Amanda Stephenson

When the COVID-19 pandemic began and offices transitioned to work-from-home arrangements, many people speculated that remote work could become the norm and replace the physical office forever. But a new survey suggests the office is not dead, as employers appear to be growing less enthusiastic about remote work as the pandemic drags on.the tower of the city: A halo around the sun shines above downtown Calgary's skyscrapers on June 5, 2020.

According to a report by commercial real estate firm Colliers, employers surveyed in June estimated that working from home had caused employee productivity to drop by 22.6 per cent. In a November survey, this number had increased to 23.4 per cent.

John Duda, president of real estate management services at Colliers Canada, said growing concerns about employee productivity, the potential erosion of workplace culture and a general feeling of “Zoom fatigue” means employers are now less likely to say they will need less physical office space going forward.

For example, in June, 46 per cent of respondents to the Colliers survey expressed a desire to reduce their office space, but this number dropped to 37 per cent in the November survey. Compared to June, tenants were 20 per cent less likely to indicate they need less space, and 30 per cent more likely to want more or the same amount of space.

“At the beginning, there was almost a bit of a euphoria. It was, ‘we can do this, we can work from home, I’m going to get rid of some of my space,’ ” Duda said. “And now that this is setting in and people are seeing the lack of productivity . . . they’re seeing that people are fatigued by the whole thing, and they’re saying ‘wait a minute, I can’t function like this as a business.’ ”

The Colliers report also reveals that 54 per cent of businesses across the country expect 100 per cent of their employees to return to the office after a vaccine is available, which Duda said indicates that people value the role of the workplace and want to return when it’s safe to do so. Regional and small businesses are more likely than national and international businesses to indicate that 100 per cent of their employees will return to the office.

“Things are changing very quickly, and it’s possible attitudes will shift again once the vaccine is in place,” Duda said. “What we’re seeing on the leasing side is, very few people are making long-term decisions (about real estate needs) right now.”

Mary Moran, president and CEO of Calgary Economic Development, said she has not heard of any significant Calgary companies that have made the decision to make remote work arrangements permanent. She said different companies will gauge the success or failure of these past nine months of work-from-home differently, but added the general consensus is that productivity goes down when employees work from home any more than two days a week.

“I do worry about the mental-health implications of it, too,” Moran said. “As convenient as it is to roll out of bed and head to your home office, the monotony of it is not healthy. Limited social interaction during the day is not healthy.”

Prior to the pandemic, Calgary was struggling with sky-high downtown office tower vacancy, due to ongoing weakened oil prices and rounds of layoffs in the energy sector. That downtown vacancy rate remains elevated, at 27.8 per cent, Moran said.

While some Calgary companies may opt for more flexible work arrangements or remote work options even after a vaccine is available, Moran said, it is unlikely that these changes will result in any significant increase in the city’s downtown vacancy rate. However, that doesn’t mean that problematic vacancy rate is coming down anytime soon.

“The more acute problem that I’m worried about is the consolidation in the energy sector, which is going to have a negative impact. The Husky-Cenovus (merger) was a big surprise to a lot of people, but we know there’s going to be a lot more of that. And I think there’s going to be shedding of office space that way,” Moran said. “I’m more worried about that in the short-term than about people deciding that everyone’s going to work from home.”

astephenson@postmedia.com

Canadian inflation, as measured by the Consumer Price Index (CPI) rose by 0.7% in October year-over-year, up from the previous month’s increase of 0.5%. Excluding gasoline, the CPI rose by 1.1%. Prices rose in five of eight components year-over-year in October, with food contributing the most to the increase due to rising prices for lettuce as a result of disease and inclement weather. Growth in the Bank of Canada’s three measures of trend inflation rose by 0.1 percentage points in October, averaging 1.8%. 

Regionally, the CPI was positive in all provinces. In BC, CPI rose by 0.5% in October year-over-year, up from September’s increase of 0.4%. Strong price growth continued for health and personal care (3.1%), shelter (2.2%), and food (2.0%). In contrast, downward price pressures were ongoing in gas (-18.0%), clothing and footwear (-3.8%), and transportation (-1.7%). 

