To ensure delivery, please add newsletter@bisnow.com to your address book, learn how
July 2, 2014
Why Apartment Investors Love The 'Burbs
Residential real estate investors are giving Metro Vancouver's suburbs a "warm embrace" of late, market analyst David Goodman tells us. (Like a grandmother or the sun at the beach.)
They're drawn to the larger lot sizes, unused densities and higher cap rates on offer in the hinterland. (Plus the lines at the bank are usually shorter.) Of the estimated 3,100 rental apartment buildings in Metro Vancouver, David tells us, 1,300 of them are located in suburban centres like Abbotsford and Surrey. "And it's these suburban areas that are getting all the activity [from investors] for the most part."
The recent $10.3M purchase by Calgary-based REIT Mainstreet Equity of Abby Glen Apartments, a 108-unit low-rise apartment complex in Abbotsford—is a case in point. This is right up Mainstreet's alley, David says of the deal, which closed in mid-May. The 1977-built apartment was sold by Prestigious Investment & Management, which acquired the property in 2009 for $8.5M. "Mainstreet likes going into lower-tier markets and taking buildings that are tired and revitalize them. So it's a perfect acquisition for them."
Enticing Tenants Into Older Offices
Speaking of elderly office buildings, look for landlords to offer incentives to entice tenants to move into mature office towers after an exodus of tenants for newer spaces. (They wanna show you they've still got it, no matter what those young whipper-snappers might say.) A new report from JLL Canada notes Vancouver will see 16% more Class-A inventory come to market by 2017, with planned buildings 60% pre-leased. In Toronto seven developments will inject 5M SF of new space into the downtown market by 2017, and Toronto tenants pre-leased in the new developments will give back over 300k SF. Landlords of existing buildings are responding to the competition, JLL president Brett Miller says, by "reevaluating rental rates and offering increased tenant inducements to secure early, long-term renewals with quality tenants."
Luxe Hub
Recent transactions on the retail front reflect a larger shift going on in the market, says CBRE SVP Mario Negris. L'Occitane took half of the former Bebe space at Robson and Burrard, Sketchers moved into the Robson space formerly occupied by Shifeon, and Christian Dior is moving into the Hotel Vancouver. “The luxury market is now clearly being defined in Vancouver as being on the Burrard and Alberni corridor,” Mario says. (You know where not to let your teenagers go alone with your credit cards.)
A Survival Strategy for Class-B
Landlords of lower-quality Class-B office buildings may well fear the deluge of Class-A space coming online over the next few years in markets like Vancouver and Toronto. But repurposing or repositioning lesser office spaces to lure specific, niche industries could be the secret to survival, says Curtis Scott, Collier's Vancouver-based market intelligence analyst. "It is a viable option for some landlords," he tells us, especially landlords looking to tap into the growing trend of organizations looking for creative spaces that spur collaboration. "But it's important to understand that it restricts that building's use to a specific industry."
YOU TELL US: Millennials and the 'Burbs
Millennials are ditching their cars for public transit, bikes, and walking and have more money to spend on rent (and non-prescription eyeglasses). But when they have get married and have families, many believe they'll head back to the 'burbs. So are today's urban developers over-relying on the tastes of Millennials who might not be in their projects 10 years from now? Tell us your thoughts by clicking the poll to the left, and make sure to read our special report on walkability in this week's National Real Estate Bisnow newsletter.
