Outlook 2016: What Vancouver CRE Pros Will Be Watching For Next Year
As 2015 draws to a close, Bisnow asked Vancouver commercial real estate experts about the action-packed year that was and what's on their radars for 2016.
Office Delivery Digestion
Vancouver took delivery of a whopping 2.4M SF of new office supply this year, so 2016 will be focused on “chewing through that,” says CBRE’s Norm Taylor, snapped at the firm’s new light-infused Vancouver HQ, the first wave of a CBRE-wide transformation that continues in 2016, with revamped spaces being unveiled in Toronto and Montreal. Vancouver’s had a big injection of office this year, but Norm indicates 83% of it’s pre-leased. “So it’s a very healthy market,” he says, noting this came as a “pleasant surprise.” Economic uncertainties at the start of 2015 created concerns that “maybe we overbuilt the market and it wouldn’t sustain itself.”
In 2016, Norm will have his eye on The Exchange, a 31-storey LEED Platinum office tower being built on spec by Credit Suisse. “It'll be interesting to see how it leases through the year,” he says, noting the building, slated for 2017 delivery, is 12% leased, with National Bank as anchor. Vancouver office vacancy will remain "slightly elevated" in 2016, and Norm says he anticipates further movement of tech and creative firms to “edgy areas” undergoing transformation, like Mount Pleasant, Railtown and Strathcona. "These companies want to create a culture that fits into Vancouver's organic vibe."
Continued Retail Dominance
BC led the nation in retail sales this year, and Colliers International senior consultant / retail specialist David Bell sees more growth in 2016, particularly in luxury nodes and premium regional centres. Vancouver had major milestones in this regard in 2015: the highly anticipated arrival of Nordstrom at Pacific Centre (where David snapped this selfie), and of McArthurGlen Designer Outlets, whose launch (its first in North America) caused minor mayhem. The opening of Tsawwassen Mills in 2016 may prove an even bigger deal. Timing couldn’t be better, David says; the lowly loonie has been a boon for retailers. “It makes more sense now for people to shop north of the border.”
David is monitoring the growth of retail-anchored mixed-use hubs along transit lines. “People are less interested in single-purpose shopping centres these days. Today’s time-starved consumer wants a place to hang out.” In 2016 he'll be tracking Shape Properties' reinvention of Brentwood Mall (it has similar plans for Lougheed Town Centre); Anthem Properties / Beedie Development Group’s Metrotown at Station Square; PCI Developments’ Marine Gateway, a new centre of gravity on the Canada Line; and in Port Moody, along the future Evergreen Line, Onni Group's Suter Brook Village. These projects are "reimagining what it means to be a transit node."
Spec-tacular Industrial Activity
Metro Vancouver industrial had record absorption in 2015, but saw no end to supply issues (vacancy was 3.3% in Q3, almost unchanged from a year earlier). Avison Young’s Ryan Kerr tells us relief is on the horizon, though. “We’ll be seeing a significant amount of spec product come to market in 2016,” including a 670k SF building at Onni’s Golden Ears Business Park in Pitt Meadows. Onni also has a 400k SF spec project in Campbell Heights, where Hopewell Development is spec building a 210k SF facility. In New West, Oxford Properties Group is on the third building at Queensborough Logistics Park. Ryan says these new spaces are “predominantly unspoken for.”
Supply issues and peak pricing are driving industrial tenants to strata developments, too. Next year will see the launch of PC Urban’s IntraUrban (above), a 167k SF project at 8811 Laurel St. And Conwest Developments is proposing redevelopment of the former Terminal City Ironworks site into wholesale/office space. While supply woes limited industrial sales in 2015, Ryan expects a resurgence in dollar volume and deals next year in anticipation of an interest rate hike. That drove Dayhu Group’s $28M sale of 5850 272 St to a private investor earlier this year, he notes. “Owners and vendors are seeing now is a good time to divest assets that aren’t long-term holds.”
More Tightening of Multifamily
BC multifamily had a monumental 2015, with CBRE’s Lance Coulson brokering two of the biggest transactions in the province’s history. The deals were all the more remarkable given the absence of multifamily opportunities in Vancouver. But lack of supply is leading to greater pricing demands by owners of existing assets, DTZ Vancouver’s Chris McIntyre (pictured) tells us. “They’re aware of escalating values and tend to expect a significant value increase over the last comparable sale.” With more capital than multifamily product, buyers are being forced to “think outside the box” to justify lower returns.
Vancouver vacancy will remain low in 2016 as net migration into BC remains “positive and constant” (36,000 people/year), CBRE's Norm Taylor notes, and ongoing investor interest in rental assets will continue driving down cap rates. Chris says Port Moody is a multifamily market worth watching as the Evergreen Line nears completion. “Anything along rapid transit generates strong demand." He’s also watching Wesgroup Properties' River District, a 130-acre waterfront community on Marine Drive (above) that'll have 7.2M SF of res, 250k of retail and 260k SF of office. “There'll be nothing like it in terms of scale in Vancouver."