Article courtesy of Real Estate Board of Greater Vancouver, Commercial Market News, February 2012

The BCREA Commercial Leading Indicator (CLI) rose for the second consecutive quarter, advancing 1.1 points to an index level of 111. On a fourth-quarter over fourth-quarter basis, the CLI moved 1.6 per cent higher in 2011. While this is a marked slowing from the 5.2 percent surge in 2010, the index picked up considerable momentum in the third and fourth quarter of the year, more than making up for a weak first half of 2011.


The trend in the CLI turned up slightly as early softness in economic activity was smoothed out by a stronger second half of the year. This change in trend indicates a positive economic environment for the BC commercial real estate sector in 2012. “Improving economic data provided a strong tailwind for the CLI in the second half of 2011,” said Brendon Ogmundson, BCREA Economist. “However, growing anxiety surrounding the global economy could constrain the economic environment for commercial real estate this year.”The full BCREA Commercial Leading Indicator index is available at: www.bcrea.bc.ca/docs/economics-forecasts-and-presentations/clireport.pdf

Francine Tracey

604-961-6550

Vancouver  Office and Industrial News July 2012 – Source Colliers International News Service

 

Office:  Metro Vancouver Vacancy rates have inched marginally lower from 7.7 % to 7.6% during 2012 with net absorption this quarter at 51,000 square feet.   Downtown Vancouver vacancy rates remain low at 3.5%.  This is expected to change when HSBC moves into its new location. 

 

There are a number of developments under construction including 745 Thurlow, Telus Garden, and the MNP tower, which will be creating competition in this marketplace.

 

The market is steady at the moment, however landlords need to be aware of the impeding supply and be sure that their tenants are locked up before they go shopping for new terms including potentially significant inducements to move. 

 

When shopping for space, tenants are looking for green buildings, and amenities like bike lockers, showers and fitness facilities.

 

Industrial: Vancouver’s industrial market showed a slight decline in leasing activity.  Following a strong start to the year, the second quarter of 2012 saw vacancy rate move upwards from 3.8% to 4.0 %. 

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Reported by,


Audrey McKinnon

A group of Denman Street business owners are giving their landlady seven days to reconsider their disproportionately high rent or they may have to leave the building. They are requesting that she agree to fair lease rates and longer lease terms.

 

"We're fighting for our block," says Joseph Mireault, Eyeworx owner since 2007.

 

The business are located between 1110 and 1124 Denman Street. Landlady Elaine Owyang, who could not be reached for comment, charges from $78 per square foot to almost $120 per square foot, depending on the business, while market value in the area is $50-$65 per square foot.

 

"In my opinion that's way above market," says Colliers commercial realtor, Sherman Scott. He adds that more mindful landlords will charge a low enough price in order to keep long-term tenants. But Scott says that high rent is not the only factor of business failure. Inexperienced business operators might be tempted by Denman's high profile, but aren't prepared to run a business successfully.

 

The beach side block has three commercial spaces for lease. Roentgen, a clothing store, Qoola Yogurt & Fruit, and Cookies by George were all occupants. Qoola closed on September 25th "due to the incredibly high rent" according to the moving notice posted on their door.

 

Mireault, who says that the street has been labeled "Deadman Street," says that after rent and taxes, there's nothing left for business operators. "If tenants are working and the money that they're making only covers . . . property taxes, operating expenses, rent there's nothing left over for you . . . You're working for the landlord," says Mireault.

Falafel King, for instance, would have to sell close to 750 shawarmas a day to cover nearly $6,000 in rent plus operating costs for the 500-square-foot space.

 

Mark Kenna is the former owner of Obsessions, which previously occupied the corner building two years ago before Roentgen. He says Owyang was unwilling to negotiate and wanted to increase rent by 30% before the Olympics while Kenna and his business partner had been struggling to keep their eight-year-old business afloat.

Obsessions went bankrupt as a result. "We should have gone to arbitration for it, but we just had so much on our plate," he said. Nobody in the building has gone to arbitration yet, which is the primary legal recourse available to commercial tenants in this situation.

 

"When she turns on you, she turns on you," said Kenna, adding that Owyang would refuse to speak English during a disagreement. He thinks the rental issues are not just a problem for that building alone and believes that the entire street suffers for it.

 

But Nariman Moshfeghi, Pit Stop owner, notes that many of his neighbouring businesses two blocks west have changed ownership up to eight times in the 14 years his store has been in business. He blames it on high rent and slow sales from late October through February. "Two to three months, you barely make your rent," Moshfeghi says.

 

"If it's cold nobody comes out." Robin Delany, who established his first Delany's Coffee on Denman Street over 18 years ago, says that the location is the most seasonal out of the five Delany's he has opened. He says the rent is also a challenge for all businesses in the area: "We're paying less than across the street, but we're all paying a lot."

