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It's that time again, and just like last year, the team unveils their 5 best commercial investment markets for 2023. This week, Cory and Melisa welcome back Rod MacKay from William Wright Commercial's Vancouver office to roll out where you want to invest this year. The criteria is simple: these markets offer above average returns with the opportunity for a major increase in net operating income in the coming years, resulting in a big potential equity gain. We can't give away the best investment advice in the write-up, so you will have to listen to the episode to find out. Get your pens and notepads ready because Rod doesn't disappoint!
The word for 2023 is opportunity! Discover the best commercial real estate opportunities for you when we count down the 5 best commercial investment markets for 2023!
2023 is here! Are we seeing more interest in residential real estate this January?
We are feeling a bit of an uptick over the last few weeks. I think we’re cautiously optimistic about a good first quarter.
Who is Rod MacKay?
I was born and raised in Vancouver and have lived here my whole life. I ended up at William Wright Commercial after about seven years in the hospitality business. And now I’ve been here five years.
What is the criteria for selecting the top 5 commercial investment markets for 2023?
We chose markets where you have a great opportunity to get in now and where you’ll see a higher average return on your money in the foreseeable future. If a city isn’t on the list, it isn’t because it’s a bad market. It may just be more expensive to get into and have lower cap rates.
Let’s dive in! What’s #5 on the list?
The 5th commercial investment market for 2023 is Calgary. We’re going out of province! In the first quarter of 2022, Calgary had some massive office transactions. We saw a lot of markets tracking and investments rising in early 2022; there was a lot of growth in Calgary relative to other markets.
The cost of living in Calgary is low and they’ve done a great job backfilling their office market with the tech industry. The city is also looking to convert some of their office space into residential space. They’ve done a great job trying to diversify themselves and there are lots of opportunities in the downtown core.
The Class A office market in Calgary has a 7-8% vacancy rate, which is considered healthy and balanced. Years ago when that market had more vacancy, a lot of the Class B office market moved into Class A and absorbed those vacancies.
Calgary is a safe investment that will see slower growth, but is one to watch.
“Over the next five years, Calgary is going to be a great opportunity for people who hadn’t thought of Calgary in the past 10 years.”
There’s been a big push from the Alberta government to get people to move to Calgary and other parts of Alberta based on cost of living alone.
We don’t currently operate in Calgary or Alberta so don’t know the market as well as we do our BC markets. But we’ve been reading reports, following the market for years and hearing a lot of excitement around it.
What is #4 on the list of best commercial real estate markets for 2023?
Number four on the list is Abbotsford in the Fraser Valley. What we’re really looking at is the industrial market in Abbotsford.
At the end of 2022, it was announced that a new 140 acre industrial plot was just approved in Abbotsford. It will bring in over 9.4 million square feet of industrial real estate. Industrial space has been scarce across the Lower Mainland, so this will ease the burden, especially with Abbotsford being so close to the border.
“Abbotsford has a great opportunity to become a logistics hub. Having an industrial market in Abbotsford for companies that go up to the Interior, to Alberta or across the border will be huge.”
Abbotsford also has the airport, the university, and growing multi-family projects. There’s a lot in the Abbotsford and Chilliwack area to be excited about.
I don’t think we’ll get back to the high prices we saw during the pandemic when everyone was moving out to the Fraser Valley and interest rates were low. But there are still excellent opportunities for those in the Lower Mainland who want to buy where they know.
Abbotsford also has a high population and is so accessible. On the residential side, pricing has come down significantly from what it was at the peak. So there’s a lot of opportunities. A lot of people will be looking at Abbotsford as a hub in 2023!
What is #3 of the best commercial investment markets for 2023?
The third commercial market to invest in this year is Kamloops. We’re investing in Kamloops because it’s one of the fastest growing cities in Canada.
Traditionally, Kamloops was a logistics hub and known as the tournament capital of Canada. But now we’re seeing a lot of development, spurred on by affordability. A lot of people who got priced out of Kelowna and the surrounding areas are moving into Kamloops.
