With 2020 in the rear-view mirror, and the economy still in the throws of the COVID-19 pandemic, it begs the question, what can we expect for 2021 in commercial real estate? While some of the larger commercial markets have faced significant challenges across the Country, it seems as though Kelowna has been able to not only weather the storm but find the silver lining in the clouds with increased interest and activity on all real estate fronts.
Kelowna is no longer a hidden gem as it was reported to be the 4th fastest growing City in the Country for 2020 (Stats Canada). A place where local provincial visitors, and interprovincial visitors were able to experience the features, advantages and benefits the region has to offer while they could not travel outside the Country. Kelowna was able to showcase itself to a national audience during the past 9 months, and as businesses pivot, and look to the other side of the pandemic, Kelowna becomes more than just a seasonal destination, and now is a year-round business and lifestyle opportunity.
Residential sales in the Central Okanagan were up 117% in December alone (Association of Interior Realtors), and in the downtown Kelowna area there are over 2500 residential units that will be completed and/ or constructed over the next 2-3 years. The majority of these include mixed use developments allowing for commercial businesses and services to also take advantage of the growing number of new residents. This increased density has been the vision set forth by the local government and has encouraged the growth opportunity we see taking place today.
Commercial sales have followed suit most notably with the recent sale of the BC Tree Fruits building located at 1723 Water St which sold for over 7.5 million dollars, which also happens to be over 2.3 million dollars above the asking price. This level of interest and activity continues to span across the City attributed to record low interest rates provided by lenders, and a lack inventory given Kelowna’s landlocked geographical makeup, similar to that of Victoria and Vancouver.
UBCO recently announced it’s plans to build a Downtown Kelowna Campus consisting of 80-100 thousand square feet of academic, office, and university housing space, providing further cultural, societal, and economic growth in Kelowna’s downtown core. The Kelowna International Airport also has plans for expansion and will see an investment of approximately 240 million dollars over the next 10 years to help meet “unprecedented levels of passenger growth”. The City is also planning to expand the Health District around Kelowna General hospital which is already the largest of its kind in interior BC.
This is great news for all investors and stakeholders in the Kelowna area, and will likely expand to benefit the tertiary markets in the South Okanagan like Penticton, and markets to the North like Vernon and Salmon Arm. Combine all these economic and infrastructure growth factors along with the City of Kelowna planning for an additional 60,000 new residents over the next 20 years, and its not hard to see what all the buzz is about.
Written by Jeff Brown for William Wright Commercial.
Entering 2020 the Greater Vancouver market has record low vacancy rates in many asset classes and in some cases the lowest vacancy rate in North America. This was driven by lack of supply and extremely high demand across the board.
Where do we stand entering 2021? The Greater Vancouver commercial marketplace has been resilient as the macro economics and key fundamental mentioned above remain in place. The first of these fundamentals is we operate within a supply constraint market. Although constructions continue, we suffer from geographical restraints and the red tape as timelines develop make it still very challenging to build thus keeping demand high while supply is slow to enter the market. In doing so, this keeps vacancy rates low across all asset classes. Downtown Vancouver is landlocked as there is only so much land available to develop which will continue to keep land prices high as companies slowly re-enter the workplace in 2021. Lease rates will remain high due to lack of supply available and coming to market into 2022. Similar geographic challenges are found in Victoria, Kelowna and Nanaimo, with these cities downtown hubs boarding water coupled with heritage and zoning restrictions in their respective markets will also keep demand high in certain asset classes and these markets should see continued growth into 2022.
The second; the Greater Vancouver marketplace is fortunate to have a truly diverse tenant pool. Although some industries have been impacted more than others, industries such as firm, tech, construction and industrials remain active and growing. The tech industry has turned Vancouver into the Silicon Valley of the North and remain one of the largest office tenants absorbing what little office space is available in downtown Vancouver. This trend is also seen in both Kelowna and Victoria and the livability, costs of living and proximity to California make BC an attractive option for both workers within this space and employers looking to add top talent to their companies. Tech company’s that have expanded into BC over the years include Amazon, Sony, Microsoft, Samsung, and Apple to just name a few.
Lastly, look for continued population growth once the boarders reopen within Greater Vancouver. The Federal Government announced their vision to welcome 1.1 million new immigrants to Canada by the end of 2022 and livability, jobs and access to the Asian Pacific market will make BC one of the top destination for new people looking to call Canada home in 2021 and 2022.
Let’s not kid ourselves, Vancouver was impacted heavily by the pandemic along with most cities and countries but, entering this year we were well positioned to overcome any challenges presented by our historical low vacancy rates in most asset classes. Hotels won’t remain empty forever, people will return to their offices, employers want to maintain staffing levels and retain staff long term and the office culture will be a key contributor to this. The industrial market will continue to see tightening as more businesses have been forced to think of a digital platform for their business and retail was already seeing a shift in the types of tenants occupying spaces. This pandemic will accelerate that shift creating opportunities for some and unfortunate challenges for others.
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