Demand for retail space is bouncing back in some Vancouver neighbourhoods: report

Joanne Lee-Young
The Vancouver Sun

Louwella Malda and Kyle Roberts launched The Filipino Noodle Joint in a mall on Keefer Street in Chinatown that has one of the highest 
vacancies in an especially hard hit area.
Louwella Malda, a co-owner of The Filipino Noodle Joint at Chinatown Plaza, which has a high vacancy rate. She is trying to bring in customers with a fun and lively Instagram presence. Photo by Francis Georgian /PNG
The retail landscape has been one of boarded-up windows, double-digit vacancy rates and discussion of empty store taxes, but now there’s talk of a few green shoots.
One commercial real estate broker is homing in on specific blocks of streets to see where there are tight vacancy rates and why. Meanwhile, some hardy entrepreneurs have started new businesses far from these locations and are trying to buck the trend by drawing online customers.
A few months ago, Louwella Malda and Kyle Roberts launched The Filipino Noodle Joint in a Chinatown mall on Keefer Street that has one of the highest vacancy rates with only about five of its 18 shop spaces occupied. Some customers live in nearby condos, but the couple is focused on enticing others with a lively Instagram presence that features giveaways, contests and fun videos of bubbling spaghetti sauces and freshly topped sisig bowls.
“We’re trying to create a presence,” said Malda.
Retailers are selling different products in slightly different ways and, beyond a physical store, they need to build awareness with an online base, said Madeline Nicholls, senior managing director at Colliers Vancouver.
“There is no doubt, a lot of retail has suffered and even, unfortunately, disappeared during the pandemic. It’s a great shame in many ways, but it has opened opportunities for a new wave of retail to come in. It’s important to acknowledge that, as much as there have been casualties, there are also opportunities,” she said.

Colliers recently looked at 13 retail areas in Vancouver to see where there is demand for retail space and why vacancy rates are lower even with many negative factors in the mix, including rising inflation, constructions costs and recessionary times.
“We looked at certain blocks on the streets, not entire streets,” said Nicholls.

On Robson between Thurlow and Burrard streets, there is still solid demand with the vacancy rate at only 2.2 per cent and median net rents between $180 to $240 per square foot a year. Photo by Jason Payne /PNG
In some areas, recovery has been uneven from one block to another. For example, on Robson between Thurlow and Burrard streets, there is still solid demand with the vacancy rate at only 2.2 per cent and median net rents between $180 to $240 per square foot a year. But one block over, between Thurlow and Bute streets, where a transition in tenants was been happening before the pandemic, the vacancy rate is much higher at 9 per cent and rents are lower at between $75 to $125 per square foot a year.
Overall, looking at these parts of the strongest retail streets in various areas of Vancouver, the Colliers index found that the average vacancy in these urban settings was a low 2.5 per cent.

“We are seeing from clients, both landlords and tenants, that there is demand for certain nodes that have foot (traffic) and are close to a higher density of residences.”
The lowest retail vacancies in Colliers’ index were posted from Kerrisdale at 0.0 per cent, Davie Village at 0.89 per cent, Cambie Village at 1.04 per cent and Yaletown at 1.3 per cent.
Main Street in Mount Pleasant from East Broadway to East 16th Avenue is an in-demand area with vacancies at 2.65 per cent and where rents before the pandemic were around $50 per square foot and now are in the $60 to $70 per square foot a year range.
Colliers notes that the downtown core, Chinatown and Gastown “suffered some of the largest swings in vacancy” during the pandemic and are still impacted by people working from home as well as a drop in tourism and conferences.