Prices have gone up and infrastructure is coming in. We’re seeing high demand and low vacancy in Kamloops. The multi-family asset class is a tremendous opportunity, as is the industrial asset class. As those markets grow, the office market will grow, even though office isn’t a big industry in Kamloops right now. It’s only going to get better.
“Kelowna has the greatest runway ahead of it. It may take a little longer, but if you get into the market now and play the medium to long term game, it will be a tremendous investment.”
A lot of people are asking about Kamloops who have never asked before. That’s an indication that the market is about to take off!
What is #2 on our list of best commercial investment markets?
The second best commercial investment market for 2023 is Kelowna, returning to our list from last year.
Population growth is a big factor in choosing our top five – if people are moving to the city, that means money is pouring into the city, which leads to more infrastructure and investments.
Kelowna is the fastest growing city in Canada, with a 14% population growth from 2016 to 2021. International immigration was slowed during covid so a lot of people are moving to Kelowna from BC and from Canada.
Kelowna has had a tremendous run, no questions asked. But Kelowna has land restrictions. As the population continues to come in, the city will have to keep growing.
UBC is building a massive new campus, big companies are making investments, towers are coming in and the city council is very forward-thinking. The climate is also amazing! Kelowna is no longer just supported by tourism – there’s real estate, construction, education, healthcare, etc.
We may be seeing a little pull-off right now, just because the run-up during covid was so big. But I think that will return. So right now you might be able to buy something in Kelowna you wouldn’t have been able to a year ago. And you may be paying a bit less.
“You have an opportunity to buy something in Kelowna now, at maybe a slight discount, knowing there’s a tremendous runway with that market. You might not have gotten in a year ago, but we think the market will return in a few years across all commercial asset classes.”
And the #1 best commercial investment market for 2023 is…
The best commercial investment market for 2023 is Nanaimo. Last year our number one pick was Victoria and this year we’re heading less than two hours away to Nanaimo. There has been a lot of buzz about Nanaimo recently!
There’s a huge investment coming into Nanaimo’s container port. That’s expected to bring over 1000 new jobs. The major employers in Nanaimo are recession-resistant: healthcare and education. We’re also seeing a lot of people moving to Nanaimo after being priced out of Victoria. Nanaimo is the third fastest growing city in Canada.
The fast ferry is also coming this summer, connecting Nanaimo to Vancouver in under an hour. That, plus the affordability of Nanaimo, will open it up. We also have a progressive mayor and council who are bringing in a new OCP to build out the downtown commercial street. A lot of projects are coming to fruition.
“This is your time to get into Nanaimo. This is your greatest opportunity to make money because you’re getting into a market with lower vacancy rates in most asset classes, great population growth, and a forward-thinking council.”
A lot of people from the mainland who never considered Nanaimo are now interested in investing there. This is your best bet to invest in 2023, as long as you can get the right price. With these smaller markets, you have to understand the local market and buy smart. Work with a professional who understands the local market.
To recap, the 5 best commercial investment markets for 2023 are:
And four out of the five have William Wright Commercial offices!
The 6 Pack: Getting to Know William Wright Commercial Agent, Rod MacKay
What is your new year’s resolution?
I prefer to have goals, rather than resolutions. But this year, I’ve signed up for a marathon on May 7th. Whether I make it or not, we’ll see!
What was the best Christmas gift you got this year?
My girlfriend got me a new watch. I had a FitBit before and thought I didn’t need anything better. But this new watch is amazing!
What’s a book you recommend to our listeners for 2023?
Continuing with my theme, I just finished a book called Never Finished by David Goggins. He’s an interesting guy! He mentions running ultramarathons in this book. It’s very impressive what he does both physically and mentally.
Imagine you’re on death row. What’s your last meal?
It’s going to be a 48 ounce, bone-in rib-eye with lots of mushrooms and asparagus, all well seasoned. Though 48 ounces might be a little big!
What are you binge watching?
I just finished The Lincoln Lawyer. I really enjoyed it!
Best advice for our listeners in 2023?
2023 is going to be a very different market than what we’ve seen in the last couple of years. You need to lean on people for advice. Call up your broker and see what they’re seeing so you can put your best foot forward.
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, YouTube Music, or your favourite streaming platforms.
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.
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