Broker sentiment
A recent survey of its offices across the country has resulted in an optimistic report from Colliers International – at least so far as industrial property is concerned.
Brokers expect demand among users of industrial space to rise over the coming year, according to the survey, with two-thirds expecting greater demand for service, warehouse and distribution space. They also anticipate net effective rents to rise in lockstep with demand, especially in the case of warehouse space, which is pegged as having the best chance for increases.
But the optimism surrounding industrial property doesn't extend to office space. A wave of new buildings is completing across the country, and Colliers brokers feel distinctly bearish regarding the outlook for existing stock. Sentiments are lowest regarding A-class suburban office space, with no one expecting increases in rents in the coming 12 months. Downtown space fares slightly better, with an average of 12% of brokers across the country expecting increases in rents for available space.
It's not that the demand's not there; rather, new supply is keeping expectations of rent growth in check. Indeed, upwards of 63% of brokers expect Class A rents to decrease, while 55% expect Class B rents to follow suit.
The situation is neatly summarized by Maury Dubuque, managing director for Colliers International in Vancouver, who points to a second-quarter rise in the region's office vacancies to 9.3% as a sign of things to come over the next 12 months.
Vacancies are now at their highest level since 2005, thanks to sluggish demand for existing space.
“Close to 60%, maybe just over 60%, of the occupancy in the new buildings is actually new growth,” he said. “But there's been very little interest to date in the space being left behind.”
Dubuque isn't dour about the rise in vacancies and softening in rental rates, however.
He expects vacancies to rise slowly and steadily for at least another 12 months, and Colliers' own projections accept that vacancies could rise as high as 12% before falling.
“Are vacancy rates going to go up? Sure they are,” Dubuque said. “Will it be catastrophic? I don't think so. … It may swing slightly in the tenant's favour, but I don't think it'll be any kind of Armageddon.”
Powder trail
Southern Okanagan ski hill Mount Baldy is on the block.
A consortium of U.S. investors that included Brett Sweezy, Brent Baker and Robert Boyle purchased the 46-year-old property in 2004 and drafted a master plan, approved in June 2006, that sought to position it as “B.C.'s newest four-season resort.”
Traditional ski lifts would be complemented by backcountry skiing, which a media kit assembled that year described as “designed to reinforce and further build the area's reputation as a mountain play-oriented resort that celebrates the outdoor environment.”
Up to eight new ski lifts were planned, as well as a 7,800-bed village including an 18-hole golf course.
B.C. Major Projects Inventory entries pegged the cost of the ambitious, four-phase project at $100 million.
But when the financial crisis and ensuing recession hit, Mount Baldy Ski Corp. found itself stuck for financing and unable to build out the main attraction that was supposed to anchor its real estate development.
While 1,012 beds were developed in the planned village, and approvals secured for an additional 962, the master plan became subject to larger forces. The hill failed to operate last winter.
Consequently, lead creditor Stark BC Venture LLC petitioned BC Supreme Court in July to appoint G-Force Real Estate Inc. to act as marketing agent for the property.
G-Force managing director Gary Powroznik is now soliciting bids from prospective buyers keen to groom the hill for the coming season and sell season passes that will start the cash flowing again.
“What we're looking for is a party that can take this amenity and make it sparkle, and then the real estate will follow,” Powroznik said. “Most of the real estate is driven by the success of the amenity, but the amenity itself is not real estate – it's an activity. … So the expertise that you need is the hospitality expertise.
“You need that to drive the business.”
G-Force has set a deadline of August 21 for expressions of interest, and Powroznik aims to conclude a deal in time for the start of ski season.
Pre-season work, including maintenance and the sale of season passes, will occur during finalization of terms.
Such deals typically require six to nine months, but Powroznik is undaunted and said the buyer will be motivated to make good on the acquisition.
There's no suggested price, but Powroznik said all reasonable offers are welcome.
“Do we have sufficient interest to do a deal? I think we do,” he said.