© 2022 Vancouver Sun

No cause for panic on variable rates, says industry expert

Fergal McAlinden
other

Variable rates are expected to increase again after Wednesday’s Bank of Canada announcement
The surging popularity of variable-rate mortgages continued in the second half of 2021, according to new data from the Canada Mortgage and Housing Corporation (CMHC), in a finding that will come as little surprise to the nation’s mortgage brokers.
A majority of Canadians preferred variable mortgages in the final six months of last year, the crown corporation indicated, with the popularity of those options rising by 19% (from 34% in the first half of the year to 53% in the second).
Still, although that trend continued into the early months of 2022, it appears to have “plateaued,” CMHC said, as interest rates started to rise.
Variable-rate holders are expected to face another sizeable increase to their monthly rate after Wednesday (July 13), with another oversized rate hike by the Bank of Canada – probably by 0.75% – seemingly on the way.
That would represent the Bank’s largest single rate hike of the year to date and the fourth consecutive increase to its benchmark rate. However, while it would also mean higher monthly payments for variable-rate holders, it’s unlikely to make those mortgages unaffordable for the majority, according to a prominent mortgage broker.
Leah Zlatkin (pictured top), LowestRates.ca expert and licensed broker, told Canadian Mortgage Professional that variable-rate holders would have been stress-tested at a level of either 4.79% or 5.25%, meaning that with the prime discount on their mortgage, their payments would still be lower than they had been tested at.
Read more: Residential mortgage debt continues to surge, says CMHC
Canada’s prime rate currently sits at 3.70% and would rise to 4.45% with a three-quarter-basis-point hike to the central bank’s benchmark rate on Wednesday.
That said, the country’s present uncertain economic climate could pose challenges in the future. Canadian unemployment fell to a record low of 4.9% in June, a record low – but the economy lost 43,000 jobs and observers including RBC have sounded the alarm on a likely recession in 2023.
That recession will probably be “moderate and short-lived,” RBC has indicated. Still, potential job losses are a more potent cause for concern than rate hikes, Zlatkin said.
“For somebody who experiences a change in their employment status, that’s when you need to worry,” she said. “You don’t really need to worry just based on rates going up. That’s not something that’s going to be [hugely] concerning for people.”
There is one homebuyer segment that Zlatkin said should be paying particular attention to the central bank’s action on rates: those who were preapproved at the previous rate before the Bank’s impending change.
That’s because the stress test requires borrowers to be tested at either 5.25% or their contract rate plus 2%, whichever is higher. With future hikes likely to bring variable rates close to 4%, that means a borrower who was preapproved at 5.25% may now have to qualify at closer to 6%.
“If somebody was preapproved at 5.25%, their budget might be $500,000 for what they can afford in a mortgage,” she said. “The change there is going to be that if rates go up, that same person may only get approved for [a lower amount].
Read next: Bank of Canada – could it pause rate hikes as market slows?
“For those people who may have a preapproval in their hand who are going out bidding on a house, you’ve got to really watch out if you’re going in firm around the 13th, or even those two weeks after.”
CMHC’s findings were revealed in its biannual Residential Mortgage Industry Report, which showed that borrowers had swayed toward variable-rate mortgages as discounts on those options surged.
The share of mortgages with variable interest rates plummeted between 2019 and 2020 as the discount narrowed – but that figure has crept upwards since, and with the discount on variable rates hitting close to 1.25% by the end of 2021, Canadians’ interest in those options soared.
Variable rates usually rise and fall in tandem with the Bank of Canada’s trendsetting interest rate, which the central bank slashed to a rock-bottom 0.25% as the COVID-19 pandemic took hold in March 2020.
It kept that rate resolutely low throughout nearly two years of the pandemic but increasingly signalled that rates would need to rise as inflation began to grow.
It introduced its first rate hike of the year at the beginning of March, increasing its benchmark rate by a quarter point, before announcing two further hikes of a half point each in its next two policy rate decisions.

Copyright © 1996-2022 Key Media, Inc.

Bank of Canada decision: What’s next for the fixed-vs-variable debate?

Fergal McAlinden
other

Interesting developments could be ahead on a prominent debate in the industry

 The Bank of Canada’s next policy rate announcement, scheduled for Wednesday (July 13), is expected to see another oversized hike to its trendsetting interest rate – with a seeming consensus emerging that a 75-basis-point hike is likely.

That move, which would mirror a similar measure taken by the US Federal Reserve in June, would represent the single largest rate increase made by the Bank in 2022 and mark yet another step in the end of the record-low-rate environment that prevailed for the first two years of the COVID-19 pandemic.

It would also see variable-rate mortgage holders contend with another increase to their monthly payments in a trend that could have some interesting portents for the fixed-vs-variable question among homeowners and would-be buyers.

