The Vancouver Real Estate Forum, one of the most important industry and expert meetings of its kind recently took place. The results underline and confirm the current strategies of our real estate investors with their focus on office, industrial and fulfillment buildings.
Office Market: Growth Despite COVID-19 but Structural Changes
Before the pandemic, office space in Vancouver became scarcer as large tech companies were lured by a strong labor pool, friendly immigration policies and proximity to their US West Coast company headquarters. Vancouver has also benefited from tech-centric post-secondary schools such as the BC Institute of Technology and the University of British Columbia. There are over 100,000 technology professionals across BC, with almost 85% working in Metro Vancouver. The industry represents an important economic contributor and is growing by 6% each year.
During the pandemic, the vacancy rate in downtown Vancouver increased to 3.7%, but still remains the second-tightest market in Canada, after Toronto. Although space requirements are being reassessed in light of reduced revenues and new work from home policies, average rents have continued to climb in both the city center and the suburbs. In the meantime, around 4.7 million Canadians started working from home in March, enjoying the greater flexibility and time saved by commuting. But even though work practices change, not all jobs can be done remotely, and many companies will still favor the social and collaborative benefits that can be fostered through in-person working relationships. The pandemic is also forcing the real estate industry to speed up its digital transformation, be it creating a safe return to work, effectively manage building communications and operations or making the workplace an engaging place to be.
Industrial Sector Unscathed by COVID-19
Vancouver’s industrial vacancy rate rising slightly to 1.7% remains one of the tightest in North America. Even before the pandemic, Vancouver’s industrial demand has been largely driven by last-mile logistics. With the Growth in e-commerce further skyrocketing during the pandemic, the demand for industrial space will be spurred even further. Consumer expectations for same-day or next-day goods are likely to keep growing, and the lack of well-positioned industrial space is placing a significant strain on various retailers and e-commerce giants that depend on a network of distribution hubs.
Despite a fundamental shift away from traditional retail uses, Vancouver used to have one of the lowest vacancy rates of Canada’s major cities. The pandemic has massively slashed population growth rates from immigration, tourism and job growth, all factors that propel retail spending. As a result, total sales are expected to decline by one third this year with luxury apparel and major chains hit to be rather moderate while smaller apparel and chains even might have to close or at least drastically reduce their retail footprint.
Throughout the pandemic, grocery-anchored assets have performed well and continued to be the most sought-after assets among retail investors. Investors continue to focus on transforming older retail properties into mixed-use communities to meet changing demographics and customer demands by combining features of retail, entertainment, office and residential uses in a single location. Many of these properties are in well-located areas near major road networks and transit nodes, making them ideal properties for successful intensification.