B.C.’s Commercial Real Estate Boom

The real estate market in Vancouver continues to sizzle, but it’s not just condos and homes that are attracting interest. Within the Lower Mainland and beyond, the commercial market is hot too.
 

“An historic amount of capital is propelling Canadian commercial real estate into new territory,” notes the CBRE Group’s 2015 Canadian Market Outlook. “The commercial real-estate investment market is experiencing simultaneous maturation and expansion.”
 

Gaining momentum in the Greater Vancouver area are mixed-used developments, including those with an anchor tenant such as Walmart or London Drugs. The downtown core remains in demand—consider the recent sale of the Fairmont Hotel Vancouver—and it’s a trend that’s expected to continue with more tech companies setting up shop locally. 
 

Elsewhere in the province, meanwhile, a key trend in commercial real estate is large-scale projects in more remote communities that are set to grow as a result of LNG pipelines and the proposed Site C dam. Fort St. John, for instance, is an area where potential abounds. LFG Capital, a commercial mortgage brokerage company and a division of the LFG Group, recently financed an ambitious 150-acre mixed-use project in the northeastern town for Vancouver-based developer the Monark Group.
 

“The long-term prospects of Fort St. John are above-average,” says Sam Perera, a founding partner of the LFG Group of Companies. “We feel it’s the next big growth area outside the major urban markets. Major projects like Site C dam going forward are going to need infrastructure for people to work, live, eat and shop.” 
 

After noticing a gap when it came to B.C.’s mid-market companies accessing capital, LFG set out to help mid-size organizations and developers find and secure appropriate financing. “The market in general is underserviced in this sector,” says Ian G. Sebastian, LFG Capital’s vice president of real estate. “Many were finding difficulties sourcing deals with traditional real-estate mortgage brokers. We look at all primary commercial real-estate asset classes, from construction to office buildings to multitenant retail units to specialty assets such as farms, agriculture and seniors’ care homes,” he adds. 

Determining and achieving an optimal level of leverage is vital to successful commercial real estate financing. That’s where private lenders can provide clients with an advantage. They work with a range of lenders, including banks, credit unions, trust companies and pension funds, as well as private debt and equity firms.
 

Like residential mortgages, commercial mortgages offer a range of terms and amortization periods as well as flexibility to meet long-term financing needs. 
 

“In non-traditional, smaller markets, from a commercial-mortgage lending perspective, we find that senior banks and institutions aren’t able to provide high levels of leverage,” Perera says. “This reduces the overall return on equity. In such markets, alternative private lenders, while being more expensive, provide a level of leverage that maximizes profits. Even in core urban areas, a blend of traditional and non-traditional financing translates to an optimal return on equity.” 

Be it land acquisition and assembly, industrial or hospitality, the B.C. commercial real estate industry is booming.