A 0.75% rate hike would see monthly payments increase by roughly $40 per $100,000 owed, according to RATESDOTCA expert and licensed mortgage agent Sung Lee (pictured top). That would mean an extra $200 on a mortgage size of $500,000, for instance, on top of the rate increases that have already taken place this year.

“For variable- or adjustable-rate holders, this isn’t the first time that they’ve had to make some sort of adjustment to their overall budget,” Lee told Canadian Mortgage Professional. “It definitely is adding up, and for those individuals that took variable but had pretty decent room for any kind of upward movement, I think they will start to feel the pinch.”

Read next: Variable vs. fixed – which rate has the upper hand?

After the Bank of Canada slashed its benchmark rate to 0.25% in response to the outbreak of the COVID-19 crisis, the popularity of variable-rate mortgages surged. Canada Mortgage and Housing Corporation (CMHC) said in its recently released Residential Mortgage Industry Report that 53% of Canadians opted for variable terms in the second half of 2021, an increase of 19% over the first six months of the year.

Variable rates are likely to remain a popular option even in the case of a 75-basis-point increase to the Bank rate – but some Canadians could also be taking another look at fixed rates even though they’re still much higher than variable options, Lee suggested.

“For those that were assuming the variable rates would stay lower for longer, they may want to consider what the fixed options are, if they want to convert,” he said. “Without really knowing where or how high the Bank of Canada’s going to go, there is a case to consider a fixed rate mortgage.

“The fact that [variable holders] had to make several budget adjustments throughout the course of the year, for someone to think about this happening potentially several more times over the short term – if that has them panicking, then converting it to a fixed and having just kind of a one-shot payment increase and being able to keep that for the next several years, if that helps them alleviate some of the stress, it might be worth considering.”

Another option for borrowers hoping to free up some cash flow might be speaking to their financial institution and exploring the options for stretching out their amortization. That’s not always the best choice, Lee cautioned, because most homeowners’ goal is to pay off their mortgage rather than extend it.

Read next: Variable rate mortgages in Canada – what will happen in 2022?

“But if someone is stretched so thin and if they’re at the risk of default, it might be worth considering that option, more of a temporary solution,” he added. “And then as rates start to turn the other way, they can still keep their payment where it is and then they’ll be able to shorten the amortization again.”

Flexibility and adaptability could be the name of the game for mortgage holders, particularly considering that rates rise and fall cyclically. Indeed, a new RBC report indicated that when inflation cools, rate hikes are likely to reverse – something that borrowers should be attuned to, according to Lee.

“One consideration could be if someone does want the stability, they could go with a shorter-term option, [for instance] a one- to three-year term on the fixed,” he said. “If there are some discounts out there, that might be a good solution so that when rates eventually do come down, then they can take advantage of going back to variable.”

With bond yields having recently dipped, that may provide room for some lenders to offer specials around the fixed rate to minimize the spread and create a more compelling offer – particularly considering other rumblings about variable-rate discounts shrinking. “The case for fixed rates might be a little bit more prevalent in the next little while,” he said.

 

Copyright © 1996-2022 Key Media, Inc.

