Vancouver Commercial Real Estate Podcast

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October 5, 2022
VCREP #68: The 5 Best Cities to Invest In for 2023 with Frank O’Brien

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As summer comes to an end and we start the fall season, Western Investor is due to release their five best cities to invest in for 2023. This week, Cory and Matt welcome back Frank O'Brien from BIV Media Group to tell us about their top cities for commercial real estate in 2023. This year's list has a few VCREP favourites plus a couple of surprises, and not to mention the number one spot is not even in BC this year!

Frank also shares his opinion on the NDP's David Eby's new housing plan and how it could be setting us back and opening an even bigger opportunity for speculators. Frank never disappoints with his charismatic storytelling and insight. Tune in!

Who is Frank O’Brien?

I’m a longtime writer and editor but for the last few years, I’ve been the editor at Western Investor and a real estate contributor for Business in Vancouver. Western Investor is published across Western Canada and we’re going into our 38th year. It’s likely the largest commercial real estate paper in Canada.

NDP candidate for premier, David Eby, recently came out with his new housing plan. What are your thoughts on his plan?

Like many things with the NDP, they don’t really think things through. This is a knee-jerk reaction. It’s a sweeping policy that doesn’t feel well thought-out. My opinion is the policy is a gift to speculators, even though it’s billed as the exact opposite.

For example, if you’re buying a condo and it doesn’t allow rentals in a city with the highest rental rates in the country, you may look elsewhere. But if every condo building is forced to allow rentals, some end-users may leave but investors will come in. Prices could get up to $3500 for a rental.

Nobody is flipping houses in BC anymore. And since the speculation tax only lasts two years, you can get high rental income for two years and then sell the condo two years later and make money.

The NDP is planning to put up $500 million in funding to help groups, like non-profits, buy older rental buildings. So for investors who own these old buildings, you can’t lose – it’s a guaranteed sale!

The new buyers will then realize they can only raise rent by 1.5% but the building needs a new roof and new plumbing, plus property taxes are going up. And the investor who originally owned the building already got his money and can now move on to something more profitable.

Another part of the plan was allowing single family lots to have three houses on them. Pricing will go up 20-30% when single family lots are automatically zoned to have more properties on them.

Investors and speculators can thank David Eby. That’s my opinion on his plan.

On co-op housing in Vancouver:

There’s a lot of talk about co-ops in Vancouver, as if they guarantee affordable housing. But co-ops are actually becoming a speculator’s dream. The people in the co-op own the building and can sell it; 16 have sold in Vancouver recently for a huge profit. So co-ops are not permanent low-cost housing – they’re a way for a small group of people to make a lot of money on their real estate.

On the foreign buyers’ tax:

Foreign buyers have a lot of markets to play in outside of Vancouver. The second biggest foreign buyer of real estate in the US is Canada. The third largest landlord in Arizona is a mother from West Vancouver.

It’s so hypocritical and so provincial of us to have this foreign buyers’ tax. Imagine if you said there are no foreign buyers allowed in Paris? And if you have an apartment there you visit, you’re going to get taxed heavily. It’s backwards!

How has the Vancouver commercial real estate market been in the last six months?

In San Francisco, there’s talk that the entire downtown commercial market will collapse because no one is coming back to the office. They’re calling them “zombie buildings.” But it’s a different story in Vancouver.

Vancouver’s office market is red hot! We’re building and selling out entire strata buildings. The industrial market never stopped. I’m very confident in Vancouver.

Vancouver is an anomaly across North America. It’s wonderful right now but it’s hard to say if it will always be like this.

Why is Vancouver’s office market doing better than San Francisco’s?

Immigration is key. That’s what is fueling the tech firms up here. All of the big tech companies are moving up here because of the great talent we can attract. We’re hungry for immigration. Young tech people want to move to Canada because they think it’s safer and there are more opportunities.

But it’s not consistent across Vancouver. Yaletown has huge vacancy problems right now because there are lots of B buildings there. B buildings are older but companies want the newer Class A and AAA buildings with all the amenities. Those AAA places are downtown or in the suburbs.

