Top tier asset
The most recent gathering of commercial real estate association NAIOP was set to discuss whether it’s “best out West,” but Bentall Kennedy LP’s announcement earlier in the week of its $396 million deal for Bentall 5 couldn’t help but prejudice the conversation.
Having asked panellists for their take on the market, moderator Kevin Meikle quizzed Bentall Kennedy president and COO Remco Daal about the transaction. Three years ago to the day, in a deal hailed as a vote of confidence in Vancouver during the depths of the financial crisis, Deka Immobilien GmbH bought the 33-storey tower for $300 million.
“We probably have an office market here that’s the envy of any major market on the planet,” said CBRE broker Tony Quattrin in 2009, having brokered the sale to Deka with partner Jim Szabo. “Investors are turning to solid fundamentals in Vancouver, and buying downtown office [space], which is probably the strongest of all investment markets in the country.”
The situation hasn’t changed much, with Daal praising the Vancouver market and calling Bentall 5 a “best-in-class” asset worth every penny.
“You talk about the most-defensive assets globally, you’ll find that Vancouver is right up there,” Daal told NAIOP. “In this market, you can rationalize acquiring best-in-class assets at a number that might be over replacement cost. ... You’re not going to get another shot at it.”
Daal’s fellow panellist Tom Knoepfel, a senior vice-president with Cadillac Fairview Corp. Ltd. and manager of the firm’s Western Canada portfolio, agreed. Cadillac Fairview’s own purchase of the HSBC tower at 885 West Georgia Street was similar.
“You can’t buy another building at that kind of location in downtown Vancouver,” Knoepfel said.
The only alternative is to develop new space, which Cadillac Fairview has plans to do in the old Sears premises at Pacific Centre but which is otherwise virtually impossible.
“There [are] no other development sites,” Knoepfel said.
Metro’s Shaughnessy
Dismissing talk of a real estate bubble in Vancouver is a speech that almost writes itself for condo marketer Bob Rennie, who addressed the Urban Development Institute in Vancouver on May 17 regarding the question “What if it is not a bubble?”
Rennie offered up several statistics from individual project sales to future development plans to assuage any concerns that the Vancouver real estate market is flying too high.
But nestled in the reassurances was the big picture, which Rennie – to his credit – keeps in mind even when he’s positioning projects for the market.
Rennie reminded his audience that when he began selling real estate in 1975, a standard 33-foot lot in East Vancouver was selling for $33,000 in land value. Today, the same lots are worth $750,000.
“Vancouver had its higher-end areas such as Shaughnessy, and affordable home ownership was decanted to East Vancouver,” he said. “All of the West Side thought that the city literally went Granville Street, then the province of Alberta.”
Rennie argued that the situation today is no different. The high-end areas cover a broader swathe of the region – the residential marketing wing of Colliers International recently moved its West Side boundary a block east to Main Street – but the dynamic is the same. “Is Vancouver to the region today what Kerrisdale and Shaughnessy were to Vancouver 37 years ago?” he challenged. “And are the suburbs to the region today somewhat like East Vancouver was to Vancouver 37 years ago?”
The lesson, in Rennie’s view?
Metro Vancouver has to start thinking about housing regionally and make transit networks fundamental to that thinking.
Deal deadline
Bids for Oxford Properties Group’s national portfolio of data processing centres – including four properties in Vancouver – will be accepted until June 12. Avison Young, the listing brokerage, announced the deadline May 16.
While there’s no word on the interest expressed to date, the deadline is a promising sign.
The properties in Vancouver are clustered along 4th and 5th avenues between Main and Quebec streets and are appealing as either investments or redevelopment plays. •
