The CoStar Canada Market Analytics Team recently released its December newsletter update focused on Vancouver. Check out the team's assessment of performance across all Vancouver market segments, and its forecast for the days and months ahead, below.
With the holiday season around the corner, British Columbians will be entering 2020 in good shape to start the New Year, despite a shrinking provincial surplus. With the release of the second quarter fiscal update, Finance Minister Carole James noted that the provincial surplus has been downgraded from $179 million to $148 million, with much of the decline attributed to the ongoing problems with ICBC, as the crown corporation still struggles to get its finances in order due to ongoing legal battles. Additionally, several months of forestry mill closures and almost 4,000 jobs losses has resulted in an 11% drop in forestry revenues valued at $133 million. Finally, an even slower than expected retail sector has also resulted in a loss of $49 million in sales tax revenue, particularly in the automotive and building supply segments. Luckily, due to conservative planning, the provincial government has allocated a $550 million contingency fund, however, BC will need to resolve these issues to ensure that they do not remain ongoing problems moving into 2020.
Metro Vancouver GDP growth benefited from rising activity at the offices of real estate agents and brokers, which was up 1.2% in September, and rising for the seventh consecutive month, mainly due to higher housing resale activity across the Lower Mainland and the Fraser Valley. This also helped housing investment in Canada as a whole, which is up 3.2% over last year, the fastest pace since the first quarter of 2012. Moving in to 2020, the City of Vancouver is aiming to alleviate housing affordability issues by increasing the empty homes tax by an additional 25 basis points to 1.25%. The tax has already resulted in the number of vacant homes dropping by 22% between year-end 2017 and year-end 2018, while the number of properties rented out increased by 7% over the same time frame. The jump is expected to increase the number of properties that are put back on the rental market in 2020, while the city has noted that it is open to additional 25% hikes in both 2021 and 2022.
On the commercial front, Metro Vancouver will gladly welcome the news of Amazon securing all of the 1.1 million square feet of office space within The Post redevelopment. Initially, the tech giant planned to lease only 35% of the total space and hire 1,000 additional employees, however, with this increased space commitment in Vancouver the company will likely increase its workforce even more, contributing to further gains in technology employment while also becoming the dominant corporate tenant within the city. This comes at a time when office vacancy across Metro Vancouver is expected to reach 2.9% at year-end 2019, which is down from 3.9% at year-end 2018 and 3.1% at the end of November 2019, while gross rents have increased by 2.9% year-over-year.
Similarly, the industrial vacancy rate ended November at 1.8%, which is down from 2.8% at this time last year, with rents at the end of November up 9.7% over the same time in 2018 and expected to end 2019 up 10.1% year-over-year at $12.63 per square foot. Developers have realized, and have been contemplating the need to increase the densification of industrial projects to overcome shortages of industrial zoned land. In fact, Oxford Properties recently announced that it plans to develop Canada’s first large bay multi-level industrial property. The two-storey, 707,000 square foot facility will arrive in 2022 and will receive the title of largest industrial property in Metro Vancouver. With industrial rents expected to grow by at least 6.5% in 2020, it finally makes financial sense to move forward with multi-storey developments due to the higher construction costs. This will likely be the first of many multi-storey industrial buildings for the region going forward.
The latest retail sales data from September indicates that Metro Vancouver has seen no change in retail sales compared to the same time last year, even after a 0.8% increase in August. Despite the unchanged sales volume, retail net absorption has been relatively strong, and retail vacancy is expected to close the year at 1.5%, however, this is up from 1.3% at mid-year 2019. Furthermore, net rents are expected to grow by 5.6% in 2019 as a whole, compared to 2018. Keep in mind that growth in retail sales has been stagnant due to declines in new vehicle purchases and gasoline rather than in traditional retail experiences. Due to the higher cost of living in Metro Vancouver, Vancouverites have tended to focus their spending away from big ticket items and towards experiences such as dining out where restaurant receipts have increased by 3.7% year-over-year in August. However, with more and more retailers extending their holiday promotions, BC residents are expected to fork out $688 on gifts this holiday season, slightly higher than the Canadian average.
These insights are made possible through CoStar, the largest commercial real estate source for property listings for sale or lease in Canada. CoStar enables users to gain insight into over 25,440 properties currently tracked in the Greater Vancouver Area, which include 990 properties for sale and 2,663 spaces for lease.
CoStar conducts constant, proactive research with a team of 60+ researchers making over 12,000 database updates each day.
Learn how CoStar can help accelerate your business. Request a Demo.