Office space, industrial demand buck slower investment market

Slowing sales

Office assets were the bright spot for Metro Vancouver investment transactions in the first quarter, according to real estate consulting firm Altus Group.

A total of 26 office transactions occurred in the first quarter, double the number in the same period a year earlier. Just two deals accounted for the majority of the aggregate value of $395 million, however – Fiera Properties acquired Airport Executive Park in Richmond for $208 million while Slate Asset Management LP paid $95 million for Metrotown Place 1 and 3 in Burnaby.

All other asset classes saw transactions slip below the levels of previous quarters. Overall, the quarter had 322 transactions worth $1.6 billion, half what transacted a year earlier. This was the lowest value since the third quarter of 2014.

The aggregate value of residential land market transactions was $46 million, the first time in more than three years that the tally had been below $1 billion, and the lowest sum since the second quarter of 2014. Transaction volume, meanwhile, was the weakest since the start of 2013.

“[This] is reflective of the gap between vendor and purchaser price expectations, the lack of product, and has resulted in decreased market activity,” noted Paul Richter, director of data solutions with Altus.

The same might be said of industrial assets, sales of which totalled $228 million in the first quarter. While demand remains strong, buoying values, there simply isn’t enough supply to meet demand. What product is available is typically strata-titled, with such deals accounting for 49% of transactions. Strata space averaged $399 a square foot, according to Altus, pushing up rents for occupants.

“The development community has responded with (you guessed it) a record amount of new supply,” said tenant representation firm Cresa Global Inc. in its review of the industrial market in the first quarter. “While the market would appear to be acting as it should, for what matters to users [supply and cost], new space can’t come fast enough, and the new rents are very challenging.”

The first-quarter industrial report from Lee & Associates, meanwhile, notes that warehouse space averaged $370 a square foot in the quarter, a record, while the average net rent sought rose to $12.81 a square foot.

“All of these factors are putting pressure on tenants and potential purchasers to find space in a very competitive market,” Lee & Associates reported.

Kids in construction

Bill 8, which proposed amending the Employment Standards Act to restrict children under the age of 16 from working in dangerous occupations, was poised for third reading in the legislature last week.

“We are moving the minimum age from 12 years to 16 years,” Labour Minister Harry Bains said in announcing the bill on April 29.

Youth aged 14 and 15 will be able to hold employment with parental consent, but they’ll be limited to what Bains called “light duty,” something regulations will define once the amendments are law.

“They will not be allowed to work in dangerous occupations like construction, mining and others,” he said.

While the idea of kids working in mines, on construction projects and in other roles – and the idea of employers remitting payroll taxes on the work – may seem Dickensian, the stats from WorkSafeBC confirm that kids are indeed working, and receiving disability benefits as a result of workplace accidents.

A report from the BC Law Institute in 2018 noted that long-term disability pensions were awarded to workers 14 years and younger in every year since 2005. The report didn’t break out claims by sector, but WorkSafeBC reports that both short-term and long-term benefits were paid to construction workers aged 12 to 15 every year of the last 10 except 2014. Three such workers received benefits last year, with two a year being the average. •

pmitham@telus.net