Tony Quattrin, vice chair of capital markets for CBRE Canada, is bullish on the Vancouver market, telling Green Street News the city offers opportunities that can’t be found elsewhere.
Earlier this year, CBRE brokered the sale of two high-profile downtown office buildings even as the sector faces strong headwinds. Germany-based Deka Immobilien bought the properties, at 401 West Georgia Street and 402 Dunsmuir Street, from a joint venture between Oxford Properties and Canada Pension Plan Investment Board.
We spoke to Quattrin about leasing dynamics in the Vancouver market, what the sale means and what he expects in the months ahead.
It’s been a challenging year for the office sector. How is the Vancouver market holding up?
Vancouver probably has one of the strongest fundamentals of any office market in North America, maybe globally. Vancouver is very strong certainly in North America, probably the strongest, in terms of vacancy rate, [in] holding up rental rates.
We probably have the strongest market, running at 11% vacancy rates. That includes the shadow market and sublease market. With no supply on the horizon for five or more years, it looks like a pretty healthy market.
Why is Vancouver doing better?
When our major supply of office space came on, we also caught a period of rising growth in the tech industry, and all that space got taken up. Then, before the next wave got started, this recession kind of hit, and everyone put their buildings on hold.
“Vancouver has always been more resilient than any other market”
So, while we have two or three buildings ready to go, I don’t see any new starts for two to three years, and then it takes two or three years to build a building. So, five years before we see new supply actually affecting the vacancy rate.
Can you talk about CBRE’s strategy in this environment?
Vancouver has always been more resilient than any other market. We always say in down periods it’s a buying opportunity. It takes very brave and very courageous decisions to buy in these markets.
The opportunity in Vancouver is not necessarily deeply discounted values but availability. There are things here you couldn’t get in regular marketplaces during regular times in the market.
Does the recent purchase by Deka represent a shift to more international buyers?
International buyers have always had a strong interest in Vancouver. In my role here as co-director of the national investment team with my partner, Jim Szabo, we’ll see every couple of weeks a new investor or new foreign investor who wants to learn more about the Vancouver market or the Canadian market. More and more, they’re coming.
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The issue here is scale. When they come to Canada, they realize it’s not that big of a country, so they can’t get that much, so it’s not worth the effort. Others who have come up have done quite well.
Interest is always constant, but I’d say the acting on interest is getting a little more robust.
How does this affect local companies?
In Canada, the biggest buyers of large commercial assets have typically been institutions or pension funds or advisers that form funds from pension funds. They’ve always been the main players. Over the years in Canada, we’ve seen tremendous change in real estate.
“As interest rates go, the markets will go, but there’s lots of background activity. We’re hoping it translates into transactions soon”
For years, since the ’80s, people have been acquiring real estate voraciously. Well, the Canadian contingent is full. They’re at their quotas. So, they’ll buy, and they’ll sell when the opportunity is right.
The appetite coming from foreigners is starting to make some sense, so we’re seeing some domestics starting to trade out because they’re full in Canada, balance-wise.
Behind the scenes, what’s going on in the Vancouver market?
We thought we were a bit out of the woods at the beginning of this year with interest rates seeming to have settled. There were a lot of predictions about rates coming down, and that seems to have gone the other way and that seems to have slowed markets back down.
As interest rates go, the markets will go, but there’s lots of background activity. We’re hoping it translates into transactions soon.
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