Vancouver Commercial Real Estate Podcast

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September 15, 2021
VCREP #19: North America’s Best Market Just Keeps Getting Better with Mike Mackay

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North America’s best industrial market just keeps getting better and better as Strand looks to add 1,000,000 SQFT to Vancouver Island’s industrial driving force, Langford, BC.

This week, Adam and Cory welcome Strand Development’s President Mike Mackay to talk about everything Langford and the exciting projects in Strand’s pipeline. With the recent acquisition of the former Langford Speedway, which encompasses over 80 acres of prime development land, the growth and excitement of the Greater Vancouver Island industrial market just keeps growing.

A multi-phase project set to launch this year, Strand (in partnership with Bastion Developments) will add to one of North America’s most desired industrial markets, further attracting local, national, and international tenants to Vancouver Island. Investors alike have been buying up Victoria, Colwood, Esquimalt, and Langford for the better part of the last three years, so don’t miss your chance to hear about the future of one of the best marketplaces on the planet.

Please tell us about yourself.

I’m the President of Strand and have been in the industry for over 15 years. I started interning with various developers, worked my way up with other businesses, and then built out the development arm of Strand. Our development is primarily focused in the Lower Mainland and BC.

Why real estate?

It’s in my blood. My dad has been in the business since before I was born. I started as an intern for Mark Chandler which was a great exposure to the business and what not to do.

Can you tell us about the history of Strand?

It was formed 45 years ago by my father, John, and was initially focused on financing developers and repositioning rentals in Canada and the US. About seven years ago, I formed the development arm of Strand. It’s been a big value-add for the other side of the Strand office and it’s been fun to partner with my dad.

Can you tell us more about Strand’s Langford acquisition?

Victoria is experiencing a big transformation with huge population and job growth. To accommodate that growth, we realized the current industrial spaces don’t meet modern needs. The value proposition of relocating to Victoria is there for a lot of people. A lot of people are moving to Victoria from Ontario, which will lead to a lot of new businesses coming in.

Where else could we find 80 acres of developable industrial land? That’s what we have in Langford. We’ve been looking for something like this for the last five years. There were some red flags because of the speedway but working with the city, we were able to unlock a really great industrial space. We’re hoping it’ll be Victoria’s major business park.

What have been some of the challenges with this site?

There’s a large protection area running through the site. I think it’s a good thing to have that green space but it is a challenge with soil issues and environmental concerns.

It’s a large amount of inventory so differentiation is a big focus of ours. We’re confident we have a great piece of land and we’ll be able to create a cohesive business park. We’re prioritizing local and regional users.

Does the Vancouver Island market support a business park of that size? What is the response like from companies outside of Vancouver Island?

I think we’ll have a mix of local, regional and national organizations that want to have a presence here. We’ve had early interest from regional and national groups, some in the ecommerce space. We haven’t brought the project to the market in a widespread way but the early interest has been promising. I think we’ll have a nice mix.

What’s the overall vision for the site?

I think it’s going to be mainly small bays and mid-size bays, and then larger bays in the second phase. We have great flexibility right now and there’s time for users to come along and change their bay to suit their needs. There’s also a parcel of residential land we’ll likely be delivering 50 single-family lots on. That goes along with space we’ve dedicated to the city for a community centre and some park space. There may also be film studio space as there’s a lot of demand for that.

What role does Langford play in the region?

Langford has led the charge in BC, and maybe even in Canada, in acknowledging this housing crisis we are living through. Supply is the answer and the Langford council knows that. They’ve done a phenomenal job of attracting new businesses and population to their city.

There’s a lot of new rental properties in Langford. We’re bullish on ground-oriented product in Langford and we’re actively hunting for more townhome sites. All of that housing has built a demand for businesses such as landscaping, building materials, ecommerce and film development.

Will Langford be an industrial hub for the island?

I think it’s very well-positioned to be the industrial hub for the island. Whether you’re going up island or coming down, the perfect stop is Langford. It’s one of the few areas that has enough land to build a master plan around industrial space. It’s a unique opportunity to have 80 acres close to the highway, close to Victoria and close to roads up island. If you go to the other side of the Malahat, you run the risk of being farther from the core and subject to bad weather conditions that halt deliveries.

