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Chinese investors turn attention to Vancouver’s commercial real estate

Barbara Yaffe: Chinese investors turn attention to Vancouver’s commercial real estate

Asian buyers have for some time been putting pressure on Vancouver’s stock of detached homes. Now China’s development industry is showing interest in the region’s commercial properties.

Asian buyers have for some time been putting pressure on Vancouver’s stock of detached homes. Now China’s development industry is showing interest in the region’s commercial properties.

It is part of a cross-Canada trend, says Colliers International in a report issued earlier this month: “Canadian property owners have traditionally been the incumbent buyers of real estate assets, but a growing mix of international property investors, specifically Chinese developers, are seeking to park their capital in stable markets like Canada.”

Lately, “we are starting to witness a significant wave of Asian investors underwriting commercial real estate deals across the country,” says the report. “Several recent transactions have transpired where traditional domestic players were outbid by Chinese investment groups ...”

In the Vancouver area, activity has escalated noticeably over the past 12 to 18 months, reports Kirk Kuester, executive managing director of Colliers.

“There’s been an immense amount of activity occurring in the city,” especially along Oak and Cambie Streets.

“Dozens of transactions are in the works,” he says, and numerous deal have already been done.

One particularly large acquisition cited by Colliers was of a 232-acre development site in Port Moody from Imperial Oil by the Brilliant Circle Group Investments Ltd., based in Shenzhen, China. The land, bought last January, has been earmarked for a residential project.

This same company last year purchased the Buschlen Mowatt building on West Georgia.

Previously, Chinese developers were kept busy supplying residential product to an emerging middle class in their own fast-urbanizing country.

But the economy in China has slowed and the property market there has become overheated, says the Colliers report.

As well, Chinese restrictions on investing beyond Mainland China have lately eased.

“The top tier of Chinese development companies, backed by insurance and pension fund capital, have got the go-ahead from the Chinese government to pursue opportunities globally.”

As a result, capital outflows have grown since 2010, from $2.3 billion to $18.3 billion, with nearly half the cash reflecting investments in centres like Manhattan, London and Sydney.

But Asian developers are also noticing “the Canadian economy is perceived as safe and stable”. And they especially like the newly depreciated currency here.

Chinese developers are looking specifically for “development opportunities with a high residential component in major cities ... land that is ready for development is a fundamental motivation”. The companies also appear to prefer large-scale projects.

Colliers calls the current wave of investment from China “experimental in nature,” but predicts, “there is a high likelihood that more will come in 2015.”

The commercial real estate services company says Canadian sellers of commercial property wanting to attract Chinese buyers should be ready to explain the sales process here, be straightforward about an asking price, translate sales material and enlist help of an adviser with Chinese-based operations.

Colliers has 27 offices in China. But other realtors, too, are scrambling to accommodate the emerging market.

B.C.-based Macdonald Realty several months ago opened a Canadian Real Estate Investment Center in Shanghai.

More than a third of detached homes sold by the company in 2013 were to buyers with ties to China.

The Shanghai office is being launched by Dan Scarrow, VP of Corporate Strategy for Macdonald, who told The Vancouver Sun last month that an overseas presence was needed because “Chinese investors are becoming a bigger and bigger part of our market, both on the residential side and the commercial side”.

Until now, offshore buyers have been fairly restrictive in their real estate purchases, concentrating on the residential sector.

They have even steered clear of the multi-family real estate market, says David Goodman, principal at HQ Real Estate Services, specializing in Vancouver-area apartment building sales.

But the new interest in commercial real estate suggests the Chinese may be expanding their reach. And, if what has happened on Vancouver’s residential side now is about to happen on the commercial side, we had all better hang on to our hats


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