Commercial Real Estate: Optimistic forecast for local commercial property market
Credit to Author: Evan Duggan| Date: Tue, 05 Nov 2019 19:00:32 +0000
Despite global instability, Vancouver’s commercial property market will continue to adjust and punch above its weight, predicts Jason Kiselbach, managing director in Vancouver with commercial property brokerage house CBRE.
Kiselbach made his forecast while delivering a regional market update at the Vancouver Real Estate Strategy and Leasing Conference on Oct. 29.
Above all, the local office and industrial markets are performing at extraordinary levels, Kiselbach said.
Office vacancy is at a record low and is the second-lowest vacancy rate in North America. Meanwhile, industrial availability is at a near-record low.
“These declining vacancy numbers have put upward pressure on rental rates, which have increased significantly across the board over the past three years,” he said.
Higher rents will be welcomed by owners who have seen construction costs, land values and development charges rise steeply in recent years.
“These fundamentals explain why we are experiencing a construction boom that cuts across all asset classes and includes numerous redevelopment and master-planned communities,” Kiselbach said.
The global backdrop for which Kiselbach delivered his optimistic forecast includes a flurry of pressing political, social and economic issues.
Among them are: the U.K.’s tangle over Brexit, emerging inequality protests in Chile, political division and rising xenophobia in the U.S., Hong Kong’s extended protest for democratic freedoms with China, the clarifying consequences of climate change, and ultimately, concerns over a global recession.
The effects of those issues, and others, make Canada and Vancouver appear safer than ever for investment.
“Overall, the Vancouver market exceeded expectations in 2019,” Kiselbach said.
There are several reasons for that, including the steady influx of new residents to the Vancouver region thanks to a strong local economy and friendly Canadian immigration policies, he said.
The region continues to attract 45,000 new residents on an annual basis.
The local logistics and warehousing industries continue to flourish as more people do their shopping online and companies hustle to get products delivered in short order.
The tech industry is also booming. “We have added over 22,000 new tech jobs in the past five years,” Kiselbach said.
Looking at the year ahead, Kiselbach predicted that overall commercial vacancy levels with remain at their current level, given overall pre-leasing numbers for new construction projects.
He said demand for commercial space will continue to be driven by large multinational tenants and new market entrants in search of prime location and top talent.
“On the other hand, local and regional operators will find it challenging to grow given the lack of available space and resulting upward pressure on rental rates,” he said.
The region will continue to attract new international capital in search of long-term growth and the next construction cycle will feature creative solutions in the industrial sector which is squeezed for space. Most notably, the region will start to see the emergence of multi-level, or stacked, industrial space.
New infrastructure projects such as the planned Broadway subway project and the Pattullo Bridge replacement will provide an added boost to the economy by creating jobs and providing new transit-oriented development opportunities, he said.