Vancouver Commercial Real Estate Podcast

With properties in Canada, the US, the UK and China, “Investorpreneur” Peter Leung is well positioned to look at the Canadian commercial real estate market from a global stage. What is Peter buying now? Where does the commercial market go in 24 months? And why is BC real estate the safest investment? 

Who is Peter Leung? 

Nobody in my family is in real estate. My father was actually always very much against real estate because it’s high debt and high leverage. Growing up in Vancouver and working in restaurants and financial planning, I stumbled upon real estate through the advice of my accountant. 

I started with investing in residential pre-sales and then transitioned into commercial real estate in 2012. I began working in commercial real estate in Canada and then expanded my portfolio into the US, the UK and China. 

What is happening with interest rates? 

Property is for the long term. It’s get rich for sure, not get rich quick.

I don’t think interest rates have peaked. Economies have been stronger than people expected so interest rates keep going up to cool them. 

I think there’s room for interest rates to grow but we’re nearing the end of the tunnel in North America. That’s where the opportunities are. 

There are more vacancies in office space but that’s cyclical. Certain markets in the UK, China, Hong Kong and Australia are seeing more people coming back to work in the office. Office is one of the first to go down in an economy and the last to come back up.

Overall, I’m still very bullish. There are opportunities to invest. 

What is happening with office real estate globally? 

In terms of office space, I think mirroring is really important. I have a bit of an edge here in Hong Kong with office real estate. Right now, it’s the worst time in office because there are high vacancy rates. But people are starting to come back to work.

With mirroring, you can reference this same phenomenon in other markets like New York or even Vancouver. Looking at markets that have led the way gives you precedence for what to look for in the future. A lot of the time the things we see in Vancouver actually happened in another market first. 

If places like Hong Kong – where traditionally everyone worked in the office because there’s no space to work at home – are just starting to pick up and return to the office, then it’s a bit early for the rest of the world. But once Hong Kong is 80-90% back then it will begin trickling out to the rest of the world. They will look at Hong Kong for a reference of what the new office looks like. 

I’m not bullish on office space today but I think there will be opportunities in due time. We’re certainly not all the way back to the office in Hong Kong. But there are still a lot of bullish views in the long term. 

How do commercial investments in the US compare to opportunities in Canada? 

Lending is still relatively accessible in the US as long as you can find a good property to buy. You can still get a high single digit cap rate. That’s an attractive opportunity in the US.

In Canada, there’s safer opportunities. There is less volatility, smarter money, flow of capital and immigration. There’s a lot going for markets like Vancouver, Toronto and Calgary. It’s just a different opportunity to what is happening in the US. 

Would you buy in BC right now? If so, where?

I am absolutely buying today. I’ve been looking at opportunities globally but haven’t purchased anything outside of Canada in the last 12 months. That’s just my own capital. 

But I think there are a lot of opportunities in Canada. I’m very bullish on the Canadian economy for the long term. The Canadian dollar is weak which gives more value to my money. 

I think you’re now getting discounts to value in Kelowna while the upward trajectory is still intact. I love getting a discount! You have to look for what has proven to be successful but at a discounted value. I’m still very bullish on the Island, Chilliwack and Abbotsford. 

I’m looking for where the markets are proven, where there is a capacity to increase rent, and where I can redeploy. I want to be where there is an influx of people and their capital. I need opportunities that can fulfil a checklist rather than be in a specific area.

Which asset classes are you focused on?

I’m staying away from office. The most important thing to know is what the lenders want. Lenders are not bullish on retail or office. Does that mean you can’t buy office or retail? No, but it will cost you more to pay for the risk. 

The banks love industrial and mixed-use buildings. They are okay with some element of retail but not more than 30-40%. Multi-family isn’t an asset that I’m really into in BC because of the tenancy laws that slide in the tenant’s favour. Not that I’m against that, but it’s not the investment I’m looking for. 

So industrial, mixed-use office and combinations with retail are what I’m looking at. 

Are there other markets in Canada that you’re excited about? Where else are you investing outside of Canada? 

Calgary is one on the map. Between BC and Calgary though, I’d hands down pick BC. 

Right now I’m not actively looking outside of Canada. But I am doing other things, like private lending. In the UK, we’re able to achieve lending rates between 15-18% per annum lending to property owners who can’t get lending otherwise. That’s a double digit rate of return on capital. So I’m involved in other real estate markets but looking at alternative opportunities. 

In the next few years, I’m going to be looking at parking lots and parking spots in China. The demand is high and the yield is strong so it’s a potential market for me. 

Overall, I think Canada is it for me in terms of a strong real estate investment market. I don’t see a lot of opportunities globally that compare to Canada.

Where is the BC real estate market 24 months from now? 

In BC, I think the market will be up in the next 24 months absolutely. You still have to do your due diligence and identify the right strategy for the opportunity. But 24 months from now, the commercial real estate market in BC, and Canada as a whole, is up. 

I think the opportunity is going to last about 10 years because of the hyper-inflation. Inflation is strong which leads to higher costs. We see that in rents, what restaurants charge, what investors have to charge, etc. We might see bumps in certain sectors but I think real estate will be strong through 2030. 

Once the interest rates dip, I think we’ll see a new generation of wealth and investors in this market. Assets all go up over time – you just have to give it time. You need people around you who can support you but also poke holes in your thesis. There’s still room for the Canadian commercial market to run for the next 7-8 years. 

The 6 Pack: Getting to Know “Investorpreneur” Peter Leung

If money was no object, what would your dream car be? 

I’ve never really been a car guy. If I had to pick, it would be a custom Rolls Royce. 

As a big watch person, what is your dream watch? 

I was recently given the opportunity to meet the CEO of this company, Greubel Forsey, in Hong Kong and they just released a new watch five days ago. There are only 11 made in the world and the price tag is about $588,000 USD. 

Every watch I own has to go on the wrist. If you’re not getting wrist time, there’s no point. I see my watches as legacies to pass onto my kids. I’m a hoarder of real estate and watches. Every watch marks an anniversary of something. 

We work with a watch group here and at one point there were 60 of us in a room and we calculated that there was $40 million USD worth of watches in the room. Luckily this is one of the safest places in the world to have an expensive watch on your wrist. 

What is one book you recommended?

Never Split the Difference by Chris Voss. His book is also very good on Audible! 

What would your last meal be on death row? 

It would have to be hot pot. Part of my roots are in that business so I would go for a great hot pot meal with all of my friends. That would be a great way to celebrate life! 

What is your go-to karaoke song? 

I would go with Gangnam Style by PSY! The point of karaoke is to have a lot of fun. I would love to watch PSY in concert in Korea. 

What advice would you give to someone interested in investing in commercial real estate today? 

Have a very clear understanding of your strategy. A lot of people are buying just because they have the capital. But you want to identify why you’re buying and how you’ll be able to exit, refinance, redevelop, etc. Be very purposeful.