Back to Insights

Vancouver commercial real estate market update - Q2 2024

Our quarterly update on Vancouver’s commercial real estate market, including overall cap rates and notable property transactions across asset classes.

Insight Vancouver CRE Market Update Pillar

September 19, 2024

6 min read

Share
Share this on
Send this by
Email

Key highlights


  • After a slow first quarter, the Vancouver market picked up momentum with $5.6 billion in dollar volume transacted as of Q2 2024 YTD, up 31% compared to the same period last year

  • The industrial sector reported $1.3 billion in dollar volume transacted, an increase of 13% year-over-year (YoY)

  • Residential land and ICI land (particularly ICI land) has begun to show signs of recovery, with $2.4 billion in dollar volume transacted in Q2 2024

  • The sale of several high-profile office buildings in downtown Vancouver has contributed to an unanticipated increase in the office sector’s investment volume, with $512 million in dollar volume transacted as of Q2 2024 YTD, a 41% increase YoY

  • The multi-family sector recorded $638 million in dollar volume transacted, an increase of 68% YoY

  • The retail sector recorded $723 million in dollar volume transacted, a 91% increase YoY, the highest YoY increase observed out of all seven sectors

Investment activity in the Vancouver market is on a gradual rebound, with an increase of 31% year-over-year

 

After a slow first quarter, the Vancouver market picked up momentum with $5.6 billion in dollar volume transacted as of Q2 2024 YTD, up 31% compared to the same period last year. According to Altus Group’s most recent Canadian CRE Investment Trends Survey, Vancouver ranked as the second most preferred market by investors in the second quarter of 2024, followed by Halifax. Moreover, industrial and ICI land were the most attractive asset classes to investors in the first half of 2024, which made up over 23% and 24% of the total investment volume respectively.


Figure 1 - Property transactions – All sectors by year

Insight Figure Property transactions

The industrial sector reported $1.3 billion in dollar volume transacted, an increase of 13% year-over-year (YoY). As reported in Altus Group’s most recent Canadian industrial market update, Vancouver’s industrial availability rate increased by 260 basis points to 4.9% YoY, the highest availability rate observed since Q2 2015. The Vancouver market recorded 519,646 square feet of new completions, with 88% of the space available. In addition, the market has nearly 4.9 million square feet under construction, with almost half of the space already committed. Despite the slowdown in absorption due to the availability of larger spaces, the market has continued to see a vested interest in its industrial assets at certain price thresholds.

After several quarters of stalled activity primarily due to elevated interest rates and financing challenges, investment volume in the land sector (residential land and ICI land), particularly ICI land, has begun to show signs of recovery, with $2.4 billion in dollar volume transacted, a 20% increase YoY. The residential land posted $1 billion, while the ICI land posted $1.3 million, a 1% decrease and a 45% increase YoY, respectively. While investment volume in the residential land sector has yet to return to historical averages, the ICI land sector has bounced back, demonstrating Vancouver’s importance as a trade hub in Canada’s western trade corridor.

The sale of several high-profile office buildings in downtown Vancouver in the second quarter of 2024 has contributed to an unanticipated increase in the office sector’s investment volume, with $512 million in dollar volume transacted as of Q2 2024 YTD, a 41% increase YoY. Altus Group’s most recent Canadian office market update revealed that Vancouver’s office availability rate has increased 70 basis points to 12.5%, the highest recorded availability rate in two decades. The market’s availability rate has flattened in the first half of 2024 as rightsizing efforts persisted. The sublease market also showed signs of flattening and the availability rate for downtown Class-A office buildings has begun to drop from its peak in Q2 2023. Vancouver, Toronto, and Montreal were the only major markets to report construction activity as the flight-to-quality trend offered stability to Class A office products.

The multi-family sector recorded $638 million in dollar volume transacted, an increase of 68% YoY. Strong population growth has continued to sustain rental demand and outpace supply in the market. Furthermore, healthy long-term market fundamentals continued to make Vancouver an attractive market to investors. The market’s multi-family cap rate was among the lowest in Canada alongside Toronto, and is an indication of low-risk, high reward for the asset class.

The retail sector recorded $723 million in dollar volume transacted, a 91% increase YoY, the highest YoY increase observed out of all seven sectors. According to Altus Group’s most recent Canadian CRE Investment Trends Survey, Vancouver’s first-ranked property type was food-anchored retail strips, which continued to be preferred for its low-risk, stability and as consumers prioritized spending on essential goods and services. Vancouver’s retail sector remained resilient with several shopping centre redevelopments and mixed-use development projects underway (e.g., Oakridge Park, CF Richmond Centre, The Shops at North Harbour, etc.).


