Greater Vancouver Industrial Market Seems Immune to COVID-19 Impact
Greater Vancouver Industrial Market recorded 433 sales in 2020. That is almost the same as the average of prior 3 years—at 439 annual sales.
Out of 12 municipalities studied, precisely half of them did better their past 3-year average, while the other half recording fewer transactions.
Richmond, and Coquitlam experienced the highest growth in their sales, while Vancouver and Chilliwack experienced the most decline in sales.
Covid-19 has accelerated migration of business to online. That has increased the need for warehousing, logistics, and servers. These activities in turn increase demand for industrial land. Meanwhile industrial land remains scarce in Greater Vancouver.
Industrial sales may be even higher in 2021, independent of impact of Covid-19 on wider economic sphere. If Covid-19 conditions persist, some of the sellers who are currently sitting on the fence may be motivated to adjust their price expectations. Otherwise, if Covid-19 restrictions are lifted—and life goes back to normal, some of the buyers might be willing to pay even more for the industrial properties. We will have to wait and see who blinks first.
Persian Qanat: A 3,000 Years Old Engineering Marvel
Qanat is 3,000 years old Persian ingenious technology that transformed arid, inhabitable, areas into prosperous, irrigated, cities.
Qanat is an underground horizontal water canal. It brings water from aquifers in the mountains to dry lowlands of Iranian Plateau.
Today this technology is being used from China to North Africa and irrigates about 1.5 Million Hectares of land worldwide.
Key benefits include: resistant to earthquakes and floods, resistant to destruction in war, insensitive to the levels of rain and precipitation, gradual variations from wet to dry years, secure from contamination by animals and people.
This was all done in an environmentally sustainable way without use of pumps, or electricity. It only used gravity as source of energy.
It is exceptionally impressive as the modern tools of surveying, communication, navigation, GPS, and underground imaging were nowhere to be seen for another 3,000 years!
The longest qanat is 80 km long and took centuries to build. As such it required an intergenerational commitment, and perseverance, to complete the work; in absence of which, many cities in Iran would not exist.
It is estimated that total length of Qanats in Iran is about 350,000 km, or same as the distance between earth and moon.
Greater Vancouver Apartment Looks Poised for another Price Surge
Despite a series of government interventions to cool the Vancouver Apartment market, the market seems primed for another price hike.
This assessment is based on Sales-to-Active Ratio (SAR) trend of Greater Vancouver Apartment market starting in 2016. SAR is the demand/supply ratio that serves as one of the best metrics to forecast near future price movements. If the SAR is above 22% for several months, it will likely experience price increases in subsequent months. This can be viewed in the graph below where SAR increase (blue waves) were followed by apartment price increase (yellow line) in the following months.
The SAR has been steadily increasing in all Greater Vancouver municipalities in 2020, despite COVID-19 pandemic. In December 2020, Coquitlam, Port Coquitlam, Port Moody, and North Vancouver all had SAR ratios above 50%. This indicates a high likelihood that prices will begin to rise in these municipalities in upcoming months.
Starting in 2016, a series of interventions by all levels of government were implemented to make housing more affordable (see below). Government, media, and public expectation was that these policies will lower prices by 30% or more. Contrary to this popular expectation, apartment prices were increased by 57% in the 2 years after these policies were enacted and have remained at these elevated prices ever since.
Thus, it is fair to say these government interventions have not had the intended outcome. In the next housing crisis, it may be wise to determine the source of the problem first. That is before rushing to implement a vote, and tax, enhancing solution.
"I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail." Abraham Maslow (1966)
Government Intervention to cool Vancouver Housing Market (2016-2017):
1. New 20% Foreign Buyer Tax (BC Provincial)
2. Property Transfer Tax Increase (BC Provincial)
3. New additional school tax for properties over $3M (BC Provincial)
4. Speculation and Vacancy Tax (BC Provincial)
5. Vancouver Empty Home Tax (Municipal)
6. Mortgage Qualification Stress Test (Bank of Canada)
7. Increase development fees (Municipal)
Greater Vancouver Office Sales Hammered in Third Quarter of 2020
A critical question on top of mind of many is how has the COVID-19 pandemic impacted the Commercial Real Estate market. Office sector seems to have taken the most brutal beating compared to other asset classes.
Dollar volume transacted in Third Quarter of 2020 were 207% lower than same period in 2019, 2,141% below same quarter in 2018, and 334% below same quarter in 2017.
This perhaps is the reflection of employees working from home and diminishing the necessity to increase their office footprint.
Interestingly, the number of transactions at 37 are similar to 2018 (33) and 2017 (27) and less than half of 2019 (77).
Total office size transacted in the Third Quarter of 2020 was 207%, 2,140% and 334% lower than Third Quarter of 209, 2018, and 2017 respectively.
In conclusion, Third Quarter of Office Sales were less than half of 2019 and less than a third of 2017 both in terms dollar volume and total size (SF) transacted. That is considering 2018 extremely high transactions as an outlier.