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Metro Vancouver made for commercial real estate

Affluent enclave hemmed in by geography, politics has nowhere to go but east and up
Vancouver office tower confidently rises on Burrard Street without a single tenant in place |  Chung Chow

If an urban planner were to design an environment for commercial real estate success, Metro Vancouver would fit the bill perfectly.

With a population of around two million big-spenders hemmed in by mountains, oceans, the U.S. border and decades of progressive politics that has frozen thousands of acres out of the market and stalled necessary development, there is nowhere better to make money in real estate.

And the data shows it.

Metro Vancouver has the lowest industrial real estate vacancy in North America and the highest leasing and strata costs in the country. The industrial land base has shrunk close to zero, driving land prices into the stratosphere.

In the multi-family sector, where rental construction is low, demand and rents are the highest in Canada. Sales of existing apartment buildings hit a record $1.6 billion through the first half of this year.

New condo apartments, meanwhile, are pre-selling for $2,000 to $3,000 per square foot at new Vancouver towers at Oakridge and downtown.

Despite the pandemic, confidence in downtown offices is so strong that developers are building giant towers without a single tenant signed on, and the biggest strata office offering sold out two years ago at more than $2,000 per square foot.

The retail sector, which should be suffering in a pandemic, has been buoyed by Metro consumer spending that is rising faster than anywhere else in Canada. Even in the worst streets in the region, the notorious Downtown East Side, retail sites sell for the equivalent of $10 million an acre and retail strata sells at up to $800 per square foot. When the province bought skid row hotels in the area this spring, it paid up to $327,000 per door.

Yet, while the opportunity to profit from a captive market appears legendary, Metro Vancouver real estate developers must be wily to make it all work.


Serviced industrial land has virtually disappeared in Metro Vancouver. Developers are now looking east to areas like Chilliwack and Abbotsford, even Mission, for raw land. With 150,000 acres locked in the 40-year-old Agricultural Land Reserve, industrial developers and owner-occupiers are paying tens of millions per acre for brownfield parcels and turning to questionable sites for construction.

This year investor Veramax Holdings paid $44 million for a 2.5-acre industrial site in North Vancouver and biotech firm AbCellera paid $38 million for two acres of East Vancouver industrial land.

Beedie, B.C.’s largest industrial developer, has been struggling for six years to turn 163 acres of a Delta peat bog into an industrial park, a plan that has raised protests from environmentalists and huge infrastructure costs.

In Richmond, a 170-acre waste landfill is being converted into a $300 million industrial park by Montrose Property Holdings. The resulting Richmond Industrial Centre will include up to 14 buildings ranging from 100,000 square feet up to 500,000 square feet when completed.

The payoff could make it worthwhile. The second quarter of 2021 marks the fourth consecutive quarter of no industrial vacancies in the 100,000-square-foot segment across Metro Vancouver, with the largest vacancy being 47,495 square feet, according to Colliers.

Industrial space now leases for an average of $14.88 per square foot, up 13.7% from a year ago and the highest in Canada. Suburban industrial strata space is selling for an average of $488 per square foot, but that price can more than double in Vancouver or the North Shore.


There is some debate about how many workers will return to the office this September, and the office vacancy rate is rising, but downtown developers appear giddily bullish on the future.

There is 3.3 million square feet of office space under construction in Vancouver’s downtown, including three towers scheduled to open from this year to 2024 that have no tenants in place. A 215,000-square-foot, 25-storey office tower set to open this fall has signed only one tenant, which has taken just 27,000 square feet.

Still, reports Avison Young, 61% of all the new office lease space now under construction to the end of 2023 is pre-leased.

In its mid-year 2021 office report, the agency summed up the core confidence.

“Despite a significant increase in vacancy, the overall market performed quite well through the pandemic with very few tenant defaults or lease terminations or developers abandoning development projects,” the report noted. “An increase in new supply may actually provide a short-term benefit for the market and stimulate leasing activity and accelerate the recovery.”


Metro Vancouver saw a multimillion-dollar shopping spree by investors snapping up retail assets this year before the province began to lift restrictions on store openings July 1. But, for many retailers, the traffic had already returned, according to a Cushman & Wakefield study.

“Google data shows that, as of the end of June, Metro Vancouver was just 3% below normal traffic for destinations including restaurants, cafés [and] shopping centres,” the agency reported July 28.

Its Marketbeat report also noted that at least 10 notable brands, including Athleta, Dollarama (TSX:DOL), Herschel Supply Co., Lucid Motors (Nasdaq:LCID), Nike (NYSE:NKE) and Peloton (Nasdaq:PTON), had all either expanded or opened retail outlets in Metro Vancouver while restrictions were still in place.

May Metro Vancouver retail sales, at $3.7 billion, were up 34.5% from the same month a year earlier. This is the largest year-over-year increase of any city in Canada, according to Statistics Canada.

Bricks-and-mortar retail investors have been piling into the Metro Vancouver market for months.

On May 12, the 42,000-square-foot Nordel Centre shopping centre in Delta sold for $21.3 million, nearly $3 million over its BC Assessment value, reported the Fraser Elliott Group, which brokered the deal.

Other big sales in the first half of this year included the 81,000-square-foot Lougheed Super Centre in Coquitlam, bought in a share-sale worth $42 million; and an assembly of three retail properties on Victoria Drive at East 49th in Vancouver, totalling 45,257 square feet, that sold for $42.5 million.

In the second quarter, Skyline Real Estate Investment Trust paid $31.4 million for a 71,800-square-foot Abbotsford shopping centre; and a private investor bought the 34,781-square-foot Rodeo Square in Surrey for $23.3 million.

There has also been an increasing number of storefront retail assets and strata retail sales across the City of Vancouver, based on Western Investor Done Deals listings.

“Economic recovery is ramping up in Metro Vancouver and can be expected to gain significant momentum through the second half of 2021,” the Cushman & Wakefield Marketbeat report concluded. •