British Columbia, Canada real estate firm looks for luxury buyers in China

Sales of high-end properties are on the upswing in the Vancouver region, spurring one of British Columbia’s leading real estate firms to search for wealthy buyers by setting up shop in China.

Dan Scarrow, vice-president of corporate strategy at Macdonald Realty Ltd., said he has heard enough anecdotal evidence of well-heeled home buyers with roots in China to make it worthwhile to invest in a Shanghai office.

In February, Mr. Scarrow will start the first of two three-month assignments in 2014 in Shanghai. After his fact-finding mission, he plans to hire Mandarin-speaking staff in China to keep the overseas branch office going.

While real estate experts have estimated the proportion of foreign buyers in the Vancouver region’s housing market at only 1 to 3 per cent, Mr. Scarrow said if the statistics were to include recent immigrants with origins in China, the influence of rich Chinese buyers would be greater, especially on single-family detached homes in pockets of Vancouver’s West Side.

Most high-end transactions occur on Vancouver’s West Side and the Municipality of West Vancouver. In the luxury market, there were 644 properties that sold for $3-million or higher in the Vancouver area last year, up 47 per cent from 439 homes that traded hands in 2012, according to data compiled by Macdonald Realty. Of homes that sold last year, there were 148 that fetched at least $5-million, compared with 107 sales in that category in 2012.

Mr. Scarrow said it is hard to determine how many of those elite sales went to recent immigrants from China, noting that the ripple effect due to an influx of new money can easily be exaggerated. Still, he believes the proportion was significantly higher than 3 per cent last year.

“There isn’t this wave of offshore investors with no ties to Canada who are coming in to buy, but the genesis of their wealth is from mainland China,” said Mr. Scarrow, a Canadian who speaks Mandarin fluently. “Most of these people land in Canada first as investor-class immigrants.”

He dismisses tales circulating of wealthy offshore buyers snapping up Vancouver properties sight unseen as false, emphasizing that he will instead seek to nurture a market in which China-Canada family ties are crucial.

The 30-year-old Mr. Scarrow said that as a product of a mixed-race marriage, he is acutely aware that the issue of foreign shoppers is a sensitive one in British Columbia. “The perception among some sellers is that mainland Chinese money is driving the luxury real estate market here,” he said.

But Mr. Scarrow cautions homeowners against hiring real estate agents based only on ethnicity, stressing that the best representatives know Vancouver’s neighbourhoods well, no matter what their race.

Mr. Scarrow’s mother, Lynn Hsu, moved in 1979 from Taiwan to Vancouver. Ms. Hsu is the president and majority owner of Macdonald Realty, which has more than 1,000 real estate agents and staff across British Columbia. Her ex-husband, Peter Scarrow, is a lawyer who has worked in Asia for the past dozen years, including advising wealthy Chinese on Canadian immigration and tax rules.

Dan Scarrow said there will be opportunities to tap into the Chinese market during his stay in Shanghai. Besides seeking contacts who are interested in single-family residential properties, he will be on the lookout for investors in Vancouver’s commercial real estate market and also new condo projects.

Benchmark index prices, which strip out the most expensive properties, have jumped 17.3 per cent to $2.1-million for single-family detached houses over the past three years on the city’s West Side, according to the Real Estate Board of Greater Vancouver. By contrast, West Side prices have risen only 4 per cent for townhouses and 3.5 per cent for condos over the same period.

Fitch: Canadian CMBS Market Stable, Losses Rare

Summary:  Canadian CMBS returns, specifically office and retail, are expected to be positive, though tempered by comparison to recent years.  Conservative lending, recourse loans, and low volume issuance have contributed to low default rates for Canadian CMBS (1.9% default rate in Canada compared to 13.7% in US).  Stable employment, low vacancy rates, rent growth in Montreal and Vancouver, oversupply of condos in Toronto and Montreal, and economic growth stemming from the oil and gas industry in Alberta, Manitoba, and Saskatchewan are expected.


New York --(Business Wire)--
Canadian CMBS will likely perform positively in the near term, Fitch Ratings says. We expect retail and office properties to be positive but slightly lower than they have in recent years. Also, Canadian transactions have had extremely low default rates over the past 15 years. In 2Q13, we calculate a cumulative default rate of 1.9% of issuance by balance. The U.S. rate for the same period was 13.7%. In our view, more conservative lending, the commonality of recourse loans, and the relatively small amount of Canadian CMBS issuance and lending explain much of the difference.

Our view of the office market is rooted in our expectation that Canadian unemployment will remain stable through 2015 at approximately 7%. Nationwide the average vacancy rate in the second quarter was 8.7%. Rents have been growing in Montreal (4.2%) and Vancouver (3.0%) over the prior year.

Over the longer term, we observe some trends in multifamily housing that could slow its growth. The vacancy rate at the end of the second quarter was under 3%. But an oversupply of condominiums in Vancouver and Toronto may be forming. Those markets also have higher youth unemployment rates than the rest of Canada.

