The Coast Hotel in Osoyoos is one of at least three hotel properties in the Okanagan waiting for buyers.

Image Credit: Google Maps

It seems like only yesterday that everyone wanted to buy into the Okanagan real estate market, especially in Kelowna.

Fourteen months ago, in November 2021, investors were flooding into the region, spending tens of millions of dollars buying up housing projects, even before they were built.

“You’re seeing a lot of that institutional capital flow to secondary markets,” Carey Buntain, a realtor with the international commercial real estate firm Avison Young, told iNFOnews.ca at the time.

His firm had just brokered a $63.3 million deal to have Canada’s largest landlord, based in Toronto, buy the Lakeview Point apartment complex in West Kelowna, their first buy into a secondary market.

READ MORE: Big, eastern investors starting to buy up Thompson-Okanagan apartments

Now, given high inflation and the high interest rates being used to combat it, the tide is flowing out for the commercial real estate market in the Okanagan.

“It feels like everybody is just waiting – waiting for sellers to become more desperate,” Terese Cairns, a real estate advisor with Faith Wilson/Christie’s International Real Estate, told iNFOnews.ca this week.

“There are not a lot of developers jumping at opportunities right now because there are so many deals out there because so many are in trouble. They’ve got so many more options to choose from so they will pick and choose and cherry-pick the best deal.”

One example she gave was the Ramada Hotel in Kelowna.

“That is a fantastic piece of property with over four acres right across from the mall,” Cairns said. “That is a redevelopment site extraordinaire in the future. It’s been sitting on the market for months and months. The $32 million price tag is not happening there.”

When it went on the market, the $8 million per acre value of the land made sense but no one wants to pay that now.

READ MORE: Kelowna’s Ramada Hotel for sale for $32 million

The 65-room Coast Hotel, which is on the waterfront in Osoyoos, is for sale for $16.9 million.

Her firm has the listing for the nearby 34-room, newly renovated Westridge Motor Inn for just under $6 million. It just signed a five year contract to be managed by Ramada.

“We’ve got some people kicking tires but there’s not a lot of pen to paper,” Cairns said.

High interest rates are keeping the buyers on hold, unless some really good deal comes along.

“I think people are just really becoming more opportunistic with what they choose to do and where they choose to do it,” Cairns said. “A lot of investors are looking away from the secondary markets and back into the primary markets now because they’re safer.

“Even if you are working with the risk, you would rather make your bet in a primary market than in a secondary market. When you compare Kelowna to Vancouver, even though we like to see it as a primary market, it’s still a secondary market compared to Calgary, Vancouver or Toronto. A lot of investors are investing in Ontario and in the bigger cities. If they’re going to do anything at all, that’s where the money’s going first.”

Key to it all will be the next Bank of Canada interest rate announcement, scheduled for March 8.

When the bank raised rates on Jan. 25 by 0.25%, there were indications that it could be the last increase for awhile. Buyers, however, are still jittery.

“They (the bank) need to come out with some sort of definitive statement,” Cairns said. “Hopefully this is it but they need to come out and say to people: ‘This is it. It would be nice to have some sort of comfort and people can take a deep breath and regroup. Then you know what you’re dealing with. You know you’ve got a 6.4% interest rate. When you know that, you can move accordingly."

Even if that happens, she doesn’t see the commercial segment of the real estate market rushing back to what it was a year or so ago.

“I think the residential market might see a little whoosh,” Cairns said. “Usually, by the spring and summer, tourists come back. People start looking at Kelowna again and there’s always a little bit of a revival.”

She’s not alone in that.

“The last few weeks have not only felt busier but also seem busier,” Re/Max realtor Colin Krieg wrote in his monthly newsletter. “Many lower-priced properties have pending offers, even backup offers. I was involved in two sets of multiple offers in January as well - unexpected.”

Many sellers pulled their listings last fall and may create a “surge” of new listings this spring if they put them back on the market, he wrote.

That would make it attractive to buyers, even if the interest rates are stuck at their current levels.

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