Province’s tech sector braces for downturn

Derrick Penner
other

American companies are getting hit hard, especially those involved in cryptocurrency
Sauder School of Business economist Werner Antweiler views the upheaval happening in technology industries as “the great filter,” a weeding out of flashy ideas such as cryptocurrency in favour of innovations built on delivering real products.
Tech companies have seen share values fall since the beginning of the year and cryptocurrencies such as Bitcoin have collapsed, wiping out billions of dollars in wealth that might otherwise have been used to fuel future growth in the tech sector, leading to fears about an overall slowdown.
“There’s a lot of hype in some of these industries, great promise of delivering value and the value never (showed) up,” said Antweiler, associate professor and chairman of strategy and business economics at the school. “So in that sense, that boom-bust cycle that we see in the world there is quite different from other technological sectors where it’s kind of like slow innovation, deploying technologies, commercializing applications.”
Antweiler believes B.C.’s tech sector might be somewhat isolated from the downturn with the number of startups here aimed at creating innovative products for the natural-resource sector and so-called green industries such as hydrogen, which are still attractive investments.
Companies, however, won’t be immune to the “shakeout” to occur, Antweiler added.
The tech news website Crunchbase has kept a rolling count of layoffs in the U.S. that added up to more than 24,000 as of June 27 among firms including Netflix, cryptocurrency platform Coinbase and electric-scooter firm Bird. Locally, Thinkific Labs Inc. cut 100 jobs, 20 per cent of its workforce in March, as a COVID-19-driven growth spurt in its business as a platform for delivering online education faltered, resulting in a $26-million loss.
There will likely be more, according to Vancouver-based tech entrepreneur Markus Frind, as some startup firms struggle to raise new rounds of financing.
“There are a lot of companies out there that could barely raise money when the going was good at the end of last year,” said Frind, who founded the dating website Plenty of Fish and turned to tech investment after selling the company.
“And a lot of these companies only have six to nine months of runway left at the end of (the first fiscal quarter).”
There is a “a massive valuation reset” happening among publicly traded companies, he said. “The private tech sector is in for a rough time as new rounds (of venture financing) get priced.”
Investors are definitely “taking a hard look at their costs” when making investments, said Jill Earthy, CEO of InBC Investment Corp., “and obviously staff and salaries are often a significant portion of overhead.”
However, Earthy said it doesn’t mean investment capital will evaporate altogether.
“We are seeing investors sort of, I would say, slow down their decision-making,” Earthy said, putting more of an emphasis on startup firms’ ability to generate revenue and potential profits.
The companies that stand to do well, Earthy said, are those that have grown steadily, haven’t been caught up in raising a lot of money for excessive growth plans and have a “more sustainable mindset.”

© Pressreader

Affidavits for Shangri-La tower class-action lawsuit examine market values

Joanne Lee-Young
The Vancouver Sun

The case began in December 2015 when the lead plaintiff filed a notice of civil claim, alleging that defective glass windows were fogging, leaking and spontaneously breaking.

 The Shangri-La tower in downtown Vancouver. Photo by Francis Georgian /PNG

Lawyers involved in a class-action lawsuit over defective windows at Vancouver’s Shangri-La residential condo tower tapped real estate appraisers to assess how the market value of the building’s luxury units has been impacted by the problems.

 

There is no precise answer in the experts’ affidavits during this preliminary phase, but arriving at a conclusion about who is responsible for compensating any losses is the crux of a complicated case that dates back to 2015 and is set to be heard this fall.

The trial features one of Vancouver’s tallest towers, where the windows frame floor-to-ceiling ocean and mountain views and some of the city’s most expensive condos.

Subject to any appeals, the case is expected to take over 130 days.

Original buyers and current owners who bought a condo from an original buyer had until last week to opt out of the class-action lawsuit against the legal owner of the land, KBK No. 11 Ventures Ltd., the developer, 1100 Georgia Partnership, and its partners, including companies related to high-profile local groups such as the Peterson Group and Westbank Corp.

The case began in December 2015 when the lead plaintiff filed a notice of civil claim, alleging that defective glass windows were fogging, leaking and spontaneously breaking.

In an affidavit filed last year, businessman Amos Michelson, who has owned and lived in a penthouse unit of the building since 2009, said that several months after moving in, he noticed fogging in his windows that would last for hours and then several days, making it difficult to see outside. In total, three inner panes in his unit have spontaneously shattered. One that broke in 2017 sent pieces of glass into the pool of his unit and also onto a plaza area below, as well as into the hotel pool on the fifth floor.

As strata president, he was also aware of other instances in other units where insulating glass was fogging and shattering. He included various photos as exhibits.

In total, there are 307 residential units in the building that are part of two separate stratas. The various legal actions to recover costs under warranty from insurers and from developers, builders and contractors, have been merged into one class-action case.

Prospective buyers have questions about the situation and, in particular, the cost of dealing with it, according to real estate agents.

In one affidavit that is part of the class-action case, Neil Hahn of Garnett Wilson Realty Advisors, an accredited appraiser with the Appraisal Institute of Canada, reviewed all sales for the strata that covers the 234 units on floors 16 to 43 of the tower.

He compared prices for these sales to the Real Estate Board of Greater Vancouver’s Housing Price Index for residential apartment units in the downtown core. The index tracks changes in market values over time for a benchmark unit in a given area.

 

He found that, over time, sale prices for the Shangri-La units were below or underperformed those of the market as a whole.

