Top 5 Commercial Real Estate Trends in BC
Trends in Commercial Real Estate You Don’t Want to Miss
Despite high interest rates, inflation, increasing building costs and rent hikes, the future of commercial real estate in British Columbia is looking brighter than ever. British Columbia continues to withstand and adjust to market challenges by embracing commercial real estate trends. Easily adapting to change is key to maintaining resilience in the fast-paced real estate sector.
At D. Fritz Appraisal Inc., we’re experts at understanding today’s real estate trends. With that in mind, here are five commercial real estate trends worth flagging for future investment!
Repurposing Commercial Office Space
Hybrid work models have eliminated the need for professionals to go into the office at a rate never seen before. Vancouver’s office space availability is the highest in 20 years, with landlords and building owners adapting their leasing strategies as many tenants require more flexibility with their office space rentals.
One such adaptation is coworking. Though it had a shaky start, coworking or flexible workspace locations continue to expand beyond Vancouver’s downtown core, providing renters with shorter leases and more flexibility at a higher cost.
While easier said than done, another approach to repurposing empty offices is to turn them into housing. Converting commercial real estate into residential housing may help with the housing crisis, but there are a host of challenges to consider:
- Size and number of windows
- Electrical
- Mechanical
- Plumbing
- Elevators
Based on the requirements above and other specifications, only about 25% of commercial buildings meet the conversion criteria.
Thriving Retail Sector
The retail sector recorded a whopping 91% increase year over year in Vancouver’s second quarter, with over $723M in transactions. Traditional retailers are adapting to online shopping by creating experiential shopping centers that integrate residential living, office space and in-person shopping. Oakridge Park and CF Richmond Centre are examples of shopping that blend living, leisure and work.
Top among the shopping experiences driving growth are food-related retail spaces such as grocery stores. There has been a shift from traditional clothing and jewelry merchants to more service-based offices and restaurants.
Investment in Multifamily Homes
At D. Fritz Appraisals Inc., we understand that finding affordable housing amid the housing crisis has become a significant challenge in British Columbia. Zoning changes now mandate that all large municipalities in BC allow multiplexes to be built on lots formerly deemed single-family or duplex.
As a result, the Altus Group has recorded huge gains in the multi-family sector in the second quarter of 2024, with $638M changing hands in Vancouver, a 68% increase year over year. Multifamily properties are attractive to institutional investors for their ability to generate stable income in a market known for low vacancy rates and where demand remains high for rental housing.
Clean Energy Infrastructure
Commercial real estate trends in clean energy infrastructure are on the rise. As the demand for more sustainable building construction grows in the industrial real estate sector, greener solutions like North Vancouver’s hydrogen liquefaction plant are becoming more common.
A few of the incentives and programs leading the way when it comes to cleaner building include:
- BC Energy Step Code – The BC Building Code requires a 20% energy efficiency improvement for most new builds in BC
- Vancouver’s Zero Emissions Building Plan (ZEB) – A plan to transition to zero-emission new construction by 2030
- BC Hydro’s Power Smart – Free offers and rebates for energy-efficient renovations and products
- LEED – Leadership in Energy and Environmental Design is an international symbol that recognizes green building practices
Despite the higher initial cost, investing in clean energy is sound. Investors and tenants can reap long-term benefits such as lower operating expenses, higher property values, and reduced environmental impact.
Rising Interest Rates and Increased Building Costs
High interest rates and higher costs to build are a few of the challenging trends in commercial real estate. High construction costs are affecting the supply on new builds and slowing down the release of new properties into the market. The financing hurdles associated with increased costs are driving investors towards existing properties to generate income.
High interest rates were a major concern for commercial real estate investors at the start of 2024. With the Bank of Canada holding interest rates at 5% (Dec 6, 2023), there was no relief in sight for investors struggling with high payments. Now, as interest rates soften, the commercial real estate sector has started to recover and become more attractive.
What Does the Future Hold?
As you might expect, government policies, population, and the economy will influence the future of commercial real estate in BC. Expect to see:
- Traditional office spaces will continue to be repurposed as working from home becomes the new gold standard for achieving work-life balance
- Industrial real estate will expand to accommodate e-commerce. Distribution centers, logistics hubs and delivery spots will grow to meet demands
- Stricter environmental regulations will force developers to adopt green building practices and energy-efficient technologies
- Rental rates will remain high as housing demands continue to exceed supply
These are just a few trends in commercial real estate that will shape British Columbia’s future.
Trust D. Fritz Appraisals to Keep up with the trends in Commercial Real Estate
Would you like to know what to expect from a real estate appraisal with D. Fritz Appraisals Inc.?
You can expect our commitment to provide you with the highest level of residential or commercial appraisal service from Victoria to Nanaimo and the Gulf Islands. Our outstanding team of certified appraisers will tailor your appraisal report to meet your lender’s requirements. A list of frequently asked questions can be found here. But if you still have questions, our team will be standing by to assist you.
Follow D. Fritz Appraisals Inc. on Facebook or Instagram for client reviews and to keep up to date with trends in BC’s ever-changing real estate market, and don’t forget to reach out to order your appraisal. You’ll be happy you did!
