According to the Commercial Leading Indicator (CLI) calculated by the BC Real Estate Association (BCREA), leasing and sales should increase modestly in 2013’s second half compared with the year’s first half.
Much of the optimism comes from improving exports from B.C.’s lumber industry. According to BC Stats, forestry exports have increased 30.2% to nearly $1.8 billion in 2013’s first quarter, up from $1.4 billion in the same period last year. A 45.7% increase in wood exports to the U.S. was among the key contributors to the increase.
That boost has contributed to a 4.5% increase in B.C.’s overall exports to $7.9 billion year to date from $7.6 billion in the same period in 2012. Continued improvement in the U.S. economy should help drive continued improvement in B.C.’s forestry sector. The forecast in the report expected the world’s largest economy to grow more than 3% in 2014, contributing to overall global growth of 4%.
There are, however, some worrying signs in the forecast.
The report noted that while construction spending and investment have increased so far this year, the 72% drop in industrial building permits and the 22.9% drop in commercial building permits could be signalling a slowdown in commercial construction down the road.
Weak consumer spending in B.C. is also a concern. So far, retail sales have declined 0.4% this year, underperforming the BCREA’s already low sales expectations.
There are also worries over what impact the new office towers being built in downtown Vancouver will have on the office leasing market in the city and beyond.
Will the existing office space be filled once some tenants move to the new buildings?
The impact of any of these challenges will depend on whether B.C. can ride on the coattails of an improving U.S. and global economy. The report had a cautiously optimistic tone, noting a growing economy should lead to better job growth and help fill the office supply in the region. •
