North Shore Report - Avison Young

North Shore Report

North Vancouver, British Columbia Spring 2015

Source: Port Metro Vancouver

Development continues unabated as all asset types remain active

T

$72M sale of Capilano Business Park). While sales activity in 2014 did not surpass that of 2013, 2014 did record the second-highest dollar volume on record without a single blockbuster deal and just three transactions that surpassed $10M. The largest was the $30.5M sale of the 60,000-sf office/retail podium of Wesgroup’s Prescott condominium development to Morningside Properties, which serves as the new head office for BlueShore Financial.

he North Shore commercial real estate market remains one of the hottest markets in Metro Vancouver with land, office, retail and industrial assets in high demand. Strata sales were the primary driver of transactional activity on the North Shore in all asset classes in 2014. Many of the freestanding buildings that were purchased, particularly office and retail properties, were acquired with an eye to redevelopment. In most cases, developers are envisioning a mixeduse development – the new design modality sweeping the North Shore.

Deal volume remained elevated in 2014 compared with historical trends with 78 transactions completed – less than the record-setting 93 deals logged in 2013, but well above the 51 and 68 deals completed in 2012 and 2011, respectively. Office, retail and industrial strata properties remained in demand and, since they accounted for the majority of available product, were the dominant form of commercial real estate to transact in 2014.

While sales and leasing activity remained strong in the North Shore’s more traditional development nodes such as Central Lonsdale, Lower Lonsdale and increasingly the Marine Drive corridor and Lower Lynn, development activity has been spreading to secondary nodes such as Lynn Valley, Maplewood, Capilano Road, and even Edgemont Village and Deep Cove.

Office vacancy dropped to 7.8% at year-end 2014, marking two years of tightening vacancy as pent-up demand through 2013 and 2014 translated into a significant volume of lease transactions. Rental rates, which had softened

Transactional activity on the North Shore generated almost $173M worth of commercial real estate transactions in 2014 compared with the recordsetting $197M set in 2013 (largely achieved by the

continued on page 4

North Shore Commercial Real Estate Transactions 2009 - 2014

x x

x

Number of Transactions

110 100 90 80 70 60 50 40 30 20 10 0

Partnership.Performance.

Transaction Summary p. 2 Mixed-use Developments p. 3 Deal Tracker p. 4

Market Outlook Cap Rates

Industrial Vacancy Office Vacancy Retail Vacancy

28 22 40

$ Million

Office Retail Industrial

Inside

28

20 30 15

16

29

22

16

16

20

Inducements (all classes)

15

16 17

2009

Lease Rates (all classes)

30

25

2010

2011

2012

2013

2014 I 1

Office and retail activity steady with industrial space at a premium

Matt Thomas, Vice-President 604.646.8383 [email protected] Specializing in the sale and leasing of commercial real estate and disposition of development and multi-family properties on the North Shore for the past 10 years.

Terry Thies, Principal 604.646.8398 [email protected] Specializing in sale/leasing of North Shore commercial real estate for more than 20 years.

The imminent demolition of the Esplanade Centre was responsible for several office leasing transactions on the North Shore during the past six months. Hollyburn Family Services, Family Services of the North Shore, Providence Health Authority and VMS Ventures were all required to relocate. Office vacancy slipped to 7.8% at year-end 2014, down from 8.5% in 2013 and 9.6% in 2012. Imtech Marine simply outgrew its existing premises and expanded in Capilano Business Park by leasing a larger office as well as securing additional warehouse space. Strata sales dominated office deals in 2014 – many units were located in 700 Marine and Dollarton Business Park. Three office deals exceeded $2 million in 2014. The 60,000-sf office podium of the Prescott development in Central Lonsdale sold for $30.5M, while the property at 100-130 East 1st Street and 120 Lonsdale sold for $6.4M. The sale of 5775 Marine Drive in West Vancouver for $2.645M was one of four office transactions in that municipality in 2014. Retail leasing activity remained steady but primarily concentrated in existing North Shore retail nodes. In Lower Lonsdale, retail rates ranged from $20 psf to $40 psf with strong leasing activity noted in high-exposure retail space. Tap & Barrel Restaurants leased 8,500 sf in the Coppersmith Shop building at the former shipyards site. Staburn Group’s sold-out Wallace & McDowell condo development at 1st and Lonsdale is scheduled for completion in the first quarter of 2016 and will include more than 12,000 sf of new retail units. and 8,200 sf of new office space. Retail lease rates along Lonsdale Avenue are $35 psf to $50 psf with strong activity on CRUs ranging from 800 sf to 1,600 sf. Onni Group’s CentreView mixed-use development at 13th and Lonsdale will add approximately 90,000 sf of retail, anchored by Whole Foods Market, when the project is delivered in the second quarter of 2017. The project also offers 78,720 sf of office space on four floors.

