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Multi-family, industrial real estate booming in Kelowna despite rising mortgage rates

The demand for industrial space in Kelowna is extremely strong.
The demand for industrial space in Kelowna is extremely strong.

The Bank of Canada made another major increase to its key interest earlier this week, the second in two months, and with that there is some thought that the housing market will slow further from its record-breaking pace last year.

The central bank hiked the rate a half a percentage point to 1.5%, June 1, warning rates will need to rise further to rein in inflation. The increase is expected to impact mortgage rates that, at more than 4%, are higher than they have been for more than a decade.

READ MORE: Bank of Canada raises key rate by 0.5% amid stubbornly high inflation

Despite rising interest rates, realtors in Kelowna are seeing customers lining up.

“The industrial and multi-family asset classes, they remain extremely strong,” MCL Real Estate Group director Kris McLaughlin said. “Inventory levels continue to remain at historic lows. Prices per square foot are increasing.”

Raw industrial land is approaching the $3 million per acre mark.

“It’s not there just yet but I foresee it coming,” McLaughlin said.

That’s still below the $5 million per acre that the Lower Mainland is approaching but he’s seeing more interest from industrial customers in lower-priced land in places like Edmonton and Calgary. Even other parts of the Okanagan are not competing with Kelowna because cities like Penticton and Vernon are still more expensive than Alberta.

READ MORE: Study finds non-homeowners are pessimistic about buying homes despite cooling prices

Much of the demand is for businesses in things like construction needing lots of storage space along with a retail outlet.

“You have these guys from cabinets to flooring to countertops,” McLaughlin said. “It’s becoming a bit of a cluster in the Airport Business Park with these different kinds of uses because you can get in there and pay $17 to $18 per square foot for the base rent.”

By comparison, similar light industrial sites on Baron, Banks and Enterprise roads are in the $19 to $26 range.

When it comes to multi-family sites, there’s a lot of interest in consolidating multiple properties.

McLaughlin expects more 60 to 90 unit apartment buildings of four to six storeys. That’s especially the case near downtown Kelowna but he’s working on a couple of land consolidations in the Rutland neighbourhood that could end up being of that size.

He’s also working on a consolidation in Lake Country, even though they don’t, yet, have high density multi-family zoning bylaws.

“It’s likely this project I’m working on is going to be one of the first full multi-acre, high-density residential applications that Lake Country has seen,” he said.

As for the retail front, strip malls are not on the horizon because zoning bylaws in Kelowna encourage mixed commercial and residential use.

READ MORE: Destination shopping districts changing face of retail in Kelowna and beyond

That means new highrises downtown feature ground floor retail space with residences above. The interest in such space is strongest in specific areas.

“Any time you’re running into an area of town that’s in high demand for retail – take downtown, along Bernard Avenue or, as we move along, along Clement Avenue or the Pandosy corridor, 1,000 square feet for retail is very tough to find and there’s a list of people sitting in the wings and waiting for some of these to open up,” McLaughlin said.

— With files from The Canadian Press

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