Vancouver's Asian Investment Fears Are Overblown. Here's Why.
Concerns that Asian investors are driving up Vancouver real estate prices and creating a bubble are overblown, CBRE national investment team vice chair Tony Quattrin tells us. “This market is still very sound.”
Tony's Vancouver-based investment group, which he co-runs with Jim Szabo, is one of the city's leading producers in dollar volume, “so we know the market.” And despite some decrying how Mainland Chinese investors could be messing things up—overpaying for properties, leading to skyrocketing prices and skewed cap rates—supply and demand for Lotus Land assets remains in good balance. “Stronger then anywhere else in the country,” says Tony, noting his team’s book of business right now is more than double what it’s been in their best years. “The pricing is reflecting good fundamentals. Not just hype.”
That’s not to say Asian investment isn’t growing greatly. Tony says Mainland Chinese buyers—spurred by a plunging loonie and economic uncertainty at home—represented 39% of the Vancouver market in 2015 on deals over $10M with income attached (in years past it was about 20%). Among the most high-profile transactions has been the sale of the Molson brewery site at the foot of the Burrard Bridge, reportedly snapped up by a Chinese purchaser for $180M. “The impact (of Asian investment) definitely spiked last year,” says Tony. “But, it’s not influencing values as much as the media would like to make out.”
The Chinese aren’t the only foreign investors eyeing Vancouver. The Financial Post reports that German multibillionaire Klaus-Michael Kuehne is poised to buy one of Vancouver’s largest office towers, Brookfield Office Properties’ Royal Centre, a 36-storey building at 1055 West Georgia St that houses Royal Bank of Canada’s BC HQ. Tony notes downtown office is the preferred destination for domestic and foreign capital, both institutional and private. “It’s what they see in other cities and can figure out.”
As foreign investors get more sophisticated, they’re broadening their focus to other asset classes, like retail, Tony says. Confronted with Vancouver’s inherent supply constraints—mountains, ocean, border, ALR—and an overall lack of high-street retail opportunities, international buyers are looking at retail plays farther afield. “We’re seeing suburban shopping centres capture the attention of Asian investors,” says Tony, citing New Westminster’s Royal City Centre, which sold to a Chinese group. “As they get more comfortable here, we expect Asian investors to continue moving to outlying markets."