The vacancy rate is 0.88 in the CRD (Capital Regional District) right now. We have about a million square feet of industrial space on our parcel. Absorption is around 100,000 feet per year. So I’m wondering if that’s due to low inventory or if that’s consistent with demand? I think it’s a supply side issue but we’ll see.

Do you worry that you’ll be bringing too much space to this market?

We are concerned about absorption and the competitive landscape in any market we’re in. But I don’t think the Victoria market stands to be over-supplied in the near term. If we can get our product to market quickly and in advance of other competitor product, I think we can capitalize on the surplus of demand that currently exists. There is significant population growth in Victoria and with that, an increased demand on businesses.

The Lower Mainland has almost no availability for industrial space right now. So users are forced to consider Vancouver Island and will realize that ferry isn’t so bad. Calgary is too far so we’re running out of options.

Are there other areas that Strand is excited about outside of Langford?

On the residential side, we’re very bullish on Coquitlam. It’s a great municipality to do business with and we have a few projects coming up there. We’d love to work in the other tri-cities, Port Moody and Port Coquitlam, as well as Burnaby and New West. I think you’re seeing more growth in those secondary markets. We love being situated in energy centres with transit connections.

Have you been surprised by demand in the last 18 months?

Considering the conversations we were having last April, it is quite shocking to see where we’re at today. This proves that we’re a region being driven by local demand. The market is fuelled by people who live here, who work here and who want to be here for the long term. The strength of our market has been very surprising.

How has covid affected your business? What changes have been made?

Digitization and the ability to work from wherever you are without losing productivity has been huge. I don’t think the hybrid or remote model is sustainable for us because we’re a very collaborative company. We need to be physically in the same space. But we recognize our team is very capable. With Strand Cares, we want to encourage people to do a few remote days per month if that’s how they work best.

Micro-agility is something we’re allowing more formally; we’ve always told people to take care of themselves and not use up a vacation day to go to the doctor’s office. A focus on wellness has been more front and centre for everyone. We have deployed a $1000/year allowance for people to contribute towards wellness. We want to support our people to be the best form of themselves that they can be. Our team has shone throughout this pandemic so we want to offer that flexibility and support them.

Digitizing our processes has been huge. We’ve loved seeing inspectors do their work over FaceTime instead of taking two days to go out to a site. We went digital with our sales right from the beginning.

Any predictions for the market in the last quarter of 2021 and into 2022?

I think we’ll continue to see the strength that we’ve seen in the first half of 2021. Rates may start to pick up. Debating inflation is a fool’s errand; it happens when you don’t expect it.

We have a supply-demand imbalance in everything from multi-family to industrial. Office may have some oversupply but I think it’ll be a resilient asset class as we see new immigration and higher paying jobs come to Vancouver.

If there was ever a time for things to plateau, it may take place in the second half of 2022, but I see continued strength overall. I don’t see a downturn, a recession or a deterioration in values. I think it’ll still be a hot market but maybe not as hot as it is right now – which might be a good thing.

On the industrial side, we are too land constrained. We can’t grow our economy if we don’t have the space, so users will go elsewhere. It’s an endemic problem across Canada but we’re particularly challenged here due to geography.

What advice do you have for people trying to get into commercial real estate?

Don’t assume that an email or cold call will go unanswered. Young people who are just starting out reach out to me all the time and I do take a lot of pleasure in engaging with those people. So reach out and take the first step. Ask those experts, “If you were me, what would you do?” Don’t solicit for a job but certainly leave your resume on the way out.

For some people, it makes sense to go back to school and get some letters next to their name. For others, they should go to a brokerage and gain experience in seeing what factors into the buying decisions. And then there’s the way I did it where I was in front of those big players in development until I got lucky and one offered me a job.

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This communication is not intended to cause or induce breach of an existing agency agreement. E&OE: All information contained herein is from sources deemed reliable, and have no reason to doubt its accuracy; however, no guarantee or responsibility is assumed thereof, and it shall not form any part of future contracts. Properties are submitted subject to errors and omissions and all information should be carefully verified. All measurements quoted herein are approximate.