BC Business
Mark Twain’s famous suggestion to “buy land, they’re not making it anymore” resonates with anyone who has witnessed Metro Vancouver’s transformation from a laid-back West Coast retreat to a high-power international destination.
Land once so seemingly abundant is now precious, and when it’s procured, development assumes painstaking proportions in order to maximize usage—and profit; and in 2016 B.C. real estate insiders point to a host of issues that will influence the course of residential and commercial construction in the province.
“In no special order of importance, technology, environmental policies, affordability, housing form and tenure, and source and flow of foreign investment are the main issues that will have a huge impact moving forward,” says Richard Weir, executive vice president – real estate and development for Bosa Development.
Weir, who is also chairing the March 30 Vancouver Real Estate Forum, says these issues will be examined and debated extensively during the one-day event. “It’s an exciting time to be in real estate,” he says. “Each one of these issues has the potential to effect enormous change. For example, the growth of online shopping is forcing retailers to reconsider their brick and mortar presence, and it could well be that retail outlets of the future will have small retail space but include expanded shipping and receiving areas.”
Moreover, Weir points out that environmental considerations are already changing the physical landscape of the city, especially with the increasing number of smart buildings entering the market, and high-density, mixed-use communities being built around transportation hubs.
Affordability is arguably the biggest hot topic of discussion in Metro Vancouver, and Weir remarks that the cost of housing “is a crisis that will definitely impact our industry as we try to strike a balance between affordable housing and a productive industry.”
On the topic of housing form and tenure, Weir expains: “We all know about the controversy of single family home prices being far beyond the means of young families, but this raises the question, is multi-family housing suitable for these families? In Vancouver, the evidence clearly suggests that it is. Single family homes are indeed prohibitively expensive, but on the other hand families have more accommodation options than ever.”
Furthermore, discussions about foreign investment are crucial, says Weir, if only to generate more information about who is investing in what, and how this is influencing B.C. “There’s no question foreign investment has driven a lot of demand in our market, but we need to determine if it’s sustainable in the long-run,” he explains.
Tony Quattrin, vice chairman for CBRE Limited, is well aware of the offshore influence in his specialty of commercial brokerage. “According to our data, the average Asian investment in the total commercial market between 2010 to 2014 was about 15 per cent, and in 2015 it jumped to 39 per cent, which is significant,” he says.
It’s impossible to determine if that percentage will be maintained in the coming years, but Quattrin says it’s easy to understand why investors are attracted to Vancouver. “Despite its recent economic problems, China has staggering amounts of capital to invest, and like all good investors they cast around for the most secure and reliable places to invest their money. Canada is very attractive due to its political and economic stability, transparency in real estate dealings, and of course livability; and within Canada, Vancouver and Toronto are the most desirable cities in which to do business.” At the end of the day, however, Quattrin believes the edge still goes to Vancouver.
“To my mind, Vancouver has the edge over Toronto in terms of future potential, since B.C. overall will be leading the country in economic growth thanks to LNG, Site C Dam, port expansion and other mega projects—and of course our lifestyle benefits are known around the world.”
Given our plethora of positive attributes, Quattrin is frustrated by the seeming proliferation of newspaper headlines about impending real estate bubbles bursting and other calamitous developments in his chosen field. “It’s nothing new,” he says. “I’ve spent three decades giving talks and presentations to separate the fundamentals from the hype, and in assessing where we are and where we’re going in relation to other areas of Canada and the world, I’m honestly more bullish than ever about B.C.”
For example, while the rate of continued Asian investment in commercial real estate is unclear, countries such as China will continue to be vigorous players, “simply because getting their money invested is more important to them than yields, plus we’re an easy jurisdiction to get into,” says Quattrin. “And for the same reasons, we’ll also soon become a magnet for Iranian investors as relations between that country and the West normalize.”
He acknowledges that Vancouver’s commercial market has the lowest yields of any city in Canada. “But again, this is not a cause for concern, as the robust activity we’ve been enjoying clearly demonstrates. Property has always been expensive on the West Coast, hence the low yields, but the yields are still more attractive than returns in other sectors. In short, we’re a safe bet.”
Gloomy newspaper prognostications aside, Quattrin marvels at the dynamism of Vancouver’s commercial market. “We had seven new office buildings come on stream all at once in downtown Vancouver last year, and all of these facilities have entirely filled up. It’s difficult to add supply in Vancouver, because we are constrained by factors such as geography and the Agricultural Land Reserve. The bottom line is it’s likely that demand will continue to outpace supply in this part of Canada—an immutable, time-proven formula for successful business investment.”
As for the types of business driving growth, CBRE data reveals that 43 per cent of future office growth is tech or tech-related tenants. “That’s another thing we should be excited about: all this activity, at a time when two of our biggest economic drivers—forestry and mining—are in the tank,” says Quattrin. “Just imagine how good it will be when the resources industries rebound.”
While real estate trends are many, Gordon Harris is focused on just one. The internationally known urban planner is president and CEO of SFU Community Trust, overseeing the continued development of the award-winning UniverCity community adjacent to the Simon Fraser University mountain campus.
To date, UniverCity consists of over 1,800 homes and a rapidly growing town centre. “By this summer over 5,000 people will live here, with 60 per cent of that population having no affiliation with SFU at all,” he says. “Ultimately, our goal is to accommodate upwards of 10,000 people by 2023, by which point we hope to have moved beyond our current reputation as a model sustainable community and become an inspiration for many similar communities throughout Western Canada and beyond.”
Raising the bar for sustainable building practices is UniverCity’s hallmark: all new buildings have specific requirements to ensure that their energy performance exceeds the new national energy code. A low-carbon district energy system is also in place.
Absolutely no facet of the community, which first broke ground just over a dozen years ago, has been overlooked: the UniverCity Childcare project will be the first in Canada to meet the Living Building Challenge, which is widely considered the ultimate in green benchmarks. SFU Community Trust also refurbished an unused university building to create University Highlands Elementary School, which meets LEED Gold standards and includes energy and water efficiency upgrades.
Aside from its environmental benefits, the main point of UniverCity as far as Harris is concerned is that it is economically feasible. “For example, our Childcare Centre is designed to harvest more energy and water than it uses, and was built for 18 per cent below the cost norm under the code,” he says. “There’s nothing sophisticated in the materials or systems we use, we simply make the right choices—and as a result, UniverCity is both scalable and replicable.”
With the City of Vancouver considering Passive House standards and green building practices becoming steadily more prevalent in other jurisdictions, Harris thinks profitable sustainable development is becoming a significant facet of real estate development overall. “But we have to talk more about the issues that will spur growth in this regard, such as livability, regional economic development and our aging population,” he says. “The more we explore the challenges facing us as a society, the more we’ll realize that the solutions lie in the way UniverCity is currently evolving.”