Vancouver Commercial Real Estate Podcast

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December 7, 2022
VCREP #77: Vancouver’s Most Wanted Industrial Asset with Adam Mitchell

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Everyone is always looking for the next asset class to buy ahead of the curve, and we know what it is for 2023. This week, Cory and Melisa welcome Adam Mitchell of Low Tide Properties to discuss their latest project, Lab 29.

In the industrial asset class, you have sub-asset classes, such as cold storage, self-storage, data storage, and life sciences. On the show today, we are discussing what could be the most sought-after asset in Vancouver: industrial lab space.

Adam breaks down why Lab 29 helps with Vancouver demand for this asset. He also shares with us why Low Tide continues to invest in this sub-asset class and why it is in such high demand.

With the talent pool Vancouver has, international companies continue to look to Vancouver for future expansion, and this week’s episode will provide some great insight to what is next for commercial real estate in our great city.

Discover Vancouver’s most wanted asset class as Adam Mitchell of Low Tide Properties fills us in on Lab 29, the city’s next big life science building!

Who is Adam Mitchell?

I’ve been in the real estate industry for over 15 years, starting in mortgages with a commercial lender. I then transitioned over to asset management and development. I moved to Low Tide Properties just over four years ago as they were starting to expand rapidly. It was an evolution of their portfolio and I was happy to help set up the asset management side of things.

What buildings are part of Low Tide Properties’ portfolio?

Our most recognizable assets are over on Great Northern Way. We have 565 Great Northern Way, which is an office building by Emily Carr. The red tulip is pretty noticeable as you drive by.

We’ve consolidated a lot of property in areas such as Strathcona, Gastown and Kitsilano. We’re hyper-focused on neighbourhoods as part of our strategy. We go all in on specific neighbourhoods that we like in Vancouver and Seattle. We’re specifically working in downtown Seattle and into Bellevue and Kirkland.

We want to get a good understanding of a neighbourhood and make change in a meaningful way, rather than chase every asset class in every area.

Help us solve a mystery. At 565 Great Northern Way, is the red on the tulip the same shade as Lululemon red?

That is outside my area of expertise! I’m not sure if that colour of red was specifically mandated or not. I know that we did go through 15 iterations of what that building would look like – from a glass box to the red tulip you see today. The idea with the colour was to make it bold and something you can’t miss.

Everyone knows the industrial asset class has exploded lately and that there are lots of subclasses within that asset. Low Tide’s new project, Lab 29, is a much needed subclass of space in Vancouver. Can you tell us more about that? What is Lab 29?

Lab 29 is a development project we have into the city right now; we anticipate getting our development permit in Q1 of 2023. We spent a lot of time purposefully designing this building to function for the life science industry. That really impacts the design and plan of the project. We wanted to design it from the inside out, ensuring it was really functional for the end-user first, and then layer on the outside look and amenities.

Low Tide has operated a life science portfolio for over 8 years. Through that, we’ve developed an expertise in managing these types of buildings. We know the end-user needs to be able to rely on the building and trust that everything will perform as needed. To do that, we brought on the right personnel. We really value the relationship with our tenants so we can create a meaningful partnership with them.

Our Director of Property Management and Senior Building Operator have both taken certificate courses in running lab buildings. We want to drive home that service level for our tenants.

Because of the lack of lab space at scale in Vancouver, a lot of these life science companies get acquired by US companies and consolidated down to a US hub. All of those jobs would leave Vancouver because there wasn’t enough space for companies once they got to a certain size. After seeing that happen over and over again, we wanted to add to the ecosystem and dedicate a project to this sector. That’s how Lab 29 was born.

The property will only be two blocks away from the new St Paul’s Hospital, which will be a game changer for life science and healthcare industries in the city.

Lab 29 is a great way to provide that needed lab space in the city and leverage the new hospital project.

What type of tenants will be in Lab 29?

Generally, it’s a life science tenant who will run 70% of their space as labs and 30% as offices. The lab space is typically a lot of bench work and early stage development work. We’re expecting lots of therapeutic companies and front end research.

What other life science buildings and lab space does Low Tide Properties have?

Right beside Lab 29, we have another lab project with STEMCELL Technologies. 887 Great Northern Way is another project of ours where about 70% of the space is dedicated to labs. We also have another lab building on the Burrard Slopes.

In total, Low Tide Properties has about 300,000 square feet of lab space. With Lab 29, we will add another 230,000 square feet of lab space to Vancouver.

Why is now the right time for Lab 29? Why do we need more lab space and life science buildings in Vancouver?

From a macro standpoint, we believe the life science industry is coming out of a period of stable operations and is ready to expand. The speed at which these companies can do research and get products to market is increasing. There’s also a broader focus on wellness, health and longevity, so there’s more interest from the public.