Costs for shelter continue to increase, as record-low interest rates put downward pressure on mortgage costs. This has made single-family homes more attractive to households demanding more space. As provinces such as Ontario and Quebec expand their containment measures, and with new restrictions in BC, Canadian inflation is expected to remain subdued. In this environment, the Bank of Canada will continue to keep interest rates low.

Link: https://mailchi.mp/bcrea/canadian-inflation-oct-november-18-2020
Pinnacle International project will be the fourth-highest building in the city and include 152 social-housing units and 303 condominiums

Vancouver council has approved a 55-storey condo tower that will be the fourth-highest tower in the city.

The September 30 decision approved the slender, curvy 535-foot tower that is set to be the second bookend for a major gateway into the city. Construction could start within a year, with work potentially complete in 2024.

Dubbed 601 Beach Crescent, the tower will stand across the north end of the Granville bridge from the recently completed 49-storey Vancouver House, and is due east of the Seymour Street off-ramp.

It is set to include 303 condominiums and 152 social-housing units.

Vancouver-based developer Pinnacle International pins the project’s value at about $250 million. Pinnacle has completed approximately 12,000 residences in the past 40 years in Vancouver, Toronto and San Diego, California.

While the 495-foot-tall Vancouver House and 601 Beach Crescent have similarities, they also play off each other with different architectural features.

Both projects involve international design firms working collaboratively with Vancouver partners. For Vancouver House, famous Danish architect Bjarke Engels worked in partnership with Vancouver’s DIALOG; at 601 Beach Crescent, the design is the brainchild of Shanghai’s Jyom Architecture, in partnership with Vancouver’s GBL Architects.

Councillors Melissa De Genova and Colleen Hardwick were opposed and Sarah Kirby-Yung was absent in city council’s 8-2 vote to approve the 55-storey tower. •

Home sale and new listing activity reached record levels in Metro Vancouver in September.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 3,643 in September 2020, a 56.2 per cent increase from the 2,333 sales recorded in September 2019, and a 19.6 per cent increase from the 3,047 homes sold in August 2020.

Last month’s sales were 44.8 per cent above the 10-year September sales average and is the highest total on record for the month.

“We’ve seen robust home sale and listing activity across Metro Vancouver throughout the summer months,” Colette Gerber, REBGV Chair said. “This increased activity can be attributed, in part, to lower interest rates and changing housing needs during the COVID-19 pandemic.”

There were 6,402 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in September 2020. This represents a 31.6 per cent increase compared to the 4,866 homes listed in September 2019 and a 10.1 per cent increase compared to August 2020 when 5,813 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 13,096, a 2.6 per cent decrease compared to September 2019 (13,439) and a 2.3 per cent increase compared to August 2020 (12,803).

“While the pace of new MLS® listings entering the market is increasing, the heightened demand from home buyers is keeping overall supply levels down,” Gerber said. “This is creating upward pressure on home prices, which have been edging up since the spring.”

For all property types, the sales-to-active listings ratio for September 2020 is 27.8 per cent. By property type, the ratio is 28.3 per cent for detached homes, 36.1 per cent for townhomes, and 24.8 per cent for apartments.

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,041,300. This represents a 5.8 per cent increase over September 2019, and a 0.3 per cent increase compared to August 2020.

Sales of detached homes in September 2020 reached 1,317, a 76.8 per cent increase from the 745 detached sales recorded in September 2019. The benchmark price for detached properties is $1,507,500. This represents a 7.8 per cent increase from September 2019 and a 1.1 per cent increase compared to August 2020.

Sales of apartment homes reached 1,596 in September 2020, a 36.9 per cent increase compared to the 1,166 sales in September 2019. The benchmark price of an apartment property is $683,500. This represents a 4.5 per cent increase from September 2019 and a 0.3 per cent decrease compared to August 2020.

Attached home sales in September 2020 totalled 730, a 73 per cent increase compared to the 422 sales in September 2019. The benchmark price of an attached unit is $809,900. This represents a 5.2 per cent increase from September 2019 and a 0.4 per cent increase compared to August 2020.