 

"It's a big joke," says 17-year Delany's employee Barbara Wychopen. "How long will they last? We always ask that question.

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By Peter Mitham

www.biv.com

January 10–16, 2012

 

Burnaby’s year?


Colliers International says growing interest in suburban office space may bear fruit for landlords this year if numbers regarding the market’s standing relative to Vancouver are any indication.

 

Tours of office space last year were common occurrences, but few companies made the move.

 

“There’s very little movement that took place in 2011 when there was a lot of interest and a lot of tours,” Courtney Markle, research director for Colliers in Vancouver, said last week. “We predicted that they would make more movement than they have. It’s difficult to be accurate in that forecast.”

 

The numbers are clear, however: The per-square-foot net rent for triple-A space in downtown Vancouver averages $33.92, up 43.1% from five years ago. C-class space is up 48.7%. Rents in Burnaby,  meanwhile, are half what they are in Vancouver and have risen just 30% over the past five years.

 

“With the rare differential and limited spaces available, tenants are becoming frustrated and beginning to look elsewhere,” Colliers reported. “If there is ever a time when companies will consider a move from downtown to the suburbs, it will be over the next two to three years, until downtown new supply is delivered.”

 

Restless companies eyeing Burnaby include the back office departments of banks and financial institutions – HSBC plans to consolidate a portion of its staff at the Broadway Tech Centre later this year – as well as pension funds, foresters and miners.

 

Colliers reported that Metro Vancouver office vacancies ended the year at 7.4%. Downtown Vancouver

vacancies are running at 3.5%, while suburban vacancies are at 11%. All areas reported slight increases

in vacancies, Colliers said.

 

Whistler opportunities


BC Assessment reports that valuations on properties in Whistler have dropped an average of 15% from

a year ago, a phenomenon consistent with what Rob Palm, executive director of the Real Estate  Association of Whistler and a broker with the Whistler Real Estate Co., has seen on sold properties.

 

One-bedroom properties are now available from about $295,000, whereas a year ago the starting price

would have been $350,000. Similarly, a two-bedroom unit is available from $400,000, not the $475,000

buyers would have been looking at in 2010.

 

The drop has spurred sales activity, which has helped whittle down listings. There were 550 sales in 2011, up from 462 in 2010 and not far from the five-year average of 569 sales. Sales of condos and townhomes have been particularly strong, increasing 39% and 20%, respectively.

 

But anyone looking to the Olympics for an influence will come up empty. “I don’t think that the Olympic factor was as much of a factor as people thought it would be,” Palm said, while not discounting the role infrastructure such as highway improvements have played.

 

But the highway has merely helped traffic flow between Whistler and Vancouver, from whence 65% to 70% of buyers hail. And what they’re coming for is the value.

 

Many have cashed out of Vancouver and North Shore properties, Palm said, and used the proceeds to downsize in Vancouver while buying a primary residence in Whistler – often a chalet, townhome or two-bedroom apartment.

 

"We’re probably more affordable today than a lot of markets, and they’re starting to see the value,” Palm said of buyers.

 

Crowds, not clouds


Preparations for the release this spring of units in Canada House at the Village on False Creek (formerly known as Millennium Water) are under discussion. But if a new year underscores anything for the muchmaligned development, which remains a hot political potato, it’s the attraction the place had for revelers welcoming 2012.

 

A couple of hundred people lined the waterfront at midnight, watching fireworks spark off the Plaza of

Nations. A lone trumpeter played a sad reveille for the dawning year as party yachts steamed by.

 

While not apparent from West First Avenue, the activity was a vindication of marketer Bob Rennie’s proclamation last February that the cloud over the Olympic Village was finally lifting.

 

The village is a ghost town no more, with all but the presentation centre – or 91% – of commercial space leased to long-term tenants, and 70%, or 452 of the 644 available units sold.

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Commercial Bond Yields

 

Canada Mortgage Bond

Canada Housing 06/15/17*: 1.91%

Canada Housing 03/15/22: 2.60%

* denotes interpolated rate

 

Select Government of Canada Bonds

CAN 4.00 06/01/17: 1.58%

CAN 2.75 06/01/22: 2.16%

GOC Bonds are for reference purposes only

 

First National Floating

Insured Cost of Funds

1.15%

 

Bank Prime Rate

3.00%

 

Posted Rate

1 Year: 3.20%

2 Year: 3.55%

3 Year: 3.95%

4 Year: 4.64%

5 Year: 5.44%

 

Market Commentary 

The federal budget didn’t contain any surprises so the markets are taking it in stride.

 

Canadian GDP expanded slightly in January, but at a slower rate that in December. January saw a 0.1% increase, led by manufacturing. Financials also did well. The construction sector saw a 0.1% decline.

December 0.5% growth, revised upward from 0.4%.

