Corporate housing market strong; EY signs on for 1133 Melville

Good times

Highland Group’s annual report for the Corporate Housing Providers Association of Indianapolis offers a thorough overview of the corporate housing sector in Canada.

Providers of corporate housing serve both companies seeking to house employees and insurers requiring accommodation for displaced persons. The sector is worth $248 million a year in Canada.

The supply of units in Vancouver last year dropped faster than the decline in occupancies, which fell from 89% to 85%. This supported an 8% increase in the average daily rate to $175 from $162. This reflected the strength of the lodging market as a whole. Statistics presented by HVS Canada at last fall’s Western Canadian Lodging Conference indicated that the average daily rate in Canada increased approximately 7.3% in 2017.

Highland Group’s report identified the entertainment sector as the biggest identifiable source of demand in terms of industry sectors, at 12%. However, 25% of demand came from a grab bag of sectors and individuals. Accommodation related to insurance or emergencies accounted for 18% of demand.

The two key reasons for using corporate housing, aside from displacement, were project-specific or training placements at 31% and relocation at 30%.

Affordability improvement

Corporate housing providers typically lease condos as needed, and last year they tapped into approximately 66 fewer units in Vancouver than a year earlier. This should be good news for those concerned with housing affordability, which RBC Economics reports continued to decline during 2017’s final quarter. Among other implications, this meant more first-time buyers faced the prospect of an ongoing stay in rental units.

“Vancouver-area buyers experienced the most significant deterioration in RBC’s aggregate affordability measure in Canada in the fourth quarter,” the report stated, adding that it was no surprise that the provincial budget introduced new measures designed to cool demand and trigger the addition of units to the rental stock.

But will those measures, which have given rise to various kinds of outrage across the province, really have an effect?

RBC doesn’t think so, given changes to the lending environment.

“This is not the turning point for affordability in Canada,” it declared, citing the prospect of interest rate hikes and tighter qualification rules that have raised the ownership bar for first-time homebuyers.

With the average home now requiring 85.2% of household income, the most ever required anywhere in Canada, RBC isn’t optimistic. An apartment even requires 48.9% of a typical household’s monthly income, and a separate report from Scotiabank last week didn’t anticipate any near-term improvement without additional supply.

The scale of the problem means it will take more than one budget cycle to solve, something the province itself has acknowledged. Therefore, Scotiabank’s economists had a grim assessment for low and middle-income households: “prices for at least the next few years are still likely to outstrip income gains.”

Speaking of rental …

Ernst & Young will be the lead tenant at Oxford Properties Group’s planned tower at 1133 Melville Street, which goes to public hearing this week. The global accounting firm’s name will crown the new 470,000-square-foot office tower, set to be completed in 2022. EY’s current digs are in the TD tower at 700 West Georgia, managed by Cadillac Fairview.

Plans call for 1133 Melville to have some of the largest floor plates in the city, at close to 20,000 square feet. EY said its space commitment is still being worked out, with the final floor count yet to be determined.

EY’s per-person space requirements have dropped in recent years from 185 square feet to 145 square feet, thanks in part to the greater embrace of mobile devices and how they have changed service delivery.

Conversations with local brokers indicate that tech firms and the like are key prospects for other space in the tower. The large floor plates are particularly conducive to collaborative working environments common now.