The BCREA Commercial Leading Indicator
(CLI) was down sharply in the first quarter
of 2020 from 134.2 to 123.2, reflecting
the slowdown prompted by the COVID-19
pandemic. Compared to the same time last
year, the index was down by 4.8 per cent.
The pandemic-induced shutdown of the
economy in the last two weeks of the first
quarter of 2020 had a notable impact on
the CLI, turning all components negative.
On the economic activity component,
manufacturing sales led the decline. On
the employment component, a fall in key
commercial real estate sector jobs was the
primary driver. Meanwhile, the financial
component had the largest negative
impact on the CLI, as REIT prices tumbled
and risk spreads widened in March. The
underlying trend in the CLI was relatively flat in the
previous six quarters, but has taken a sudden downward
turn due to the pandemic. This suggests that going
forward, the environment for commercial real estate
activity in the province will be weak as the economy
gradually re-opens, and temporarily unemployed
individuals slowly return to work.
BC’s economy was beginning to slow in the last quarter
of 2019, but the rate of slowing was exacerbated by
the pandemic in the first quarter of 2020. A fall in
manufacturing sales of both durable and nondurable goods were the main drag on economic activity.
Also contributing to the drag, but to a lesser extent,
were lower wholesale trade sales in motor vehicles, and
building material and supplies. Meanwhile, although
growth in retail sales was positive in the first two months
of 2020, it was not enough to offset the 10 per cent
monthly decline in March, as retail stores across the
province were shut down halfway through the month
due to the pandemic.
Employment growth in key commercial real estate
sectors such as finance, insurance, real estate and
leasing was negative for the first time since the summer
of 2018, down by about 13,500 jobs in the first quarter.
Additionally, manufacturing employment fell by about
1,830 jobs from the previous quarter.
The CLI’s financial component was negative in the first
quarter of 2020 as growing fears of the potential impact
of the pandemic resulted in a full market meltdown
in late February, sending equity markets into free fall
and government bond yields plummeting. However,
private borrowing costs rose sharply due to elevated risk
premiums, causing a tightening of credit conditions.

Commercial real estate financing is very different from residential Michael Lee Western Investor

1. Thinking that costs are similar to residential 

There are much higher costs involved when purchasing a commercial property compared to residential. Costs include a commercial appraisal ($2,500 to $3,500), environmental report ($2,500 to $3,000), lender and broker fees (generally 1.5 per cent to 2 per cent) and legal costs of the lender and borrower, which are both to the borrower’s account. 

2. Not allowing enough time 

I can usually get a discussion paper back from lenders within seven to 10 business days, but that’s not something that a borrower can remove subjects on. Getting to a final commitment for commercial financing generally takes about five to six weeks. The length of time to get to a final commitment varies depending on how long it will take to get any of the conditional information in to the lender (personal, corporate, and property information), and to obtain a current commercial appraisal and environmental report. The common mistake investors new to commercial real estate make is that they think they can put in an offer and remove subjects within two weeks.

3. Expecting that projections will be acceptable to the lender

For income-generating property, all commercial financing is based on the actual current net income of the property, and what loan amount the net income shows it can service. Lenders will base their decision solely on the actual net income of the property and will not go by a client’s projections for a property. 

4. No experience with specific commercial property

I see this for all types of commercial property, including apartment buildings, mobile home parks, hotels/motels and construction. Largely, this can be mitigated by showing experience with other rental property, or business experience, and/or by putting a reputable property management company in place. Sometimes it can be offset by having the existing owner stay on for a period of time as a consultant, to assist with the transition. Where construction is concerned, a developer’s lack of experience can be mitigated by hiring a reputable project manager and builder, or by partnering up with an established developer.

 5. Consulting with a mortgage broker new to commercial financing

Commercial financing requires an active commercial broker with experience in the industry and who is aware of current conditions. Unless the broker is doing commercial financing full time, it is impossible to know which lenders are financing what types of commercial property at any given time, and which lender has the best rates and terms for a particular asset class. Even if you are a seasoned pro with commercial property, it is hugely beneficial to make use of a commercial mortgage broker because your bank might not be a good fit for financing that particular type of asset. A commercial mortgage broker can correctly structure the loan request for a particular lender, knows which lenders to approach at any given time, and can shop the mortgage market for a client. 