“From a valuation perspective, the risk of a significant special assessment can impact demand and the willingness to pay from potential buyers,” he wrote.

He looked at 188 repeat sales, following units that were presold in 2004 or 2005 and then sold again sometime between December 2008, when the building was completed, and the end of 2021.

Figuring out how much an individual unit could have sold for, “absent the deficiencies,” at a given time would take further analysis.

In another affidavit filed last year before the class-action was certified, chartered business valuator Richard Crosson said while it is possible that an appraiser could come up with a single estimate for the decline in value for all units, it was more likely for units to be first grouped by size or other criteria and then assessed.

 

© 2022 Vancouver Sun

Canada recession: It’s coming, RBC predicts, but how long will the downturn last?

Salarino Ho
other

Canada is headed towards a moderate recession, but the economic contraction is expected to be short-lived compared to previous recessions, economists with Royal Bank of Canada predict.

The Bank of Canada has been hiking its key overnight interest rate aggressively this year to combat skyrocketing inflation, which surged to 7.7 per cent in May, the fastest rise in nearly four decades and well above economists’ expectations.

With the central bank maintaining its two per cent target, more aggressive moves are expected this month and beyond to bring inflation down by 5.7 per cent. Economists are predicting a 75 basis point hike in July – mirroring the U.S. Federal Reserve’s move in June – and another 50 in September, a Reuters poll suggests.

The forceful strategy, in step with the U.S. Fed, has raised concerns that Canada is headed for a recession, with high borrowing costs leaving Canadian households carrying too much debt particularly vulnerable. Experts say lower income groups have the greatest exposure to the dual risks of inflation and rising interest rates.

According to economists, much of the inflationary pressures are coming from outside Canada, with energy and food prices soaring on the back of supply chain bottlenecks due in part to Russia’s invasion of Ukraine.

“Canada’s economic growth has fired on all cylinders following pandemic shutdowns,” said economists Nathan Janzen and Claire Fan in an RBC article published on Wednesday.

“But a historic labour squeeze, soaring food and energy prices and rising interest rates are now closing in. Those pressures will likely push the economy into a moderate contraction in 2023…Still, by historical standards, we expect the slowdown to be modest.”

Janzen and Fan said strong activity within the travel and hospitality sectors and higher commodity prices are helping to fuel a recovery, but a lack of workers is hampering businesses trying to expand. They note that while there were 70 per cent more job openings last month compared to the same time period prior to the pandemic, employers were competing for nearly nine per cent fewer workers in the job market.

“Soaring prices are cutting into Canadians’ purchasing power at the pump and the grocery store,” they said.

“As the economic contraction plays out next year, [the unemployment] rate will likely rise another one and a half percentage points to 6.6 per cent. These job losses will come at a time when Canadians are already grappling with higher prices and debt servicing costs, factors that have hit lower income households the hardest.”

Meanwhile, a report released on Tuesday by the Canadian Centre for Policy Alternatives (CCPA) found that over the last 60 years, the three times the Bank of Canada managed to reduce inflation by 5.7 per cent through a rapid and aggressive rise in interest rates, a recession followed. But economists at RBC and elsewhere have said there are few alternatives central banks can use to deal with inflation.

“The Bank of Canada now has little choice but to act,” Jazen and Fan wrote.

“Inflation has been too strong for too long and is starting to creep into longer-run business and consumer expectations. Higher inflation expectations can become self-fulfilling, making businesses more likely to pass on cost increases and consumers more willing to pay for them.”

Even without the interest rate moves, slowing growth and demand outside the country will weigh on Canada.

Despite these concerns, RBC believes the recession will be less severe than previous economic downturns.

“Global inflation pressures may soon peak,” the economists predict.

“Prices are still rising too fast and inflation won’t slow sustainably until demand falls. But once that happens, central banks will ease interest rates again…We don’t think it’ll take long to unwind that weakness in 2024 and beyond.”

 

© 2022  All rights reserved.

