Here is Western Investor’s pick of the top four commercial real estate articles published this week.
Amazon on verge of closing two major office leases in Vancouver and Toronto – Financial Post
Amazon’s expansion in Vancouver indicates that a constricting downtown office vacancy rate is about to get even smaller. Amazon are staying mum, but the Financial Post is reporting the company will lease 147,000 square feet at 401 W Georgia St.
An Amazon spokesperson would not comment on pending details. “I don’t have anything to share with regard to new office spaces coming up in Toronto or Vancouver at the moment. I can tell you that we find exceptional talent in both cities and are growing! As of today we have over 100 open roles (job postings) in Toronto and over 300 open roles in Vancouver,” according to an emailed statement from the online giant on its growing presence in Canada.
Doug Stephens, the founder of Toronto-based retail Prophet, said the office expansion is inline with where he says Amazon is going in the Canadian marketplace — namely an increasingly dominant retail market share.
“I was just staying in a suburb of Seattle and the whole town is being transformed because they are just hiring like there is no tomorrow. There are cranes everywhere,” said Stephens, in reference to Amazon which will have an estimated 12 million square feet of office space in the Seattle area by 2020. “It makes Wal-Mart of the 1980s look small by comparison.”
As to the future of the retail giant in the Canadian e-commerce marketplace, he says Amazon’s share is already the equivalent of their next six rivals. “They are far and away outstripping anybody else in the Canadian marketplace,” said Stephens, noting while only about eight to nine per cent of the retail marketplace in Canada is online it is growing at a 15 per cent rate annually. “Even search is being impacted. We know 55 per cent of all product searches are going directly to Amazon. You can’t downplay the impact of Amazon on the marketplace.”
Moore noted Amazon’s presence is already huge in Canada, beyond its two latest pending office transactions. The company has 2.2 million square feet of fulfillment centre space in Toronto and 741,000 in Vancouver. “Everybody is ramping up. But while others have converted existing facilities, or some of it (for e-commerce), I’m not sure if anybody in aggregate has as much in pure fulfillment centres,” he said.
Vancouver office vacancy rates to get even tighter – The Province
Vancouver is on track to have the second-lowest vacancy rate in the Western hemisphere, according to a new report by Cushman & Wakefield. Is Vancouver’s growing reputation as a tech hub causing the pinch?
The report says more than 700 million square feet of new office space will be built over the next three years globally, the equivalent to five cities-worth of office inventory — Washington D.C., Dallas, London, Singapore and Shanghai.
Globally, the pace of supply will outstrip the demand for office space, predicted to total about 520 million square feet, causing office vacancy to rise in most cities around the world.
In general, the big cities of the world are overbuilding office space, but not in Canada.
Here in Vancouver, developers delivered about 2.3 million square feet of new office to the downtown market between 2015 and 2017, said Stuart Barron, the firm’s national director of research.
“That 2.3 million was the most significant wave of development to arrive in basically the last 25 years in downtown Vancouver,” he said.
In that same time period, the absorption of that space was about four times the typical rate in downtown Vancouver, he said. “There was a lot of pent-up demand,” Barron said.
He said the resource and commodity sectors, once the foundation of Vancouver’s office towers, have since taken a back seat to the technology sector.
“The strength in the technology sector has been so strong that demand in the B- and C-class buildings has been more-or-less explosive,” he said, noting that the vacancy rate in downtown Vancouver’s older stock of heritage buildings is about five per cent.
“The creative companies do love creative buildings,” he said. “Companies are also taking advantage of the ability to grab on to (new) space and pull their different units together and consolidate and lock in for a longer period.”
Technology has indeed been a big contributor to growth in Canada’s two strongest markets, Toronto and Vancouver, and it’s having an impact on space requirements and rental appreciation, said Cushman and Wakefield CEO Chuck Scott in a release.
“The Canadian government is making huge investments in technology and we’re seeing its impact in the commercial real estate space,” he said. “While traditional growth drivers such as the banking industry will always remain strong, particularly in Toronto, we’re seeing an unquestionable shift in whose occupying space and where it’s being occupied.”
Winnipeg developments lead Prairie hotel growth – Western Investor
Winnipeg is the often looked at as the Prairie commercial market’s shining star, relatively unaffected by the region’s oil recession as compared to Alberta and Saskatchewan. The city’s hotel market is no exception, boosting a handful of new developments to draw in tourists and investors alike.
A report from Stevenson Advisor finds that there are at least five new hotel projects under way in Manitoba, all in Winnipeg.
The new builds are a Hyatt House luxury hotel planned for 700 Sterling Lyon Parkway; a new Best Western hotel on Regent Avenue West; the Sutton Place Hotel that will be part of True North Square in downtown Winnipeg; and a CanadInns property built adjacent to the McPhillips Station Casino to complete in 2019.
A hotel-expansion project will see a new Marriott Residence Inn extended-stay hotel added onto the existing Fairfield Inn & Suites by Marriott Winnipeg.
Stevenson Advisors vice-president Aaron DeGroot admitted surprise that so many hotel projects are underway.
He noted there was a slowdown in hotel development in 2015 and 2016, as investors and developers waited to see how well the market absorbed the rooms that were added during the last growth spurt.
That saw eight hotels built or redeveloped, including two new boutique hotels built downtown between 2011 and early 2015.
By comparison, there were only two new hotels under construction in the city in 2016 – a Super 8 and a Hilton Garden Inn.
"Investors are looking to Winnipeg again. We’ve got another kind of mini-boom of hotel development happening,” DeGroot said.
Abbotsford industrial deals displacing area’s agri-food sites – Business in Vancouver
Abbotsford industrial properties are being snapped up by investors – but is it to the determent of local food processing plants? Business in Vancouver reports that food processors may be losing out to higher bidding competitors in an in-demand market.
A local investor is set to acquire the former Brookside Foods Ltd. plant in Abbotsford, which Hershey Co. shuttered last year as it consolidated Brookside’s production at plants in Saint Hyacinthe, Quebec, and Robinson, Illinois.
A deal for the plant came together last week, explained Chris Morrison, an executive vice-president with Colliers International. The property was listed for $9 million earlier this year, with food processors a key target buyer. However, a shortage of industrial properties in Abbotsford meant wide-ranging interest.
The successful bidder was a local investor who, when the deal closes, plans to strip the 64,655-square-foot facility and retrofit it for non-food uses. A portion will be leased to others.
The deal occurs as Abbotsford approved a proposal to ask the Agricultural Land Commission to approve the exclusion of 696 acres of farm land on the city’s west side to alleviate its industrial land shortage.
The land commission last year rejected a bid to exclude 22 parcels along Bradner Road under contract to a numbered company controlled by Joe Segal and Ron Emerson, but the city’s new bid has given Segal and Emerson the confidence to close on their purchase.
The deals herald the eastward shift of traditional industrial users into a part of Abbotsford long dominated by agri-food ventures.