Activity outside the more traditional retail areas was limited. Rental rates along the evolving Marine Drive retail corridor ranged from $25 psf to $45 psf as occupancy levels improved in the past six to 12 months. NorthWoods Village in Maplewood is set for completion in the third quarter of 2015 will add 50,000 sf of retail space and is anchored by a Stong’s grocery store and a private liquor store. Eight retail properties sold for more than $3.5M in 2014 with two exceeding $10M - 819 Automall Drive and 1100-1112 Lonsdale Avenue. While retail sales activity was primarily limited to strata units in 2014, a handful of freestanding retail properties changed hands. Industrial leasing activity remained muted with vacancy at 2.3% – the lowest in Metro Vancouver – and hampered potential deal volume. The difficulty in securing industrial space was demonstrated by Honeycomb Climbing – an indoor bouldering facility – leasing five units in building 6 of NorthWoods Business Park, which resulted in the park being 100% leased. Pro Arte Performing Arts renewed in its space at Keith Business Centre whereas ADM Structural needed to relocate to a larger space on Columbia Street in order to accommodate its growth. A handful of industrial lease deals at Capilano Business Park – including Dulux Paints (4,890 sf), Roman Metalworks (5,820 sf), EMCO Ltd. (5,120 sf) and Imtech Marine’s above mentioned warehouse deal (4,840 sf) – demonstrated the more typical small-scale industrial deals common to the North Shore. Industrial strata sales remained the primary driver of sales activity with multiple units selling in Norgate Business Park and the Dollarton area. The largest industrial sale was the Cove Warehouse portfolio – four buildings along East Esplanade – that sold for $13.8M. Two buildings will be demolished and redeveloped as strata flex space, while the other two will be refurbished and repositioned for lease.

NOTABLE NORTH SHORE LEASE TRANSACTIONS ADDRESS Ian Whitchelo, Vice-President 604.647.5095 [email protected] An expert in the leasing and sale of commercial real estate on the North Shore.

TENANT

SQUARE FEET (SF)

#130-#150 & #260-#270 2270 Dollarton Highway (industrial)

Honeycomb Climbing Inc.

18,350

#3-225 East Keith Road (industrial)

Pro Arte Performing Arts

15,300

#4-1588 Columbia Street (industrial)

ADM Structural Inc.

9,750

Hollyburn Family Services

9,380

Capilano Business Park (office)

Imtech Marine

7,460

1111 Lonsdale Avenue (office)

Family Services of the North Shore

6,820

Providence Health Authority

6,580

267 West Esplanade (office)

140-148 West 15th Street (office) 200 West Esplanade (office) Partnership.Performance.

VMS Ventures Inc./North American Nickel Inc.

3,340 I 2

Mixed-use development preferred format in North Vancouver market

“Significant planning cases” as designated by the District of North Vancouver and select active development applications in the City of North Vancouver.

M

ixed-use developments continue to proliferate in North Vancouver as developers set their sights outside the more traditional development areas of Upper and Lower Lonsdale and, more recently, Marine Drive. The following is a partial list of significant mixed-use developments currently under construction or in process. City of North Vancouver (CNV)

• 101-149 Lonsdale Avenue: Staburn Property Group’s development, Wallace & McDowell, consists of a six-storey mixeduse building with 64 strata units, five non-market units, strata office space, and retail space. It is currently under construction. • 117-135 West 1st Street: The CNV has approved a rezoning application from Fairborne Properties for a six-storey mixeduse building with a neighbourhood amenity room and retail space at grade. The project is under construction.