On a market-specific level, these buildings are not cheap to build. There’s a lot of infrastructure that goes into it like higher ceilings, floors that can withstand heavier loads, etc. And building in Vancouver isn’t cheap! So making these lab and life science projects work from a pro forma standpoint is difficult; it’s much simpler and cheaper to just do a regular office building.

But that has changed over the last few years as we’ve seen a greater demand from these life science companies. Now the rental rates for lab space make it much more attractive. They’re still not easy buildings to manage, but the pro forma makes more sense.

Is Vancouver on the radar for life science companies? Similar to Vancouver becoming a tech hub, is Vancouver becoming a hub for labs and the life science industry?

Absolutely! That’s one of the key pieces for these companies. The access to the talent in Vancouver is unmatched. It’s much easier to access students coming right out of post-secondary and there’s strong immigration into Vancouver that increases the talent pool of the life science industry.

It’s also about 30% cheaper to employ someone in Canada than in the US, so that’s an attractive feature for life science companies wanting to set up in Vancouver. We’re seeing the same thing in the tech industry with Amazon and Microsoft coming to Vancouver. They get access to great talent at a bargain price.

If Lab 29 is successful, will you expand and create more lab space?

We will. We’re certainly committed to the life science space. We’ve built up our expertise and we believe in the macro-level strength of this industry. It’s a bit of a departure from our normal strategy where we focus on a specific neighbourhood, but it is a focus on a specific industry and type of commercial product. We also like to be nestled in the Great Northern Way area where we have quite a few properties.

What neighbourhoods in Vancouver are you excited about?

Within our portfolio, we work a lot in Gastown, Strathcona, Great Northern Way and the False Creek Flats, Mount Pleasant, and Kitsilano. All of those neighbourhoods are adjacent to the core; you won’t find us directly in the downtown core. It’s a different management style in the downtown core which is usually the playground for institutional capital.

We are long term thinkers when it comes to real estate. We believe these areas adjacent to the core will have a long term growth spurt. The city can’t extend further west, so it has to go east.

We focus on the macro trends of the broader area and then get more specific within each neighbourhood that we work. The macro trends tell us to go east and the specifics allow us to dig into what we like about each area. We implement a similar strategy in Seattle.

Does Low Tide plan to expand into Burnaby and the Fraser Valley?

Not right now. We’ve been very disciplined about staying in the city of Vancouver. We may look at other areas of Vancouver but we don’t have any plans to go outside the city. It’s hard because you do see these fantastic opportunities in Burnaby or Surrey. But we don’t want to spread ourselves too thin from an expertise standpoint.

We want to be a value-partner to our tenants and really understand how our properties and operations can help them. If we start looking at too many areas, we may lose that.

Where does the Greater Vancouver real estate market go from here?

I think we’re headed into a classic recession, which we haven’t had in some time. It feels like a groundshift in monetary quality, which we’re seeing with the rising interest rates to combat inflation. The norm is shifting.

We don’t view this as a temporary year of higher rates and then we’re back down to 2%. What people might need to accept is that the years of 2% interest rates actually were abnormal and that the 5-6% rates we’re seeing now are more normal. You have to adjust your expectations about the returns of real estate and your growth lens.

You’re going to have to be a good operator and run a sharp business, which is actually a return to normal after the last 10 years when everything was booming. So I see this time as a return to normal, rather than a departure.

What Low Tide projects do you have in the pipeline?

The next big thing for Low Tide is our South Flatz project, sitting in the southern part of the False Creek Flats. We own a number of properties in that area. We’re currently doing a lot of early stage design work and a lot of work with the city to create a complete community. We want to add a lot of residential, retail and job space to the area.

We’re partnered with PCI on these projects, who are probably the best transit-oriented developer in the Lower Mainland. With the Broadway Plan being approved, we’re on the path forward to getting something built in this area. Our vision is to create a world-class innovation district. We’re just at the beginning stages now, but we believe it has the right ingredients to become a vibrant neighbourhood.

The 6 Pack: Getting to Know VP of Asset Management and Development at Low Tide Properties, Adam Mitchell

What is your favourite bar or restaurant?

I’m going to go with Chambar. It’s just been so good for so long!

What is your last meal on death row?

It has to be Pacific salmon. I spend a lot of time in the summer fishing and I love being on the water. I love what the water can provide us. Over the last few months, I’ve transitioned and I’m a big air fryer guy now. It feels wrong not putting salmon on the barbeque but nothing beats the air fryer.

Who is your favourite singer or band?

It’s The Killers. I know it’s not exciting music but I really like a lot of their older stuff.

What are you binge watching?

Right now, it’s the second season of White Lotus. I enjoy a good dark comedy.

What is your favourite vacation spot?

Spain, specifically San Sebastian. My wife and I have been there three times. You get pockets of great weather and the food is absolutely amazing.

What’s your go-to karaoke song?

I’m going to go with something by the Red Hot Chili Peppers. You can get away with just screaming it and mask how bad of a singer you are. You can pull it off without exposing yourself too badly.


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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.