Market Commentary
INVESTOR OPPORTUNITY UPDATE
January 22, 2017 | Posted by: Francine Tracey
Below is a copy of my January 2017 Newsletter. If you wish to subscribe to this newsletter please contact me.
AND NOW FOR THE NEWS.......RE-CAP of 2016
2016 was a very busy year and despite recent rule changes and provincial tax legislation in the residential market, commercial real estate continued to be hot through December. Foreign and new immigrant investors continue their search for quality commercial assets and are frequently outbidding Canadian entities, including institutional investors, in a quasi-auction style marketplace. I frequently hear the complaints from Canadian investors that Cap Rates are too skinny, however, I do believe that what we are seeing is more or less the new reality. There is cap rate pressure on quality real estate assets globally, and Canada, a favourite of offshore investors, will be no exception. The recent tightening of the rules in China for investing abroad, however, may upset this trend.
Developers Scrambling
For the last number of years, and certainly throughout 2016, developers have been scrambling for land deals, and despite recent changes to tax rules for foreign buyers, one cannot ignore the fact that Canadian immigration has consistently outpaced supply of new homes, and will continue to do so for the next number of years. The proposed changes to the Canadian Citizenship Act which will allow immigrants to apply earlier and more easily will only accelerate this problem. The Liberal government planned to welcome up to 305,000 new permanent residents in 2016, the highest projected immigration level in decades, and a 7 per cent increase on the 2015 plan. The 2017 targets are for similar numbers, and I can’t find any reports that they are going to slow these figures down anytime in the near future. With Trudeau’s new infrastructure plan forging ahead, and an ageing population draining pension plans, surely we need the tax base to support the new proposed debt levels.
Many Commercial Deals are done Off Market
The MLS system of marketing properties is a complete breakdown when it comes to commercial property sales. Demand for off-market opportunities has never been stronger and sellers seem to prefer this “exclusive and confidential” style of trading their properties. As such, I continue to develop relationships with potential sellers that “may” take an offer at any given moment. Here are my off-market deals done to date (2016):
28,000 SF Retail Strip Mall (2 acres land), Langley BC – SOLD
37,000 SF Industrial Buildings on just under 1 acre of land fronting one full city block, Clark Drive, Vancouver BC – SOLD
32,000 SF Office Building on .8 acre of land, Burnaby BC – UNDER CONTRACT
High Profile Confidential Development site, Fraser Valley BC – OFFER ACCEPTANCE PENDING
Current Commercial Real Estate Opportunities
In keeping with the above, I have or am developing relationships with sellers that are interested in taking offers on their properties. If you find you might see something on this list that compels you, please contact me.
$35,000,000 Industrial Development Site, 40 minutes from downtown Vancouver in high growth suburb
$15,000,000 Highrise Development Site 30 mins drive from Downtown Vancouver
$17,000,000 midrise fully renovated multifamily building offering 3.5-4.0% cap rate
$10-20,000,000 golf course in high growth suburb of Vancouver (40 mins drive to downtown). Valuation pending. A desirable site for strategically coercing out of OCP and I’ve recently learned a good strategy for this.
$34,000,000 Strip mall in high growth suburb of BC with quality tenants, and excellent redevelopment potential over 5-10 year horizon.
$19,000,000 multi-tenanted building on high traffic area of Richmond with good tenants and solid cash flow
$6 – 7,000,000 NEW townhouse development, Richmond BC. Developer willing to take offers on a plan, pending and subject to completion of project and lease-up of property.
$3,000,000 winery, Okanagan BC