Figure 2 - Property transactions by asset class YTD (Q2 2023 vs. Q2 2024)

Insight Figure Property transactions by asset class

Unlock intelligent real estate data across Canada

Get access to commercial listings, new housing developments, multi-family rentals and transaction data across key Canadian markets.

Explore Altus Data Studio

Notable Q2 2024 transactions


The following are the notable transactions for the Q2 2024 Vancouver commercial real estate market update:

2315 West 4th Avenue, Vancouver (West 4th Avenue Safeway Site) – Residential land


In June 2024, the Safeway site located at the northwest corner of West 4th Avenue and Vine Street in Kitsilano was sold to a partnership between PCI Group and Low Tide Properties for $90 million. The new development will feature a new Safeway store just like other Safeway redevelopment sites across Vancouver, specifically 4545 West 10th Avenue in West Point Grey proposed by Bentall Green Oak, and 1780 East Broadway next to Commercial-Broadway Station proposed by Westbank & Crombie REIT. The 2.2-acre site is located just outside of the KW4A sub-area of the Broadway Plan and the partnership intends to proceed directly with the development permit application. As such, it is anticipated that under the current C-2B zoning, the height and density of the project should not exceed 6-storeys and 3.70 Floor Space Ratio (FSR), if the project consists of rental housing above a ground floor commercial space. This transaction is part of a series of acquisitions in recent years by the PCI Group & Low Tide partnership, notably mixed-use, office, and purpose-built rental development sites near the VCC-Clark SkyTrain Station and at the site of the future Great Northern Way-Emily Carr Station.

100 Forester Street, District of North Vancouver (HTEC hydrogen liquefaction plant) – ICI land


Purchased in April for $145 million, this North Vancouver industrial land represents a major investment by HTEC in a hydrogen liquefaction plant on the southwest portion of the property, able to produce 15 tons per day to meet the region’s growing demand. Under the terms of the agreement, the vendor ERCO Worldwide will lease back a portion of the property on a long-term basis for its manufacturing operations. This complex sale is the result of a multi-year process involving regulatory strategizing, capital restructuring from both parties, and collaboration with the District of North Vancouver, which started in December 2022 with a preliminary application. The rezoning application was approved in July 2023, and a detailed application received in May 2024 is currently in the development application review process.

5630, 5650 & 5668 Heather Street, Vancouver – Residential land


Purchased in June by Anthem Properties for $23.5 million, this residential development site consists of three single-family lots just north of West 41st Avenue. The current rezoning application proposes a 19-storey purpose-built rental building containing 184 dwelling units, including approximately 37 below-market rental units. Based on the project statistics this represents a price per square foot buildable of $175 and a price per unit buildable of $127,989. The site is near Oakridge-41st Avenue Skytrain Station, Oakridge Park, Oakridge Transit Centre developments, and several other projects in the rapidly densifying area surrounding the Cambie Street & West 41st Avenue intersection.


Figure 3 - OCR trends across 4 benchmark asset classes

Insight Figure Property OCR trends

Conclusion


The Vancouver market has observed a comeback in the second quarter of 2024, fueled mainly by investment in the industrial and ICI land sectors. While the BoC's decision to cut the overnight interest rate to 4.75% on June 5th has not contributed to any material impact in the second quarter of 2024, it has boosted investor sentiment and alleviated borrowing costs as investors await further cuts.



Want to be notified of our new and relevant CRE content, articles and events?




Authors
undefined's Profile
Jennifer Nhieu

Senior Research Analyst

undefined's Profile
Phil Racine

Senior Market Analyst

Authors
undefined's Profile
Jennifer Nhieu

Senior Research Analyst

undefined's Profile
Phil Racine

Senior Market Analyst

Resources

Latest insights

CRE Exchange Thumbnail

Dec 5, 2024

EP44 - Macro moves, market metrics, and tariff talk

Read more
Insight Montreal Commercial Real Estate Update Pillar

Nov 28, 2024

Montreal commercial real estate market update - Q3 2024

Read more
CRE Exchange Thumbnail

Nov 21, 2024

EP43 - US commercial real estate transaction trends - Q3 2024

Read more
Insight Hero Image Is the wellness boom reshaping global commercial real estate

Nov 20, 2024

Is the wellness boom reshaping global commercial real estate?

Read more
Insight Future Outlook of the Real Estate Cycle

Nov 19, 2024

US Commercial Property Investment & Transactions

Read more
CRE This Week Economic Print

Nov 19, 2024

Q3 2024 US Commercial Real Estate Trends By Market

Read more