Commercial Real Estate

Office rents rise only slightly in Vancouver. They're not even the most expensive in Canada

Marke Andrews
Vancouver Sun
Friday, November 23, 2007

The cost of renting office space in downtown Vancouver climbed slightly during the past six months, and rose at a greater rate outside the downtown core. But the city still looks like a deal when compared with London, Moscow or Mumbai.

In a new report from CB Richard Ellis, the world's largest real estate services company, Vancouver was ranked the 52nd-most expensive city in the world to rent office space, and the third most expensive Canadian city, at $49.98 per square foot per year. This is up slightly from May, the last time the survey was done, when Vancouver ranked 57th at $49.46 per square foot.

The cost of doing business in Vancouver's suburbs, which includes areas within the city but outside the downtown core, rose at a higher rate. Vancouver suburbs ranked 99th on the list with a rental cost of $33.46 per square foot, up significantly from the May ranking of 119th and $28.86. (The numbers represent gross rents, and include net rents, taxes and operating costs.)

Chris Clibbon, senior research analyst at CB Richard Ellis's Vancouver office, said developments in the Broadway corridor and new office buildings opening in Vancouver's suburbs are the reasons for the spike.
"Rents on the Broadway corridor have increased quite a bit because the vacancy rate is even lower than downtown," said Clibbon, citing a 2.6-per-cent vacancy rate in the Broadway corridor, compared with Vancouver's record-low three-per-cent vacancy rate in the downtown core. "And in terms of new supply, there's nothing that will change the vacancy rate [in the Broadway corridor]."

Clibbon said that new office developments in Vancouver's outlying areas have raised the suburban costs, because new buildings generally have higher rents than older ones.

The most expensive place in the world to rent office space is the West End of London, England, at $326.67 psf, followed by Mumbai, India ($188.22), the City of London ($179.57) and Moscow ($179.55).

The most expensive Canadian city remains Calgary, ranked 34th in the world at $64 - virtually unchanged from May's 33rd ranking at $64.12 - followed by Toronto, 35th at $63.35. Other Canadian cities on the list of 170 are Edmonton (57th, $46), Ottawa (64th, $44.25), Calgary's suburbs (89th, $37.11), Montreal (94th, $35.84), Halifax (111th, $30.23), Toronto's suburbs (116th, $29.50), Montreal's suburbs (130th, $25.27), London, Ont. (135th, $24.53) and Waterloo (138th, $24.32).

Market Review

Home Prices Rise Modestly in Vancouver and Victoria.

Vancouver, BC – November 21, 2007.

British Columbia Real Estate Association (BCREA) reports residential sales volume on the Multiple Listing Service® (MLS®) in BC climbed 23.5 per cent to $3.40 billion in October, compared to the same month last year. Residential unit sales increased 12.8 per cent to 7,358 units during the same period. The average MLS® residential price hit $462,912, up 9.5 per cent from October 2006.

“While home sales continue at a brisk pace, prices in Vancouver and Victoria are climbing at a more moderate rate,” said Cameron Muir, BCREA Chief Economist. Compared to October 2006, the average sales price increased 7.8 per cent in both markets. Fraser Valley and Chilliwack prices climbed 6.2 and 6.3 per cent, respectively, during the same period. “Eroding affordability is providing less upward pressure on home prices in both Victoria and the Lower Mainland, as many first-time buyers no longer have the financial wherewithal to bid up prices,” added Muir.

In contrast to the South Coast’s major urban areas, home prices in the interior and northern markets continue a rapid ascent. “The Okanagan, Kamloops and Kootenay markets are benefiting from strong demand from retiree, investor and recreation buyers,” noted Muir. “Abundant natural amenities and relatively low prices are drawing considerable attention from empty nesters around the province and across the country.”

“Housing markets in the north that are receiving new investment in resource extraction and transportation are performing well,” added Muir. “However, sluggish US demand for softwood lumber is impacting housing demand in many communities.” The average sales price of a home in the BC Northern Real Estate Board area rose 11.3 per cent last month compared to October 2006. In the Northern Lights Real Estate Board area, the average home sales price climbed 18.5 per cent during the same period.

Construction Update

Major projects keep on growing, B.C.'s large construction plans increase for the 17th straight quarter.

Derrick Penner
Vancouver Sun
Wednesday, November 07, 2007

Builders and developers piled another $3.3 billion worth of planned large construction projects onto British Columbia's Major Projects Inventory between June and the end of September ballooning the list to $135.1 billion, the province said Tuesday.

There are now 843 projects on the list, which is compiled quarterly by the Ministry of Economic Development. Some 417 projects valued at $53.4 billion are already under construction. It is the 17th straight quarter the inventory has increased. The third-quarter list, for the three months ending Sept. 30, includes projects that have been announced but have since been put on hold, which stood at 33, the same number on hiatus at the end of the second quarter.
That compares with $40 billion worth of work underway from a list that totalled $109 billion at the same period a year ago.

Minister of Economic Development Colin Hansen said the inventory "is the best indicator of real, tangible [economic] activity for the years ahead." Hansen added that the size and time span of the inventory offers hope for the B.C. economy after the 2010 Olympics, although some economists predict a softening following the Games.
"Most of these projects take us well into the next decade," Hansen said.