Let’s talk about Western Investor’s upcoming list of the top five best cities to invest in for 2023. What is #5?

Number five is Nanaimo. Land is selling there for $3 million per acre. So many people from across Canada are moving to Nanaimo; it’s a hot market. Retail is big in Nanaimo too. They have recession-resistant employers like the government, hospitals and universities. Those employees are well paid and they aren’t going anywhere.

The industrial real estate in Nanaimo is expanding as people get priced out of Victoria. Nanaimo has quite a bit of land available and there’s lots of activity happening, including a $1 million expansion in their container port. It helps take the pressure off of Vancouver’s port.

What comes in at #4 on the top five best cities to invest in for 2023?

Penticton and the South Okanagan are #4 on the list.

Greed is killing Kelowna – there is no reason older homes should be over $1 million in Kelowna. So the prices are going to come down eventually and it’s expensive to build there. You can get permits quickly but there are so many fees involved. Plus, a lot of the land is agricultural land reserve.

Compared to Kelowna, the prices in Penticton are a lot lower, it’s closer to Vancouver and there are two lakes, instead of one. Waterfront homes are big in the South Okanagan – there’s great supply and it’s a wonderful recreational market. There is a lot of waterfront acreage and prices are down 13% from last year.

What is the third best city to invest in for 2023?

Number three is Bamfield on Vancouver Island. There’s now a paved road from Bamfield to Port Alberni; it will be officially complete in early 2023. The land is freehold, there are beautiful beaches and it’s still cheap.

Land and home prices have shot up 70% and people are calling Bamfield the next Tofino. It’s the last ground floor, oceanfront opportunity in BC; it’s going to be huge. You have to get in now.

What is #2 on the list of top five cities to invest in for 2023?

The second best city to invest in for 2023 is East Vancouver. East Vancouver is the future. With the new skytrain lines coming in, it’s going to make a huge change. You also have the new St. Paul’s Hospital coming up with a 17 acre, state of the art medical campus. The False Creek Flats area is also coming up and selling fast.

Detached houses in East Vancouver are half the price that they are on the West Side. It’s cheaper to buy in East Vancouver than it is to buy on the Northshore, Burnaby and Richmond. There’s no reason for that.

The new density rules along the Broadway corridor will increase investment opportunities in East Van. If an investor can’t make money in East Vancouver, they should find a new job.

What is the top city to invest in for 2023?

Calgary is the number one city to invest in for 2023! Calgary is eating Vancouver’s lunch. A large manufacturing plant is being built there and is hiring 2600 people. Even with a 30% vacancy rate in office space, Calgary has more office space leased than Vancouver. A big high tech company came into Calgary recently and will be hiring 1000 people.

There are no rent controls in Alberta but you can buy a condo for just $165,000. There are lots of downtown condos for less than $200,000 but the rental rates are similar to Vancouver. The average price on the west side of Vancouver is $900,000 for a condo.

People are still shy about Calgary, which is great for investors. Get in now!

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Vancouver Commercial Real Estate Podcast

For all the curious minds interested in commercial real estate investing, grab a coffee and pull up a chair because we have exclusive stories and tips from commercial real estate brokers, investors, developers, economists, urban planners, and everyone in-between. From the successes and failures to the motivations and lessons learned, the Vancouver Commercial Real Estate Podcast is your insight into commercial real estate in Vancouver, Victoria, Kelowna, and beyond.

What's the best real estate market to invest in? What are the commercial real estate asset classes and property types? Hosted by Cory Wright, founder of William Wright Commercial, and co-hosts Adam and Matt Scalena of the Vancouver Real Estate Podcast, our podcast opens the door to real estate investing for everyone from beginner investors to experienced real estate professionals. New episodes are released every Tuesday. Follow the Vancouver Commercial Real Estate Podcast on Apple Podcasts, Spotify, Google Podcasts, or your favourite streaming platforms.

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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.