Three situations to watch in Vancouver's robust commercial property market
Credit to Author: Evan Duggan| Date: Mon, 25 Nov 2019 20:00:59 +0000
Investors’ demand for commercial property in the Metro Vancouver remains high, just not as high as it has been recently.
Total investment property sales for all of 2018 in the Metro Vancouver region totalled $12.88 billion. That figure fell 13 per cent from the all-time record of roughly $15 billion set in 2017, but still marked the second highest total, according to a new report by real estate data and software firm Altus Group.
The investment numbers show that most sectors in the local commercial property market continue to perform well, said Ray Wong, a vice-president with data operations with Altus Group.
“The market fundamentals in Vancouver are strong,” he said. Low unemployment, low commercial vacancies — in office and industrial especially — and Vancouver’s reputation as a livable city is an attractive recipe for companies looking to set up operations.
Here are three major situations taking place in the region’s commercial property market.
Developers added only 500,000 square feet of new office space between the middle of last year and the middle of this year. Because of that low total and high demand, Vancouver’s overall area office vacancy is at its lowest level since 2008, at 4.4 per cent. Downtown Vancouver’s vacancy is less than three per cent.
There is roughly five million square feet of new space being built or imminently planned in the downtown core, meaning help is on the way.
But even with that new space open for business, Altus Group’s five-year vacancy forecast estimates the city’s office vacancy will climb only to about five per cent.
The region’s industrial sector saw nearly 3.3 million square feet of new space added in the 23 months leading up to the second quarter of 2019.
That’s a decent total. The problem is that overall space demand and absorption outpaced the delivery of new supply.
That led to yet another drop in overall industrial vacancy, bring Metro Vancouver’s total vacancy to just 1.2 per cent.
“There is just no space,” Wong said.
Residential land, or land used to develop new homes, saw a remarkable investment drop. Total investment in that asset class fell by 16 per cent from the previous year.
Moreover, residential land investment also had a very quiet start to 2019, with the first-half investment totals down 70 per cent from the first half of 2018, and lower volumes for all residential land use categories.
The rush on residential land seems to be over, for now.