. Paul’s Hospital in Vancouver’s False Creek Flats, it was assumed that its entire 102,000 square feet would be sold to individual owner-occupiers and investors.

Instead, California medical supply company Masimo Corp. bought the whole building at 229 Prior Street for $123 million on February 14, 2022.

The deal works out to about $1,200 a square foot, which was less than other office strata is being sold for in the Flats.

“Any time you’re looking at a larger-scale transaction there’s definitely going to be a different value than there would be, comparably, than doing smaller units and selling them individually,” explained Michael Buchan, a principal with Avison Young, which represented the vendor, Keltic.

Strata office space in the False Creek Flats, a 450-acre site in East Vancouver that is seen as shaping the future of Vancouver commercial real estate, is currently selling for $1,400 to $1,600 a square foot.

A confidentiality agreement limited what Buchan could say regarding Masimo’s purchase, but he noted that the strata property had experienced strong interest even before marketing began.

Rachel Li Liu, CEO of Keltic, said the company is now scouring the Flats for a site to build another strata office building for medical professionals. Keltic had bought the Masimo site in 2019 for $25 million. It may not find that price today in the Flats, which has seen a rush of land buys and development permits over the past two years.

These include:

• Lab 29 by LowTide Properties. The first purpose-built life-science lab in Vancouver in more than a decade, the eight-storey project will rise at 1629 Scotia Street next to St. Paul’s Hospital.

• Archetype, a mixed-use development consisting of a strata industrial and office building (10 storeys) and a residential rental building (13 storeys) containing 216 secured market rental dwelling units; all over three levels of underground parking, by QuadReal and Hungerford Properties, at 1717 Lorne Street.

• A new 10-storey office tower at 306 Terminal Avenue in the Flats by Rize Alliance. It will total 146,890 square feet including 109,600 square feet of Class A open-floor office space within the upper levels, and 30,100 square feet of industrial manufacturing space in the lower levels. A floor space ratio density of five times (FSR5) the size of the lot is expected on the site, which is adjacent to the Main Street SkyTrain station.

• At 1725 Clark Drive on the eastern edge of the Flats, Alliance Properties is developing a five-storey building on a 1.5-acre industrial lot that Alliance bought in June 2019 for $30.5 million. Under FSR3 density, Alliance is completing nearly198,000 square feet of office and light industrial space.

And, of course, the new $2.l7 billion St. Paul’s Hospital and health campus at 1002 Station Street. The largest medical development underway in Canada covers 18.4 acres as the anchor for the False Creek Flats. It includes a new state-of-the-industry 548-bed hospital, and 800,000 square foot Clinical Support and Research Centre, which encompasses core research facilities including wet labs, biobanks and a medical conference centre

.PCL Construction began work on the new hospital early this year and it is expected to open in 2027.

For more on the future of the False Creek Flats, read the January 2023 issue of Western Investor, on

stands and online. 

© 2022 Western Investor

Opinion: Housing is a struggle and governments about to make it worse

Frank O’Brien
Western Investor

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