Vancouver's Ritz Carlton Hotel and residential development on Georgia Street, at a $500 million value, was the biggest new project to start construction in the third quarter. Cloudworks Energy's $263-million run-of-river hydroelectric development is the next biggest piece of work to get underway.

Manley McLachlan, president of the B.C. Construction Association said the breadth of work available on the project list is comforting. The inventory isn't dominated by either residential building or industrial projects.
The fact it is growing, rather than shrinking "supports the observation that we've had for quite some time. To call this a boom now is almost a redundant comment."

However, while the inventory is evidence that high levels of construction are likely to continue for some time, which helps the skills-starved construction industry recruit new workers, its ballooning size provides its own problems.
"The real challenge though, is are we going to continue to be able to manage that growth over the long term," McLachlan said. "And I think the verdict is still out."

Some of the rising dollar value in the inventory list reflects the inflation in construction costs, McLachlan added, as high demand for buildings - and not jus in B.C. - drives up the prices for materials such as steel and concrete as well as labour. The fact that project developers continue to make plans for new buildings, McLachlan said, is hopeful evidence "that we haven't perhaps reached the breaking point where owners are saying 'this is way too much, we're going to delay our project until something changes.' "We haven't reached that point, and I don't know where that point is," although McLachlan said shortages of skilled workers have extended the schedules of some projects.

Hansen said he believes the growth in construction in B.C. is manageable. While construction costs are increasing, that growth hasn't had too deep an impact on B.C.'s overall inflation rate, which would be a bigger concern.
"Companies are reaching out and are finding workers," Hansen said, "and I see very few projects cancelled or delayed because of skill shortages."

The value of projects on hold dropped $1.9 billion in the third quarter to $9.6 billion.
The inventory compiles the list from public sources and tracks capital projects worth more than $20 million or more in the Lower Mainland south west region and $15 million or more elsewhere in the province.

PUTTIN' UP THE RITZ

At a projected cost of $500 million, the Ritz Carlton Hotel and Residential Development in downtown Vancouver is by far the largest project by dollar value started in B.C. in the July-September period. Here are the other new projects started that have costs estimated at $100 million or more:

Aquattro Residential Development, Vancouver Island: $350 million
NEPTUNE Canada Project, Vancouver Island: $300 million
Upper Harrison Hydroelectric Project: $263 million
Delsom Estates Residential Development, Delta: $250 million
Morgan Crossing Residential Village: $200 million
Canoe Mountain Resort Developments: $100 million
All other new projects: $370 million

Total $ value of all 18 new projects started in the July-September period: $2.333 billion

Source: B.C. Major Projects Inventory

Market Update

October housing sales consistent with record highs.

Vancouver, B.C. November 5, 2007.

The Real Estate Board of Greater Vancouver (REBGV) reports that total residential sales reached 3028 units in October 2007, an increase of 11.2 per cent compared to 2,722 sales in October 2006, and a 2.3 per cent decrease compared to the 3,099 units sold in October 2005.

Property listings remain relatively unchanged compared to last year’s levels, with 4,819 active listings at October month-end, compared to 4,862 last year.

“This is only the fourth time in 25 years that sales have surpassed the 3,000 mark in the month of October,” says REBGV president Brian Naphtali. “What we’re seeing is a buoyant market fueled by strong demand from both first-time and repeat buyers. “The economy is healthy,” Naphtali says. “There’s virtually no unemployment. Interest rates are steady. These are all factors affecting the continued strong demand for housing.”

According to Multiple Listings Service® (MLS®) data, sales of apartment properties increased by 17.4 per cent to 1,368 sales in October 2007 compared to 1,165 sales in October 2006. The benchmark price of an apartment property in Greater Vancouver, calculated by the MLSLink® Housing Price Index, is $371,418, up 11.4 per cent from one year ago.

Sales of attached properties increased by 11.7 per cent in October 2007 to 527 sales, compared to 472 sales in October 2006. The benchmark price of an attached unit is $454,645, up 10.8 per cent from a year ago. Sales of detached properties increased by 4.4 per cent in October 2007 to 1,133 sales, compared to 1,085 sales in October 2006. The benchmark price of a detached unit is $730,022, up 12.2 per cent from last year.

Bright spots in Greater Vancouver in October 2007 compared to October 2006:
DETACHED:
Burnaby up 14.5% .........................(95 units sold, up from 83)

Coquitlam up 31.9%....................... (124 units sold, up from 94)

Richmond up 20.4%....................... (136 units sold, up from 113)

Vancouver East up 11.6%................163 units sold, up from 146)

Vancouver West up 11.4% ............. (156 units sold, up from 140)

ATTACHED:

Burnaby up 24.1% ............................. (67 units sold, up from54)

Port Coquitlam up 62.5%.................... (26 units sold, up from 16)

Whistler/Pemberton up 100%.............. (22 units sold, up from 11)

APARTMENTS:
Burnaby up 25.4% ............................. (168 units sold, up from 134)

Coquitlam up 20.3%........................... (77 units sold, up from 64)

Maple Ridge/Pitt Meadows up 80% ..... (36 units sold, up from 20)

New Westminster up 21.1% ............... (92 units sold, up from 76)

Richmond up 47.1% .......................... (175 units sold, up from 119)
Vancouver West up 19.8%...................(479 units sold, up from 400)