Western Investor’s annual forecast of top investment cities focuses on five hubs weathering the pandemic and looking solid for investors through 2022

No. 1: Victoria

The room: industrial strata

Victoria has a very strong multi-family market and residential sales are booming, but the real estate game in BC’s capital could be made up of industrial strata.

With a vacancy rate of 0.2% – the lowest in North America – and average rental rates of $16.02 per square foot, higher even than Vancouver or Toronto, Victoria is the leading market of industrial investors in the country.

The small 9.3 million square foot industrial inventory remains owner-occupied driven, but that is changing due to Victoria’s skyrocketing land and lease costs, combined with low vacancy rates for rental spaces. Average industrial rental rates in Victoria are up 15% this year compared to 2020, according to Colliers.

“Strata Industrial is the next big move in Greater Victoria,” said Cory Wright, president of Vancouver-based William Wright Commercial, which has expanded to the capital.

A prime example is a 13-unit small-bay strata industrial project in Langford, by a local developer, which sold for $315 to $350 per square foot, prices similar to those seen in suburban markets across the Greater Vancouver.

“About 30% of the buyers were investors,” said David Bornhold, commercial officer for Devencore Realty Corp.

The 2021 industrial development in the Greater Victoria area is a mix of strata and leases.

Omicron Development Inc. and Lotus Capital Corp. of Vancouver, for example, launched a 20-acre, 358,000 square foot, $100 million industrial project in Colwood, which is primarily a rental opportunity.

Bornhold expects strata to become a trend in Victoria’s industrial sector, due to higher land costs and a lack of rental opportunities for smaller tenants.

#2 Kelowna

The game: land, multi-family strata

Vancouver’s Cressey Development Group is seeing a quick pre-sale of a 127-unit luxury mixed-use waterfront project in downtown Kelowna, and developers are offering serviced land in the city at above-average prices. ‘Evaluation.

Cressy’s project, known as Caban, consists of high-end lakeside residential and commercial strata on Kelowna’s famous Gyro Beach.

Caban sales agent Taylor Musseau said a few invite-only previews in Vancouver and Kelowna were enough to register 200 potential condo buyers for the Caban development.

Musseau expects most buyers to be homeowners, but Cressey appears to be hedging his bets. Residential units at $850 per square foot will also be available for short-term rentals.

Another pristine site, a 1.41-acre parcel at Pacific Avenue and Pasnak Street in Kelowna, resulting from a six-lot land assembly, was sold in June by court order. Priced at $7.02 million, it sold for $8.31 million after multiple bids.

An anonymous Vancouver investor has paid $3.27 million for a 0.58 acre Kelowna site with potential for 45 residential units listed by Macdonald Realty, Kelowna. That’s $5.45 million per acre or $128 per square foot, which approximates Lower Mainland values.

The City of Kelowna offers two ready-to-use mixed-use commercial lots totaling 2.4 acres at the west entrance to the city along Harvey Avenue/Highway 97A. Bids of $11 million are expected.

“It’s just mind-blowing what’s happened to Kelowna prices,” said Jeff Hudson, director and co-founder of HM Commercial Group in Kelowna, whose recent land sales report totaled more than $24 million from transactions since May.

Hudson said out-of-town buyers include groups from Ontario, Saskatchewan, Alberta and British Columbia, the latter primarily from the Lower Mainland and Vancouver Island.

Cressey is looking for more land in Kelowna, said Hani Lammam, executive vice president of Cressey Development Group. Vancouver mega-residential builders Adera and Polygon have already staked land in the city.

“Kelowna has grown,” Lammam said, “It’s become a real competitor.”

No. 3: Surrey

Games: industrial, residential, retail

Over the next decade, Surrey is expected to become the largest city in British Columbia, surpassing Vancouver in population.

“We made the decision to be in Surrey because we wanted to be where our [customers] are,” said Mike Ng, director of business banking at Prospera Credit Union. “Surrey is one of the fastest growing cities in Canada; it’s a very pro-business climate, and we knew that people wanted to live there, to settle there. We could see what was going on and we wanted to be in the middle of the action.

Surrey is not only home to large businesses that employ hundreds of people, but it is also home to an array of small and medium-sized businesses that form the backbone of the municipality’s economy.

The city adds around 1,000 businesses each year, according to Anita Huberman, CEO of the Surrey Board of Trade. About 1,000 people move into the municipality each month.

Population and business growth have boosted Surrey’s retail market. Despite the pandemic, only 2.3% of space is vacant in shopping centers in Surrey, down from 3.9% a year ago, according to CBRE. At 5.6 million square feet, Surrey has more mall space than any municipality in British Columbia

Huberman said the city’s biggest asset is its size, with 27% of Metro Vancouver’s industrial land inventory.

“We’re still able to build on the ground, while Vancouver has to build,” Huberman said. “We are seeing a gentrification of businesses moving into Surrey and the South Fraser Valley. Led by Surrey, the Fraser Valley is also posting the highest home sales and price increases in urban British Columbia this year. In the first eight months of 2021, home sales in Valley rose 83.7%, reports the BC Real Estate Association, while the composite average home price rose 25.7% from the same period in 2020.

No. 4: Penticton

Play: recreational real estate, multi-family

A 2021 ranking of the best places to live in Canada highlights the appeal of settling in the Okanagan, with Penticton ranking in the top 10.

The Leger poll was conducted for Ratesdot.ca, which tracked the potential destinations of the 21% of big city residents who said they planned to move to a smaller center.

Western Investor chose Penticton this year because it offers the most affordable market for homeowners in the Okanagan’s white-hot housing market.

Facing two lakes and a residential construction boom, the city of 45,000 has at least a dozen residential projects underway this year, from rental units to new luxury homes on the hills and condo developments facing the Lake.

After 18 months of rising home sales, the current average single-detached home price is up 29% from a year earlier to $809,233, but you can still find single-detached homes for rent for less than $450,000. $ and two-bedroom condos for less than $240,000. .

The rental vacancy rate in Penticton is 1%, according to the Canada Mortgage and Housing Corporation. Average rents are at an all-time high, with one bedroom north of $1,100 per month and two bedrooms in the $1,900 range. Penticton is a rare positive cash flow opportunity in southern BC

Number 5: Winnipeg

Play: industrial strata

Winnipeg’s industrial vacancy rate of 2.9% is the second lowest in the Prairie provinces, second only to Regina, but much tighter than Calgary (4.9%) or Edmonton (6%), according to Colliers.

The city average industrial rental rate in Winnipeg is around $8 per square foot, but it hits $8.58 per square foot in south Winnipeg, still the lowest of any other western city Canadian.

The city seems privileged for industrial strata, which is currently rare in Winnipeg.

“Winnipeg’s demand for existing property sales remains insatiable due to attractive financing and minimal proceeds available,” according to a report by Cushman & Wakefield Stevenson, Winnipeg.

Demand for industrial condo units or “strata titles” is the strongest ever, with notable projects such as Sherwin Park Condos seeing strong sales, with an average price of $170 per square foot.

Expect more projects to come online as this sector of the industrial market matures, the report suggests.

Sales of industrial land remain very strong as surrounding rural municipalities continue to enjoy the benefits of ready-to-use land and lower taxes than in the City of Winnipeg.

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