Michael Lee is a commercial mortgage consultant with Mortgage Alliance.

March 3, 2020

February saw steady home buyer demand and reduced home seller supply across Metro Vancouver.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 2,150 in February 2020, a 44.9 per cent increase from the 1,484 sales recorded in February 2019, and a 36.9 per cent increase from the 1,571 homes sold in January 2020.

Last month’s sales were 15.6 per cent below the 10-year February sales average.

“Home buyer demand again saw strong year-over-year increases in February while the total inventory of homes for sale struggled to keep pace,” Ashley Smith, REBGV president said. “This was most pronounced in the condominium market.”

There were 4,002 detached, attached and apartment homes newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in February 2020. This represents a 2.8 per cent increase compared to the 3,892 homes listed in February 2019 and a 3.4 per cent increase compared to January 2020 when 3,872 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 9,195, a 20.7 per cent decrease compared to February 2019 (11,590) and a 6.7 per cent increase compared to January 2020 (8,617).

“Our Realtors are reporting increased traffic at open houses and multiple offer scenarios in certain pockets of the market. If you’re considering listing your home for sale, now is a good time to act with increased demand, reduced competition from other sellers, and some upward pressure on prices,” says Smith.

For all property types, the sales-to-active listings ratio for February 2020 is 23.4 per cent. By property type, the ratio is 17.3 per cent for detached homes, 26.9 per cent for townhomes, and 28.4 per cent for apartments.

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,020,600. This represents a 0.3 per cent increase over February 2019 and a 2.7 per cent increase over the past six months.

Sales of detached homes in February 2020 reached 685, a 52.9 per cent increase from the 448 detached sales recorded in February 2019. The benchmark price for a detached home is $1,433,900. This represents a 0.7 per cent decrease from February 2019 and a 1.9 per cent increase over the past six months.

Sales of apartment homes reached 1,061 in February 2020, a 39.8 per cent increase compared to the 759 sales in February 2019. The benchmark price of an apartment property is $677,200. This represents a 0.9 per cent increase from February 2019 and a 3.6 per cent increase over the past six months.

Attached home sales in February 2020 totalled 404, a 45.8 per cent increase compared to the 277 sales in February 2019. The benchmark price of an attached home is $785,000. This represents a 0.6 per cent increase from February 2019 and a 1.7 per cent increase over the past six months.

The BCREA Commercial Leading Indicator (CLI) fell for the second straight month to 134.3 in the fourth quarter of 2019. Compared to the same time last year, the index is up by 0.3 per cent.   Provincial economic activity continued to slow in the fourth quarter of 2019, with declines in wholesale trade and manufacturing sales more than offsetting a gain in retail. This left the economic activity component of the CLI negative for the sixth consecutive quarter. Office employment was up for the sixth consecutive quarter, but not enough to offset a decline in manufacturing employment, resulting in a negative change in the employment component of the CLI. The financial component of the CLI was also negative following three consecutive quarters of positive performance. The underlying trend in the CLI has been relatively flat over the past six quarters, suggesting a continued stable environment for commercial real estate activity in the province.  BC’s economy continued to slow in the fourth quarter of 2019. Weak manufacturing sales in durable goods, and lower wholesale trade sales in motor vehicles and machinery and equipment, put a drag on economic activity. Meanwhile, retail sales were positive after two consecutive quarters of negative growth. Despite this, retail sales ended 2019 with the lowest growth rate since the financial crisis in 2009. Employment growth in key commercial real estate sectors such as finance, insurance, real estate and leasing continued to be positive, up by 1,600 jobs in the fourth quarter. In contrast, manufacturing employment fell by 6,700 jobs from the previous quarter.  The CLI’s financial component was negative in the fourth quarter due to a decrease in benchmark Canadian REIT prices and an increase in short-term borrowing costs.  

Sales activity in the Lower Mainland’s commercial real estate market continued to decline in the third quarter (Q3) of 2019 compared to recent years.

There were 405 commercial real estate sales in the Lower Mainland in Q3 2019, a 32 per cent decrease over the 596 sales in Q3 2018 and a 42.3 per cent decline compared to Q3 2017, according to data from Commercial Edge, a commercial real estate system operated by the Real Estate Board of Greater Vancouver (REBGV).

