Source

Soaring crop and oil prices place Saskatchewan, Alberta and Manitoba No. 1, 2 and 3 among provinces, RBC says.

Saskatchewan will lead Canadian provinces in economic growth in 2022, with Alberta and Manitoba ranked No. 2 and No. 3, according to provincial forecast from RBC economist, released June 7.

RBC projects growth will be strongest in Saskatchewan, 6 per cent, Alberta, up 5.7 per cent, and Manitoba, with a 4.8 per cent economic expansion compared to 2021.

British Columbia will fall “to the middle of the pack,” economists Robert Hogue and Carrie Freestone said in their report, due to a decline in the housing market.

Last year B.C. registered the highest rate of economic growth among the four largest provinces, and second in Canada only to Prince Edward Island, where the provincial economy is also highly dependent on the residential real estate.

Strong global demand and prices for commodities are significantly boosting Prairie prospects, the report notes. Saskatchewan stands to report a huge rebound in agricultural production this year, coming off an exceptionally low level in 2021.

“We expect stronger agricultural production will also drive up overall economic growth in Manitoba and Alberta,” the economist noted.

“The massive upswing in global energy markets is further benefiting Alberta’s economy. While crude production to date in the province is largely in-line with year-ago levels, the value of energy exports is up 50 per cent due to higher prices.”

As of June 8, the price of West Texas Intermediate (WTI) crude, an industry standard, was at $122.40 per barrel, the highest level since September 2008.

In British Columbia, capital investment in the natural resource sector (including the construction of a major liquefied natural gas project) will continue to play a key part of the province’s growth story, the report noted. Natural gas is now priced near $9 per million British thermal units, the highest level in eight years.

But RBC cautions that B.C.’s reliance on the residential industry leaves it exposed this year. The bank is forecasting B.C. economy will expand 4.2 per cent this year – down from 2021’s 5.9 per cent growth – and even with Canada’s projected growth.

“We expect rising interest rates will further moderate home resale activity in the period ahead and broaden the cooling effect to other regions. Rapidly deteriorating affordability – especially in Canada’s most expensive markets – will make it increasingly difficult to sustain recent property values,” the RBC economists said in their analysis.

“In fact, we believe home prices have already reached a tipping point in several markets in Ontario and British Columbia. Slower activity will tamp down the substantial contribution the housing sector made to economic growth during the pandemic.”

Multiple listing service residential sales in B.C. are projected to decline to 97,240 units this year, down 22 per cent from 2021’s record high, according to the BC Real Estate Association’s latest forecast, released May 31. Residential sales are forecast to fall an additional 12.4 per cent to 85,150 units in 2023.

Source

Regional and outlier centres far east as Alberta now an option as Metro Vancouver’s land base shrinks and prices skyrocket.

A five-acre industrial parcel in Port Coquitlam sold in May for more than $2 million per acre as a land shortage push values higher. | Lee & Associates.

Metro Vancouver’s rapidly diminishing base of industrial land is forcing industry to consider new ways and new places – to meet demand that shows no signs of slowing down.

“We’re at a critical land supply shortage in the region, and persistent vacancy below 1 per cent, and we need to find creative solutions to create new supply for the market,” says Jason Kiselbach, senior vice-president and regional managing director in Vancouver with CBRE Ltd.

Metro Vancouver released a survey of the region’s industrial land supply last year that identified 3,126 acres of vacant, undeveloped industrial land. But it noted that not all those properties are suitable for current users, meaning absorption lags actual demand.

The report notes that the average size of parcels is less than five acres, too small for major warehouse development. While the report suggests that the supply could last into the 2030s, CBRE suggests that realistic estimates put the developable land supply at closer to six to eight years.

“You just can’t deliver supply fast enough. It’s just being absorbed, and we don’t see that demand drying up in the near term,” Kiselbach said. “We’re not able to get more of that supply to the market.”

According to CBRE’s industrial market report for the first quarter, Vancouver leads the country with the highest asking sales price of $575 per square foot, followed by Toronto at $346.22. But in markets such as Richmond, prices are cresting $750 a square foot.

The impacts of such dramatic escalations are felt across the market.

“The strata market has been the key driver of land,” Kiselbach said. “That doesn’t help the critical shortage of space available for leasing, especially mid-bay or even large-format space.”

While approximately nine million square feet is under construction in Metro Vancouver, 80 per cent is spoken for. Moreover, upward pressure on lease rates has made landlords reticent to enter long-term leases unless there’s room to reset rents midway through.

“They don’t want to lock in at today’s pricing,” Kiselbach said. “They want to do a shorter-term deal and have the ability to review that lease rate sooner.”

But relieving pressure on lease rates in a space-constrained market like Vancouver won’t be easy.

With several uses competing for available sites, all users have to make better use of the land base they’ve got. This favours strata units, which are typically smaller units that lend themselves well to densification. Stacking is more difficult for large-format warehouses, which require cross-docking and parking.

Sometimes, it takes creative thinking – and lots of patience – to secure additional land.

Conwest Group hopes to develop a 600,000-square-foot warehouse on three parcels in Langley adjacent to Gloucester Industrial Estates. A 2017 court decision cleared the way for exclusion of the properties from the Agricultural Land Reserve. Conwest Group satisfied the conditions necessary for exclusion earlier this year. Rezoning of the site passed third reading on May 9 and the proposal will next head to Metro Vancouver for approval.

Conwest COO Ben Taddei says the process illustrates the potential for projects to move forward in the region but admitted there are plenty of hurdles left to clear. Construction is unlikely for at least three years.

In Port Coquitlam, a May sale of light-industrial land topped more than $2 million an acre. The five-acre property, located at 590 Dominion Ave., was sold for $10.65 million to a private company, according to commercial real estate broker Lee & Associates of Vancouver

Some developers and tenants are looking further afield.

Last summer, Denciti Development Corp. and Kadestone Capital Corp. purchased 8.5 acres in Squamish to serve local companies. Plans call for light industrial units serving arrange of manufacturing and tech companies, many of which have chosen to stay in Squamish. This has made the market a viable option to Metro Vancouver, especially for those companies with roots in the Sea to Sky corridor or seeking to serve businesses in Whistler and beyond.

Similarly, Beedie recently unveiled plans for the Stratosphere Business Centre on 14.7 acres adjacent to Kelowna International Airport.

But some companies are taking a close look at relocating further afield.

“We’re hearing from clients that own properties in both provinces now that they’re seeing the same names show up on tour sheets in both Vancouver and Calgary, and sometimes Edmonton as well,” Kiselbach said.