Kelowna has burst onto the national real estate map for more than housing
While the hot housing market in Kelowna garners a lot of headlines, the influx of new home buyers has fueled a growing interest from national corporations.
Real Estate Investment Trusts are pools of money used to invest in real estate instead stocks and the managers of those trusts are keeping a close eye.
“Kelowna, a couple of years ago, would have been off the radar for most pension funds or institutional investors,” Taylor McFadyen, a Kelowna-based residential and commercial realtor with Faith Wilson/Christie's International Real Estate, told iNFOnews.ca.
“Recently they’ve really had their eye on Kelowna with everything happening here and information from the census, from 2016 to 2021, that it’s the fastest growing area of Canada. So, a lot of them have shifted their focus to say: ‘We need to get into that market.’”
Getting into “that” market takes three forms.
Commercial and industrial lands are in short supply but there’s also a growing interest in buying up apartment blocks.
That was highlighted last month when Kelowna realtor Steven Laursen helped close an $86 million deal for an unbuilt 238-unit apartment block off Clifton Road.
READ MORE: Kelowna realtor all smiles after $86M deal, and there’s more coming
There have been other Real Estate Investment Trusts (REITs) buying into the Okanagan rental market in recent months.
“There’s almost a zero per cent vacancy rate for rental right now for residential so the institutions that are purchasing some of the multi-residential apartments buildings are realizing: ‘Well, we have nothing available for people to rent so our units are going to always be rented and we’re going to be able to charge a market premium for anyone coming into them,’” McFadyen said.
That may actually be a good thing for tenants in some ways.
The investment funds want the value of their purchases to increase over the long run so they can afford to be patient when it comes to rent increases.
They can only increase rents by 1.5% in B.C. this year, unless new tenants move in.
“They (investment funds) are easier to deal with than private landlords,” McFadyen said. “Private landlords and owners, they want to up the rents all the time. Institutions, of course, they want to as well, but they follow the rules. They have to keep their reputation too when they own things across the country.”
They generally have lawyers on staff who know the laws and abide by them, he said.
That’s different from some of the smaller, private owners who, first of all, may not understand the rules against raising rents or evicting tenants just so they can charge new tenants more.
McFadyen, and Christie's, focus on the luxury housing market in the Okanagan but they’re also commercial real estate agents. They have a number of large potential deals in the works.
READ MORE: Kelowna enters a new price bracket for 'luxury' homes
“As the population increases, so does the need for additional services and supporting businesses,” he said.
Given land constraints in Kelowna – limited by mountains, Okanagan Lake and undevelopable lands in the Agricultural Land Reserve – there’s limited room for commercial expansion.
That means buying and selling existing commercial businesses. Most such deals are not listed but are “off-market” so won’t become known until after they’re sold.
The growing demand for commercial space brings with it more pressure on industrial land, particularly for warehouse space.
“I know a lot of developers and institutions and even private investors on the commercial front who are really looking for industrial here so they can have warehouse space, for shipping and receiving, as everything moves online in terms of e-commerce,” McFadyen said.
“Businesses are shipping things out more so they need a physical location here to warehouse product in Kelowna. Before, it was more bricks and mortar locations where people go in and purchase stuff at retail. That whole shift has really changed the landscape for the need for industrial space in Kelowna, which it’s very much lacking right now.”
The recent deal by Beedie to buy almost 15 acres of industrial land near Kelowna Airport helps. But the first part of their development plans will provide strata space for sale. Not all companies want or can afford to buy such facilities so they’re looking for leased spaces as well, McFadyen said.
READ MORE: Huge business centre proposed for Kelowna airport industrial park
The shortage of industrial land in Kelowna means some businesses are looking further afield, like West Kelowna or Vernon.
“A lot of them (commercial outlets) want to be as central as they can,” McFadyen said. “They like to be close with their industrial stuff but, we are seeing some people starting to look in different areas, for sure.”
To contact a reporter for this story, email Rob Munro or call 250-808-0143 or email the editor. You can also submit photos, videos or news tips to the newsroom and be entered to win a monthly prize draw.
We welcome your comments and opinions on our stories but play nice. We won't censor or delete comments unless they contain off-topic statements or links, unnecessary vulgarity, false facts, spam or obviously fake profiles. If you have any concerns about what you see in comments, email the editor in the link above.