The total dollar value of commercial real estate sales in the Lower Mainland was $1.886 billion in Q3 2019, a 59.8 per cent decrease from the $4.694 billion in Q3 2018.

“Activity in our commercial market this year is trailing the pace we’ve experienced over the last five years,” Ashley Smith, REBGV president said. “We’ve seen activity pickup in our residential market over the last few months and we’ll watch to see if conditions strengthen on the commercial real estate side in the last quarter of 2019 or the first quarter of next year.”

Q3 2019 activity by category

Land: There were 114 commercial land sales in Q3 2019, which is a 44.9 per cent decrease from the 207 land sales in Q3 2018. The dollar value of land sales was $821 million in Q3 2019, a 61.7 per cent decrease from $2.142 billion in Q3 2018.

Office and Retail: There were 155 office and retail sales in the Lower Mainland in Q3 2019, which is down 37.2 per cent from the 247 sales in Q3 2018. The dollar value of office and retail sales was $433 million in Q3 2019, a 78.4 per cent decrease from $2.005 billion in Q3 2018.

Industrial: There were 124 industrial land sales in the Lower Mainland in Q3 2019, which is a 4.2 per cent increase from the 119 sales in Q3 2018. The dollar value of industrial sales was $415 million in Q3 2019, a 41.7 per cent increase from $293 million in Q3 2018.

Multi-Family: There were 12 multi-family land sales in the Lower Mainland in Q3 2019, which is down 47.8 per cent from 23 sales in Q3 2018. The dollar value of multi-family sales was $217 million in Q3 2019, a 14.3 per cent decrease from $253 million in Q3 2018.

After a quieter first half of 2019, home buyer activity has returned to more historically typical levels in Metro Vancouver*.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 2,498 in November 2019, a 55.3 per cent increase from the 1,608 sales recorded in November 2018, and a 12.6 per cent decline from the 2,858 homes sold in October 2019.

Last month’s sales were four per cent above the 10-year November sales average.

“We started to see more home buyer confidence in the summer and this trend continues today,” says Ashley Smith, REBGV president. “It’ll be important to watch home listing levels over the next few months to see if supply can stay in line with home buyer demand.” 

There were 2,987 detached, attached and apartment homes newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in November 2019. This represents a 13.7 per cent decrease compared to the 3,461 homes listed in November 2018 and a 26.7 per cent decrease compared to October 2019 when 4,074 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 10,770, a 12.5 per cent decrease compared to November 2018 (12,307) and a 12 per cent decrease compared to October 2019 (12,236).

For all property types, the sales-to-active listings ratio for November 2019 is 23.2 per cent. By property type, the ratio is 17.2 per cent for detached homes, 24.9 per cent for townhomes, and 29.3 per cent for apartments.

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

“In today’s market, the intensity of home buyer demand depends on neighbourhood, property type, and price point,” Smith said. “To better understand the changing trends in your neighbourhood and property type of choice, it’s important to work with your local REALTOR®.”

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $993,700. This represents a 4.6 per cent decrease from November 2018 and a 1.3 per cent decrease over the past six months.

Sales of detached homes in November 2019 reached 825, a 59.9 per cent increase from the 516 detached sales recorded in November 2018. The benchmark price for a detached home is $1,415,400. This represents a 5.8 per cent decrease from November 2018, a 0.5 per cent decrease over the past six months, and a 0.3 per cent increase compared to October 2019.

Sales of apartment homes reached 1,222 in November 2019, a 50.9 per cent increase compared to the 810 sales in November 2018. The benchmark price of an apartment home is $651,500. This represents a 3.8 per cent decrease from November 2018, a 1.9 per cent decrease over the past six months, and a 0.2 per cent decline compared to October 2019. Attached home sales in November 2019 totalled 451, a 59.9 per cent increase compared to the 282 sales in November 2018. The benchmark price of an attached home is $772,800. This represents a 4.4 per cent decrease from November 2018, a 0.8 per cent decrease over the past six months, and a 0.2 per cent increase compared to October 2019.