Commercial Real Estate A Hot Commodity on Vancouver Island
Mike Mullen of Pemberton Holmes
NANAIMO – There is strong demand for multi-family real estate on Vancouver Island – not just from residents within the Vancouver Island Real Estate Board region, but from the lower mainland as well.
Mike Mullin of Pemberton Holmes Ltd. in the Comox Valley says the Island has been “discovered” as a preferred residential choice, and the multi-family market, in particular, is a beneficiary.
“All of the multi-family units in our region are filling up,” states Mullin. “In the Comox, Courtenay and Campbell River area, there are many recently completed projects and they‘re all filled – there are no vacancies to speak of.”
Mullin attributes that to the arrival of new residents, as opposed to locals simply moving living locations. “That’s what I understand,” he says. “The population growth is very strong.”
Further, it’s not easy to find developable land. Mullin points to a Ryan Road project where Broadstreet Properties is proposing a 251 unit project on land leased from Loblaws.
Multi-family construction is underway at a feverish pace throughout the VIREB region, which Mullin attributes not just to demand, but the fact builders have been able to obtain unbelievably low interest rates with CMHC’s RCF Direct Lending Program.
John Hankins of NAI Commercial
Introduced in 2020, the record lowest rate offered was 0.76 per cent as recent as August 4, 2020, for a 10 year term. That rate, linked to the Government of Canada bond rate plus 33 – 50 basis points, is 1.89 per cent today at its lowest.
“With those rates, no wonder there’s so much construction going on. Everything has gone to build, build, build,” Mullin states. “Courtenay has a population of 26,000, and currently there are 11 projects in the early planning stages to actual construction. These will add another 978 rental apartments – not to counting the completed projects in the last two years.”
John Hankins of NAI Commercial in Nanaimo sees the market in much the same way as Mullin.
“If something comes on the market, we’re seeing a lot of demand,” Hankins observes. “Regarding the recent sales on the Multiple Listing Service (MLS) for combination development, multi-family and existing buildings, in the majority of cases they’ve sold at the asking price, or just below that.
“There are a lot of people looking for product to buy,” he adds.
Hankins notes there are two different types of markets: The development land and existing buildings that have multi-tenancy residential in rental units.
“Both of these markets are really, really strong. We’re seeing a lot of developers in the lower mainland starting to turn their attention to what is happening on the island, to see what they can develop here, if they can.
Where there’s good income in a new building, or that can be improved by increasing the rents and improving the revenue stream, investors and bigger REITs are starting to expand into our market. That is putting some pressure on CAP rates.”
Looking ahead, Hankins sees the demand continuing.
“I’m not seeing any softening in the market,” he observes. “I think at this moment in time, I don’t see the market correcting itself and switching into an oversupply.”