Vancouver Commercial Real Estate Podcast

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November 9, 2022
VCREP #73: Why You Should Invest in the Lower Mainland’s New Downtown with Brad Howard

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As we have seen during the past couple of years, more and more people are moving into the Fraser Valley region as the home prices continue to increase in this market. These people need a place to work and grow their business.

This week, Cory and Adam welcome Brad Howard, Director of Development at PCI Developments, to discuss the Lower Mainland's second downtown in Surrey. PCI Developments is one of BC's largest and most respected developers since the early 80s, and we are fortunate to have Brad with us this week to tell us about one of their exciting and recently completed projects, the King George Hub.

The King George Hub is a massive investment into a transit-oriented community where residents can live, work, and shop. Next to Surrey’s King George Skytain Station, this new development offers everything.

Brad unpacks the success of the project, why it is desperately needed in Surrey, and the rapidly growing downtown district in Surrey Central. Brad provides his insight to this exciting and rapidly growing market and why more of this is needed within the Surrey and Fraser Valley market. Tune in!

Who is Brad Howard?

I was born, raised and still live on the North Shore and did post-secondary studies at BCIT and UBC. I went into the workforce as a consultant and then started working for a pension fund. In 2006, I moved over to PCI to work as a project manager. I’ve been here ever since!

I started studying engineering at BCIT but realized I wanted a change. I found a new interest in the economics of construction and development. That led me to UBC to do a urban land diploma in real estate.

Can you tell us more about PCI Group?

PCI is a privately owned real estate developer and we’ve been in business since 1982. We’re known as merchant developers; we purchase land to create value through redevelopment or repositioning and then we sell and move onto the next project. We don’t specialize in any particular asset type and adjust to changing market conditions. We’ve recently started to retain ownership of some of our projects.

Crossroads at Cambie and Broadway and Infinity on Robson are some of our most popular past projects. The King George Hub is one of our big upcoming projects that we’re really excited about. We also have a big project on Great Northern Way by VCC Clark, sites in Port Moody, and sites in Vancouver and Surrey that we’re excited about.

Let’s talk about PCI’s King George Hub project.

The property came up for sale in 2011 and we envisioned creating a similar project to the one we developed at Marine Gateway. It would be a bustling, vibrant, transit-oriented community.

King George Hub is a five phase master plan community with 365,000 square feet of office space. Half of that space is taken up by the Coast Capital building. There is 165,000 square feet of ground-oriented retail space taken up by places like Save-On Foods, Rexall, Tim Hortons, and other restaurants and shops.

There are 1600 condominiums which are all sold out; half are lived in and the other half are under construction, ready for occupancy in 2025. There’s nearly 800 rental homes; similarly half are lived in and the other half will be delivered in 2026.

How have the last few years through covid impacted the office market in Surrey?

The future of office space is anyone’s guess right now. I think the hybrid scenario will be here to stay in some form or another. That curbs demand for space but there is still a desire for people to be in the office some of the time.

I am on the Board of Directors for Downtown Surrey’s BIA so I’m biased, but I truly believe the Lower Mainland region needs a second central business district. It doesn’t make sense to continue office growth in downtown Vancouver on a peninsula. Downtown Surrey is central, has great transit connections, and is close to the US border. I believe the future of office space in the Fraser Valley is in downtown Surrey.

As employers try to lure workers back to the office, I think investment in office space and amenities will be so important. Landlords who put an emphasis on those things will have a leg up.

Will PCI continue to look for opportunities in Surrey and the Fraser Valley?

We believe in the Fraser Valley region and where it’s going in terms of growth. We’re selective when it comes to sites. We’re very keen on the Fraser Valley and sites that are well-supported by transit.

Can you tell us more about PCI’s projects in the Hastings area and on Great Northern Way?

Great Northern Way is a location we’re really excited about. We completed a project there in 2017 and have new projects in the works. Our vision is a transit-oriented community with market rental housing, affordable rental housing, vibrant and bustling retail, office opportunities, and a high quality public realm. I can’t share everything about it yet but we’re hoping to get our rezoning application into the city by early 2023.

On East Hastings, we’re active in the area by Boundary Road. We have two market rental projects under construction and a third one that is under approval.

How do you think the new Vancouver mayor, Ken Sim, will affect the development community?

I personally don’t follow Vancouver politics as much as I do other municipalities. We’re hopeful that some of the challenges of the previous council that slowed down development processes can be resolved. We hope this council sees a need to deliver housing and rental projects given the state of the market and our affordability crisis.

How will the new mayor in Surrey affect the development community?

There’s a general consensus that we need a second downtown in the region – that being downtown Surrey – and I don’t see the new mayor or council changing that vision. So I think it’s business as usual. There’s a real desire to see more growth in the downtown area, particularly in office space.

What challenges are developers facing right now?

It’s a perfect storm for developers with rising construction, labour and material costs. A lot of projects don’t pencil out given these rising costs. We’re hoping costs will stabilize and that there will be a price reduction next year. We may see some projects shelved or postponed due to these costs. A number of large public projects like the new St. Paul’s Hospital and new skytrain lines are eating up demand for labour.

Has the impact of our current economic environment changed your strategy at PCI?

We’re certainly watching the market. Inflation is high and we are in an interest rate environment we haven’t seen in a very long time. So those things have the ability to erode buying power. We currently don’t have any projects that are exposed to the condo market. We have some standing inventory on the office side that we’re working through but we’re confident we’ll get through it.

What markets is PCI Group most excited about?

We like urban locations within Metro Vancouver that are highly supported by transit. That’s where we’ll be focusing going forward.

What happens in commercial real estate in the next 1-3 years?

I think some investors will be pushed to the sideline, which might curb demand and cause cap rates to inch up. But there is so much demand that I don’t think we’ll see a complete slowdown. Vancouver’s economy has always been diverse and that will drive growth. We’re a top city for tech jobs and we need to house those people. There’s such a strong demand for real estate for both occupiers and investors in this city.

Unemployment is low, immigration is coming, tourism is rising – the fundamentals here are good. We are hearing about a looming recession but to me, it almost feels manufactured to deal with inflation. It’s not being caused by poor economic fundamentals. I’m hoping that once inflation gets in check, we’ll see a return to good times.

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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.