Avison Young principal Bal Atwal: land values have outpaced property and income values.
- Rob Kruyt.
By Frank O’Brien
Commercial developers call it “dirt”, the plot of land that will support plans to add value by building office buildings, warehouses, shopping centres, hotels or rental apartment buildings.
But today in Metro Vancouver, the dirt is worth more than anything being built on it.
When Bal Atwal, a principal with commercial broker Avison Young sold the thriving Richport Town Centre in Richmond to investors from mainland China for $78.4 million last summer, he noted that the 5.4 acre retail site would have been worth as much if it was a vacant lot.
“It would have sold for a comparable price even without the existing improvements or the income it generates,” Atwal said. “Underlying land values have outpaced income values on property along or near virtually every major commercial corridor in Metro Vancouver.”
For all of 2014, Metro Vancouver land sales tallied $3 billion and accounted for half of all the money spent on all commercial and industrial properties combined – and the gap has widened into 2015. During the first quarter, dirt sales shot up 13.4 per cent from the same period last year and the dollar value rose 4.4 per cent to just over three-quarters of a billion dollars.
As a comparison, all of the office towers and shopping centre sales combined were worth less than half that, down nearly 1 per cent to $371 million. The value of all the industrial property sold in the first quarter, down 12.3 per cent from a year earlier to $248 million, was worth less than a month’s worth of land sales.
Aside from land, the only sector of the commercial property market to showing growth in dollar value is rental apartment buildings, most of them low-rise properties 40 to 50 years old. According to sales through the Land Title and Survey Authority of British Columbia, compiled by the Real Estate Board of Greater Vancouver, the value of such property rocketed 95.2 per cent in the first quarter, compared to a year earlier, to $231 million.
Realtors note that land and multi-family values are closely linked: investors bid up prices for commercial land in areas zoned or planned for higher-density residential development, especially near SkyTrain transit stations.
