North Shore Report Spring 2008
Investment Market Overview A healthy demand for commercial real estate persists, despite current credit woes. Western Canada led by Alberta and British Columbia continues to attract a disproportionate amount of investor interest as the western economies benefit from continued high energy and commodity prices. We anticipate strong demand and tight supply for investment grade assets will hold true throughout 2008, particularly in Metro Vancouver. Recent reductions in the Bank of Canadaâ€™s key interest rate, coupled with modest real inflation numbers and a strong local economy will provide underlying support for similar capitalization values that prevailed in 2007. A US recession, which is expected, will certainly dampen commodity prices and negatively affect BCâ€™s economy somewhat through 2008 and into 2009. The availability of capital, while lenders increase their spreads and tighten their underwriting parameters, has become the biggest challenge to overcome. The result of this credit tightening is causing capitalization rates to increase in the range of 75 to 100 basis points as deals become more difficult to finance. Economic Overview British Columbiaâ€™s economy continued to expand last year, with domestic demand leading the charge. Employment grew 3.2 per cent, improving on the 3.1 per cent growth rate posted in 2006. Employment growth exceeded the growth in the labour force, resulting in a lower 4.2 per cent average unemployment rate during the year. Housing starts and retail sales were up significantly, fueled by healthy income growth and low unemployment. However, merchandise exports suffered from lower demand from the United States, resulting in falling lumber and natural gas prices.
Meanwhile, mining exploration reached an all-time high of nearly $416 million for 2007, an increase in investment of 57 per cent over 2006 levels. The sale of oil and gas rights in B.C. exceeded $1 billion in 2007, shattering the previous record of $647 million set in 2003. Construction activity was up 8.4% in 2007, with the total value of building permits issued in B.C. standing at $12.55 billion, driven primarily by an increase in residential building activity.
Average capitalization rate (Metro Vancouver)
BC Economic Growth Forecast 4.0% 3.5% 3.0% 2.5% 2.0% 1.5%
(604) 630 3396 Matt.Thomas@dtzbarnicke.com
(604) 630 3393 Rand.Thomson@dtzbarnicke.com
DTZ Barnicke Vancouver Limited
800 - 475 West Georgia Street Vancouver, BC, Canada V6B 4M9 Tel: (604) 684 7117 Fax: (604) 684 1017
Although the information contained within is from sources believed to be reliable, no warranty or representation is made as to its accuracy being subject to errors, omissions, conditions, prior lease, withdrawal or other changes without notice and same should not be relied upon without independent verification. DTZ Barnicke Vancouver Limited, Real Estate Brokerage 6/2008
Spring 2008 Investment in non-residential construction also continued to increase, led by institutional and commercial building activity. One segment that saw a decline in permit activity was the industrial sector, which recorded a decrease in total value of permits issued of almost $35 million in 2007. Further confirmation of the buoyant British Columbia economy is the provincial government’s Major Project Inventory, which tracks large scale construction projects and posted its 18th consecutive quarter of inventory growth in December.
North Shore Outlook In 2008, expect demand for quality investment product to remain strong on the North Shore. Real estate’s continued capital appreciation will drive the market and property with development potential will be the highest in demand. Capitalization rates will increase modestly to average 6.0% to 7.0%. The US recession is expected to have minimal real impact on the North Shore investment market and will filter out only the smaller investors. We would be pleased to discuss the market outlook with you.
North Vancouver Investment Market
Average price per square foot (Metro Vancouver)
The office sector of the commercial market on the North Shore comprises of 1,352,250 square feet of rentable area, or approximately 3.4% of the total Metro Vancouver market. Four noteworthy investment sales in 2007 were: Harbourside Centre Phases I & II at 38 Fell Avenue/788 Harbourside Drive sold at an adjusted price of $18,418,000.00 or $255 per square feet, yielding a cap rate of 5.4%; The Esplanade Centre at 260 West Esplanade sold for $21,406,500.00 or $204 per square foot, yielding a cap rate of 6.0%; ‘Taylor’s Crossing’ at 1025 Marine Drive sold for $18,000,000.00 yielding a 6.96% capitalization rate. The Westmar building located at 233 West 1st Street sold for $10,400,000 at a 5.9% capitalization rate. The transaction was a share transfer and equates to $275 per square foot. Sector:
Recent DTZ Barnicke Sales 1025 Marine Drive, NV
276 East 1st Street, NV Type:
11,280 sq ft
1460 - 1462 Columbia Street, NV
1525 Columbia Street, NV Type:
6,072 sq ft
6,102 sq ft
1,075 sq ft
1520 Richmond Street, NV
204 - 814 West 15th Street, NV
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