• 925 Harbourside Drive: A four-phase mixed-use development from Concert Properties has been approved for this area. The development will be guided over time by development permit guidelines to control the form and character of the development. District of North Vancouver (DNV)

• 2035 Fullerton Avenue: LARCO Investments Ltd. proposed a four-phase mixed-use development including 451 residential units in townhouses, and 6-,12- and 18-storey towers. The rezoning application was approved. A development permit application has not yet been received. • Seylynn Village: A mixed-use development featuring 790 residential units, as well as mixed retail. The first phase, a 24-storey building with 201 units, is almost complete. Development permit applications for phase two have been submitted. Phase two comprises two buildings: a 28-storey building with 240 dwelling units and 1,300 sf of commercial space and a six-storey building including 70 units, a 2,700-sf childcare facility and a recreation centre.

• 119-131 West Esplanade & 120 Carrie Cates Court: The CNV received a development application from Polygon Development 304 Ltd. The application includes a two-storey podium fronting West Esplanade and a 15-storey residential building above a three-storey podium fronting Carrie Cates Court. • 2010 Marine Drive: The rezoning application for Pacific Gate Investments’ mixed-use project, including two residential The application is currently on hold. towers, a stand-alone restaurant, and a commercial building, • 255 West 1st Street & 260 West Esplanade: Polygon was approved. A development permit application had not yet Development proposed a mixed-use development, West Quay, been received. The project will include 262 residential units. consisting of two five-storey residential buildings above two storeys of commercial space at grade. The project was approved in June 2014. Demolition of the existing structure is imminent.

• 725 Marine Drive & 843-855 West 1st Street: The two proposed developments will facilitate the relocation of the existing Kia car dealership and the development of a new mixed-use building. The CNV initially declined the application as presented in mid2014 and asked Darwin Properties to revise its application. • 1308 Lonsdale Avenue: CNV approved the rezoning application from the Onni Group for 1308 Lonsdale Avenue. A building permit application is anticipated as demolition of the existing structure is underway and site excavation has commenced. Partnership.Performance.

• 1700 Marine Drive: IMANI Development has proposed a fourstorey mixed-use development, the Tatlow, featuring 39 units with commercial at grade. • 1561 Oxford Street: Darwin Properties Ltd. has commenced construction on a six-storey rental apartment building with commercial at grade. • 1175 Lynn Valley Road: Bosa Development Corp. has proposed six residential buildings ranging from four to 12 storeys with commercial and community space at grade. The rezoning was approved in July 2014. The project is now in the development permit stage of the process.  I 3

continued from page 1

Retail assets remained a hot commodity with 30 deals valued at $71M transacting in 2014. Eleven deals involved properties exceeding $2M. And while strata played an important role in the composition of sales, stand-alone assets (many of which could be redeveloped; see page 3 feature on current North Shore development sites) were highly prized – with some commanding per-square-foot rates in excess of $1,000, including two properties in the 3000- and 3100-blocks of Edgemont Boulevard and another in the 1500-block of Lonsdale Avenue. Leasing activity was stable, particularly in the primary retail nodes such as Lower Lonsdale, as vacancy remained tight. Leasing activity in the Marine Drive corridor has increased as retailers and shoppers orient themselves to the new retail presence that has developed in the past 12 to 18 months. Residents of the many new mixed-use developments in the area are settling into their homes and beginning to explore nearby amenities and services. 

OFFICE

ADDRESS

MUNICIPALITY

TRANSACTION VALUE

SQUARE FEET (SF)

PER SQUARE FOOT (PSF)

