Foreign buyers accounted for 60% to 65% of all the retail real estate and half of all the office buildings sold in downtown Vancouver over the past 15 months, according to survey by CBRE, which looked at all sales priced at $50 million or less.
Nearly all of these buyers came from mainland China or the Middle East, said Jim Szabo, vice-chairman of the national investment team at CBRE, a Vancouver commercial real estate firm.
As they gain more confidence in the Vancouver market, “foreign investors are switching from residential to commercial,” Szabo told a Vancouver real-estate conference November 26. Szabo said that the foreign buyer characteristics are a long horizon, a search for core locations and aggressive pricing.
When selling commercial real estate to foreign investors in Vancouver, Burnaby and Richmond, Szabo said that in all cases “they outbid local buyers by quite a margin.”
He provided some downtown Vancouver examples: an unnamed “foreign buyer” paid $1,803 per square foot for a 13,200-square-foot retail building on Robson Street; another paid nearly $500 per square foot for an older eight-storey office building on West Pender. Both values are considered at the high end of the price range.
Foreign buyers are also snapping up land, and are in no hurry to build. “It is a different mindset [than with local investors], they may be looking at development in 10 or even 20 years,” Szabo said.
The PricewaterhouseCoopers and Urban Land Institute’s Real Estate Outlook 2014, held at the Vancouver Convention Centre, also heard that threats of higher mortgage rates, which have hammered real-estate investment trusts (REITs) this year, have aided cash-heavy foreign buyers by reducing competition. According to PwC, foreign investors will outspend REITs next year and are second only to institutional investors, such as pension funds, in primary Canadian markets like Vancouver.
The Middle Eastern buyers are primarily from Iran, but Dubai money has also been flowing into Vancouver, the conference was told.