 

In the U.S., personal income increased 0.2% in February while personal consumption expenditures climbed 0.8%. Real disposable income dropped 0.1%.

 

The confidence of American consumers improved in March. The Reuters/U of M Index climbed nearly 1 point to 76.2, from 75.3 in February. While not optimistic, pessimism is fading in the face of the improving job market in the U.S.

 

And the Chicago Purchasing Managers Index dropped more than expected in March to 62.2%, down from 64% in February. Expectation had been for 63.6%. Production and new orders rose, but the new orders component decelerated to 63.3% in March from 69.2% in February. Employment fell near 8 percentage points and the prices paid component rose to the highest level since Aug. 2011. Readings over 50% indicate expansion.

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Commercial Bond Yields

 

Canada Mortgage Bond

Canada Housing 06/15/17*: 2.05%

Canada Housing 03/15/22: 2.74%

* denotes interpolated rate

 

 

Select Government of Canada Bonds

CAN 4.00 06/01/17: 1.68%

CAN 3.25 06/01/22: 2.27%

GOC Bonds are for reference purposes only

 

 

First National Floating

Insured Cost of Funds

1.15%

 

 

Bank Prime Rate

3.00%

 

 

Posted Rate

1 Year: 3.20%

2 Year: 3.55%

3 Year: 3.95%

4 Year: 4.64%

5 Year: 5.24%

 

 

Market Commentary 

Canadian inflation clocked in at a higher than expected 2.6% for January, led by food and fuel.  It’s the second monthly increase in a row.  The price of gasoline is up 2.6% from January and nearly 9% from a year ago.  Even with the volatile elements of food and energy removed, core inflation stepped-up two notches to 2.3%.

 

In the U.S., new home sales in February fell for the third straight month.  Prices, though, climbed to their highest level in 8 months.  February sales dropped a seasonally adjusted 1.6% last month to 313,000 homes.  The median price now stands at $233,700.  The numbers suggest builders are anticipating higher demand in the coming months.

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Commercial Bond Yields

 

Canada Mortgage Bond

Canada Housing 06/15/17*: 1.82%

Canada Housing 03/15/22: 2.55%

* denotes interpolated rate

 

Select Government of Canada Bonds

CAN 4.00 06/01/17: 1.50%

CAN 3.25 06/01/22: 2.16%

GOC Bonds are for reference purposes only

 

First National Floating

Insured Cost of Funds

1.14%

 

Bank Prime Rate

3.00%

 

Posted Rate

1 Year: 3.50%

2 Year: 3.55%

3 Year: 3.95%

4 Year: 4.64%

5 Year: 5.14%

 

Market Commentary 

Yields are up and so is Canada’s inflation rate.  The CPI was pushed higher in January by food and energy prices.  Last month’s consumer prices climbed 2.5% Y/Y, a slight increase from the 2.3% Y/Y posted in December.  Core inflation – excluding food and energy – came in at 1.6% Y/Y in January, again, a slight increase from 1.3% Y/Y in December.  Increased car prices are cited for the increase.

 

Inflation in the U.S. increased a seasonally adjusted 0.2% in January, for a 12 month, unadjusted rate of 2.9%.   Core inflation for 12 months stands at 2.3%.

 

Initial jobless claims in the U.S. dropped to a new cyclical low of 348K in the second week of February, nearly 20K below expectations. 

 

And Canada’s international securities transactions report indicates an on-going appetite for Canadian assets.  In December foreigners acquired $4.7B worth of securities, including $2.1B in bonds.  Foreigners purchased a total of $95.6B worth of Canadian securities in 2011, down from $117.4B in 2010.

 

Next week, look forward to Canadian Retail and wholesale trade numbers, U.S. existing home sales , Canadian Q4 corporate profits and American consumer sentiment.

 

Source - First National Commercial Financing

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Article courtesy of Real Estate Board of Greater Vancouver, Commercial Market News, February 2012


The BCREA Commercial Leading Indicator (CLI) rose for the second consecutive quarter, advancing 1.1 points to an index level of 111. On a fourth-quarter over fourth-quarter basis, the CLI moved 1.6 per cent higher in 2011. While this is a marked slowing from the 5.2 percent surge in 2010, the index picked up considerable momentum in the third and fourth quarter of the year, more than making up for a weak first half of 2011.


The trend in the CLI turned up slightly as early softness in economic activity was smoothed out by a stronger second half of the year. This change in trend indicates a positive economic environment for the BC commercial real estate sector in 2012. “Improving economic data provided a strong tailwind for the CLI in the second half of 2011,” said Brendon Ogmundson, BCREA Economist. “However, growing anxiety surrounding the global economy could constrain the economic environment for commercial real estate this year.”The full BCREA Commercial Leading Indicator index is available at: www.bcrea.bc.ca/docs/economics-forecasts-and-presentations/clireport.pdf

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