Condo Smarts: Tony Gioventu pens 1,000th column on strata life

Tony Gioventu
The Vancouver Sun

Weekly Homes columnist began helping readers with strata-living issues in November, 2002
Tony Gioventu, executive director for the Condominium Home Owners’ Association in action in Vancouver, BC., April 3, 2013. Photo by Nick Procaylo /PNG
With over 34,000 strata corporations across British Columbia, it is no surprise to reach 1,000 columns on the topic of strata living.
B.C. was one of the earliest adopters of strata-titled legislation in the mid-1960’s with townhouses in Point Grey and Port Moody being the first.
Since then, strata property designations have been granted to every type of use. From duplexes to multi-building sites of 1,100 units, residential to commercial, and industrial, hotel, vacation, recreational, golf courses, marinas, land strips, riding stables, storage units, parking facilities, and mixed variations of all configurations, strata-titled property has become the broadest form of development.
Strata developments enable higher density, collective use of energy systems, added facilities such as elevators, gyms, pools, guest rooms, meeting rooms and common shared expenses. These provide safe, affordable benefits to investors and residents when administered effectively.

The challenge strata/condo corporations worldwide face is that decision-making rests on the shoulders of the volunteer owners and councils/boards.
Strata/condo corporations in Canada are deemed to be non-taxable corporations. Its strata fees, special levies, interest and general user fees are non-taxable; however, to the surprise of many strata corporations, when commercial ventures are implemented — such as leases for communications towers, signage, billboards, and commercial activities such as the operation of a business or facility for profit of the corporation — the rules change, and taxation regulations apply.
A strata corporation needs to identify that it’s a business, often with employees, and operate and negotiate as a business complying with all enactments of law. After all, this is a fundamental requirement of any bylaws adopted by a strata corporation. It must comply with the B.C. Human Rights Code and any enactment of law.

I have seen many strata corporations end up in deep financial and operational crises, mostly due to volunteer council members or inexperienced managers in control of the finances and decision-making, unqualified to administer the scope of routine maintenance, major projects, and long-term planning.
No one is expecting a strata council to be a corporate administrator. Yet, we place the operations of strata corporations, often exceeding hundreds of millions in value, on the shoulders of the volunteers and often without the budget resources necessary to retain qualified professionals.
Property owners must properly equip our councils and managers with the funding and tools they require to operate effectively, and strata councils must be honest, fair, and act in the best interests of all owners.

After 1,000 columns, here are common issues that prevail in the industry.
1. No single council member has any special authority. Decisions on construction, operations, bylaw enforcement and legal matters are made by council majority at a council meetings.
2. “Your home is not your castle!” This is a classic phrase to describe strata living. Regardless of the type of strata corporation you live in, what you do in your strata lot, will affect other strata lots. This is the reason for bylaws that regulate the use and enjoyment of all property.
3. “Keep strata fees low to make your strata lots easy to sell.” This statement is deadly for strata corporations as it results in a lack of maintenance, planning and funding for annual and long-term repairs, neglected property, emergency repairs, court actions, failed special levies, and court intervention for administration and repairs.

© 2022 Vancouver Sun

Could lumber prices fall even further?

Fergal McAlinden
other

Penticton 5.27 acres with mini storage sells at full price

Western Investor Staff
Western Investor

The industrial parcel, which includes 244 storage units and 13,000 square feet of commercial rental units, sold for $12.6 million.

Green Real Estate Group, Penticton, B.C., for Western Investor

 

Property type: Industrial

Location: 270, 290 and 360 Waterloo Avenue, Penticton, B.C.

Property size: 229,561 square feet

Land size in acres: 5.27 acresZoning: M1

List price: $12.6 million

Sale price: $12.6 million

Date of sale; June 30, 2022
Brokerage: Green Real Estate Group, Penticton, B.C.

Brokers: John Green and Keith Jakes.

 

 

© 2022 Western Investor

Gastown-area 3,050-square-foot retail site sells for $2.7 million

Re/Max Commercial Advantage
Western Investor

East Cordova Street, Vancouver, site purchased as strategic acquisition for future land assembly.

Property type: Retail

Location: 88 East Cordova Street, Vancouver

Property size: 3,050 square feet

Lot size in acres: 0.7 acres

Zoning: HA – 2 (Heritage area)

BC Assessment value: $2.82 million

List price: $2.78 million

Sale price: $2.7 million

Date of sale: June 30, 2022

Brokerage: Re/Max Commercial Advantage, Vancouver

Broker: Steve Da Cruz

© 2022 Western Investor