North Shore commercial real estate investment drastically declines

Last year was the first time that annual investment in the region did not exceed $100 million

North Shore commercial real estate investment drastically declines

New research by Avison Young indicated that commercial asset investment levels in the North Shore, BC declined to their lowest levels in a decade, despite ongoing development and construction activity.

In its latest report on the market, Avison Young stated that commercial sales (covering industrial, retail, and office properties) sharply declined from $258 million in 2017 to $87 million in 2018.

Last year marked the first 12-month period that the market’s annual investment performance did not exceed $100 million since 2009. A significant contributor to this development was the fact that majority of 2018 sales involved small strata units, with large-scale freestanding properties in the minority.

“Commercial real estate sales activity in the first quarter of 2019 remained muted with office, retail and industrial deals totalling slightly more than $20 million as investors and owner-occupiers alike struggled to secure and execute on the investment opportunities that have arisen,” Avison Young noted.

“Sale and lease options for office, industrial and retail properties remain highly limited on the North Shore as vacancy remains tight and pricing strong in all asset classes. Development sites, particularly for mixed-use developments, also remain in high demand and short supply.”

In particular, the North Shore’s industrial sector continues to exhibit an extreme 0.5% vacancy rate as of the end of Q1 2019. Any industrial space that does get introduced to the market has tended to get leased almost immediately.

“There are virtually no industrial properties suitable for owner-occupiers available for sale while there are a handful of occupied industrial properties available for sale on an investment basis,” according to Avison Young’s analysis.

“While industrial lease rates have increased significantly over the past five years and averaged $16.55 psf at the end of the first quarter of 2019, rates finally appear to be levelling off.”

Elevated demand also continues to push strata office and retail space vacancies down to near-record lows.

“Office vacancy on the North Shore, which was 10.3% at the end of 2018, has tightened in 2019 as steady leasing activity continued in most of the North Shore’s office nodes. Class A rates have averaged $28.50 psf and absorption will likely remain stable in 2019.”