The CRE Investment & Development Team | Royal LePage Commercial has just published and distributed the North Vancouver Commercial Market Report for Q1 2023
North Vancouver Commercial Real Estate Market - Q1 2023 Overview
The commercial real estate market in North Vancouver, British Columbia, Canada, continues to be robust and alluring to investors as of Q1 2023. The city's thriving economy, strategic location, and scenic surroundings make it an ideal destination for businesses, fostering an increased demand for commercial properties across various sectors. However, the market has experienced fluctuations in average prices per square foot and transaction volumes across different asset types.
Economic Overview
North Vancouver benefits from its proximity to Vancouver, the largest city in British Columbia, and a major economic hub in Canada. The region boasts a diverse economy, with key sectors including technology, film and television production, tourism, and shipping. The steady growth in these industries has contributed to a strong demand for commercial real estate in the area.
Office Space
The office space market in North Vancouver witnessed significant growth in Q1 2023. The average price per square foot for office spaces increased by 7% compared to 2022. Notably, the transaction volume for office properties in Q1 2023 surpassed the total transaction volume for the entire year of 2022, indicating a surge in demand for office spaces in the region. Lease rates for office spaces ranged from $17 to $35 per square foot, with new developments in Central Lonsdale achieving the highest rates. Unlike the downtown Vancouver office sector, the North Shore's office market does not exhibit similar high vacancy rates.
Retail Sector
The retail sector in North Vancouver also showed impressive performance in Q1 2023. The average price per square foot for retail spaces surged by 8% compared to 2022, largely attributed to the completion of the Park West project. This development significantly appreciated retail property values, attracting investors and businesses alike. Retail lease rates in various locations ranged from $25 to $75 per square foot, with Central Lonsdale and Lower Lonsdale attracting the highest rates.
Industrial Sector
In contrast to the positive performance in the office and retail sectors, the industrial market experienced a drop in Q1 2023. The average price per square foot for industrial spaces decreased by 13% compared to 2022. Nevertheless, the demand for industrial properties remains strong due to the growth of e-commerce and logistics businesses in the region and limited supply. The forecast for industrial properties remains positive, with lease rates stabilizing in the mid $20/sf.
Development Land
Development land remained the lowest-performing asset type in North Vancouver in Q1 2023. The market for development land continues to be impacted by high construction costs, the steep increase in interest rates, and District of North Vancouver's challenges with development applications, posing challenges for developers.
Total Commercial Transaction Volume
In Q1 2023, the total commercial transaction volume experienced a significant drop of 55% compared to Q4 2022. However, it remained unchanged from Q1 2022, indicating a relatively stable market despite the recent decrease in activity. The fluctuations in transaction volumes may be attributed to market dynamics, investor sentiment, and economic conditions during this specific period.
Conclusion
Despite some fluctuations in different sectors, the commercial real estate market in North Vancouver, BC, Canada, maintains its resilience and attractiveness to investors and users. Office and retail sectors experienced growth, while the industrial market faced a slight decline in average prices per square foot. Development land remains challenging for developers due to high construction costs, rising interest rates, as well as challenges in pursuing development applications in the District of North Vancouver . Nonetheless, the market remains balanced, and as the year progresses, market participants are likely to closely monitor trends and make informed decisions based on economic conditions and the evolving demand for commercial properties in North Vancouver. The sustained interest from investors and businesses in prime retail spaces is a notable aspect of the market, contributing to its overall stability and potential for future growth. Even though, the impact of increasing interest rates, persistent high inflation rates, and recession concerns are creating some caution in the market, cap rates are showing resistance to rising interest rates.
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