DATE

100-130 East 1st Street; 120 Lonsdale Avenue

North Vancouver

$6,400,000

18,875

$339

December 2014

#100, 110, 120, 130 - 233 West 1st Street

North Vancouver

$1,750,000

4,210

$416

April 2014

2436 Haywood Avenue

West Vancouver

$1,203,334

2,859

$421

April 2014

5775 Marine Drive

West Vancouver

$2,645,000

7,095

$373

March 2014

2030 Marine Drive

North Vancouver

$1,278,320

4,408

$290

March 2014

700 Marine Drive

North Vancouver

$1,165,205

2,330

$500

January 2014

1250 Lonsdale Avenue

North Vancouver

$30,516,815

60,000

$509

January 2014

236 & 240 Lonsdale Avenue

North Vancouver

$1,400,000

2,514

$557

December 2014

705 West 3rd Street

North Vancouver

$4,850,000

7,785

$623

October 2014

1323-1333 Lonsdale Avenue

North Vancouver

$7,100,000

7,140

$994

September 2014


North Vancouver

$3,500,000

2,715

$1,289

September 2014

138-148 West 15th Street

North Vancouver

$4,637,000

7,794

$595

September 2014

744-748 Marine Drive

North Vancouver

$1,700,000

2,843

$598

July 2014

3026-3028 Edgemont Boulevard

North Vancouver

$2,000,000

1,751

$1,142

July 2014

3107-3111 Highland Boulevard; 3102-3104 Edgemont Boulevard

North Vancouver

$1,750,000

4,050

$432

June 2014

277 Mountain Highway

North Vancouver

$4,400,000

15,315

$287

May 2014

819 Automall Drive

North Vancouver

$10,047,000

13,915

$722

April 2014

1763 Marine Drive

West Vancouver

$1,045,000

1,155

$905

April 2014

3060 Edgemont Boulevard

North Vancouver

$2,500,000

2,550

$980

April 2014


North Vancouver

$10,000,000

29,519

$339

April 2014

515 West Windsor Road

North Vancouver

$3,534,000

15,600

$227

February 2014

3151-3171 Edgemont Boulevard

North Vancouver

$3,250,000

3,000

$1,083

February 2014

$44,958,674

RETAIL

Industrial leasing activity remained limited in the first quarter of 2015 with vacancy at 2.3% (up slightly from 2% at the end of 2014). A lack of available industrial land for development (or redevelopment) continues to hamper construction of new industrial projects. While demand for industrial strata remains undiminished, particularly for units in the 2,500- to 10,000-sf range, the sales of 12 freestanding industrial buildings in 2014 (including the four-building Cove warehouse portfolio) are unlikely to occur again in the foreseeable future as a number of non-market factors instigated the disposition of those assets. There were 20 industrial sales in 2014 valued at $47.4M compared with 28 sales valued at $106M in 2013 (which was skewed by the sale of Capilano Business Park).

NORTH SHORE COMMERCIAL PROPERTY DEALS (GREATER THAN $1 MILLION) JANAURY 1, 2014 TO DECEMBER 31, 2014

$61,713,000

INDUSTRIAL

in early to mid 2014 to induce a relocation/renewal, have since returned to market norms – with no new construction set for delivery in the next 12 to 18 months. Rental rates are anticipate to remain stable with some upward pressure in specific market nodes as vacancy continues to tighten. Of the 78 total sales in 2014, 28 office deals valued at $54.5M transacted, which was a significant increase dollar volume-wise from 2013, when 25 sales were valued at just $16M. More than half of the dollar volume in 2014 was attributed to a single transaction with the majority of deals valued at less than $500,000.

Cove warehouses portfolio 238, 266, 350 & 366 East Esplanade

North Vancouver

$13,800,000

77,514

$178

November 2014


North Vancouver

$5,650,000

24,589

$227

November 2014

#109 - 2433 Dollarton Highway

North Vancouver

$1,275,000

4,182

$305

November 2014

#117-#127 - 1305 Welch Street

North Vancouver

$3,798,000

12,448

$305

August 2014


North Vancouver

$1,600,000

6,350

$252

August 2014

#100 & #102 - 375 Lynn Avenue

North Vancouver

$2,350,000

9,418

$250

August 2014

#108 - 2433 Dollarton Highway

North Vancouver

$1,269,288

4,182

$303

June 2014

150-152 Pemberton Avenue

North Vancouver

$1,695,000

6,360

$267

May 2014

378-382 East Esplande

North Vancouver

$1,955,000

8,407

$233

March 2014


North Vancouver

$1,850,000

6,800

$272

March 2014

1515 Barrow Street

North Vancouver

$1,988,556

6,519

$305

February 2014


North Vancouver

$3,600,000

18,000

$200

February 2014


North Vancouver

$1,750,000

7,400

$236

January 2014

$42,580,844

For more information please contact: Michael Keenan, Principal & Managing Director Direct Line: 604.647.5081 [email protected] Andrew Petrozzi, Vice-President, Research (BC) Direct Line: 604.646.8392 [email protected]

Avison Young Commercial Real Estate (B.C.) Inc. #2100-1055 W. Georgia Street Box 11109 Royal Centre Vancouver, BC V6E 3P3, Canada

avisonyoung.com © 2015 Avison Young (Canada) Inc. All rights reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young Commercial Real Estate (B.C.) Inc.