We expect the Canadian economy to grow 2% annually from 2013 to 2015. Much of the strongest growth has been in Alberta, Manitoba, and Saskatchewan and is partially attributable to the expansion of the oil and gas industry in those provinces.
http://www.businesswire.com/news/home/20131014006126/en/Fitch-Canadian-CMBS-Market-Stable-Losses-Rare

Langley emerges as hot prospect for business developers

Summary: Vancouver based Madison Pacific Properties purchased 12 office/industrial properties for $60 million, including three in Langley, where Madison hopes to capitalize off of the otherwise expensive real estate for regional industrial manufacturers who want to shift eastward toward lower leasing costs, but are stifled by the Agricultural Land Reserves surrounding Vancouver.  Specifically, the Langley neighborhoods of Clayton Heights and Willoughby are growing at "unbelievable rates" according to Cushman Wakefield Senior VP of Industrial RE.  (He projects future growth in Pitt Meadows, Abbotsford, and Mission.)

The 700-acre Gloucester Industrial Park, in northeast Langley on the Trans Canada, and connecting to all major railway lines, goes for $950,000 to $1.1 million per acre plus development cost charges and site preparation.Photo by: Handout, Cushman Wakefield

Vancouver --(Vancouver Sun)--

In a blockbuster cross-Canada deal of more than $60 million, Madison Pacific has bought 12 office/industrial properties, including three in Langley. With the Agricultural Land Reserve severely limiting development closer to Vancouver, the Fraser Valley township is fast emerging as a B.C. commercial real estate hotspot, according to industry experts.

“The Langley site in particular is strategic in that it represents 21 contiguous acres of land with over a kilometre of frontage on the Trans-Canada Highway,” says Robert Gritten, principal at Avison Young, which led the 12 deals for Madison Pacific. “As Madison Pacific invests for the long term, the opportunity this site offers for redevelopment is dramatic.”

Like all properties in the deal – to a total of 540,000 square feet of office/warehouse/enclosed storage space on 98 acres of land – the Langley ones have only 13-per-cent site coverage, compared to traditional industrial averages of 40-50 per cent. All are tenanted by Burnaby-based Taiga Building Products.

Referring to “the stifling effect” on Metro Vancouver of the ALR restrictions established by the Barrett NDP government starting in 1973, Gritten says: “As a result of this supply-demand imbalance, yes, we are more expensive than most, if not all, markets in North America. The geographic advantages that make this city such a great place to live actually work to a disadvantage when we attempt to meet the demand of our industrial manufacturers and distributors. They want and need to be here. We are the gateway for Canada to Asia, but it is so difficult to secure suitable premises for most of our user clients.”

No surprise, then, that developers are turning hungry eyes to Langley, with “its good supply of vacant land,” Gritten says. “It’s a natural extension.”

“In looking at demand in the Lower Mainland, we’re seeing a substantial eastward shift,” says Bill Hobbs, senior vice president, Industrial, with Cushman Wakefield. “Based on the tight supply, one looks farther out in valley. Port Kells [in northeast Surrey] has been substantially eroded in terms of available product. There’s significant eastern migration into Langley Township.”

Hobbs sees the Langley neighbourhoods of Clayton Heights and Willoughby “growing at unbelievable rates” as businesses shift east. The 700-acre Gloucester Industrial Park, in northeast Langley on the Trans Canada, and connecting to all major railway lines, goes for $950,000 to $1.1 million per acre plus DCCs (development cost charges) and site preparation.

For Madison Pacific, the nation-wide deal through Avison Young “was an opportunity for us to acquire a geographically diverse portfolio with good leveraged returns in properties that have long-term additional development potential,” says President and CEO Marvin Haasen. “One of our objectives has been to expand beyond the Lower Mainland where the majority of our assets are located. We have achieved this objective with the purchase of this portfolio, as 60 per cent of the properties are located outside the Lower Mainland.”

Still, Haasen says, “there continues to be strong investor interest for Lower Mainland properties. Demand is high while the supply of available properties is limited, so pricing is more aggressive.” He likes the three Langley properties for their “strong fundamentals.”

For Hobbs, the increasing strength of Langley was inevitable from the moment politicians completed their “tightly drawn” ALR lines in 1975. “I’ve been calling this one for 26 years” – his time in the business to date. “Now we’re seeing a doubling of the population. Now all of a sudden we’re going to see continued growth in the next one to two decades.”

According to a Cushman Wakefield document, Langley’s economy is not only fast-growing but increasingly diverse, with a favourable tax base, skilled labour force, state-of-the-art manufacturing industries, a strong retail and service sector, and many internationally operating and export-oriented companies moving in. These factors, plus “the proximity of Langley to Vancouver, Seattle and overseas markets have made the Langley area attractive for investment and development.”

But the migration isn’t stopping at Langley. Watch for a surge into Pitt Meadows and Abbotsford, and even north into Mission, Hobbs predicts.

The other properties acquired in the mammoth Madison Pacific deal are in: Kelowna; Edmonton (two); Calgary; Sudbury, Milton and Monetville, Ontario; Boucherville and St. Augustine, Quebec.

The transaction, which closed Sept. 12, involved eight Avison Young offices across Canada. Avison Young also represented Taiga Building Products in 2006 when the portfolio was sold to Argo Ventures.

http://www.vancouversun.com/business/commercial-real-estate/Langley+prospect+commercial+real+estate/9027569/story.html