Kelowna office 2012 q3

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  • 1. Q3 2012 | OFFICECOLLIERS INTERNATIONAL | MARKET REPORTKELOWNA BRITISH COLUMBIA Canadian Market Overview Canadian economic performance remains in growth mode, albeit moderate in the East and strong in the West. The divide between East and West is attributable to commodities driving the west and the lack of a similar catalyst in the East. Manufacturing in the east is weighed down by slow growth in the U.S.; an upside surprise is the return of Auto sector to near pre-recession levels. The outlook for commercial real estate is stable, with the exception of a few higher growth centers in the west. Employment growth will sustain the office market and growth in retail sales, along with new U.S. retailers will underpin demand for retail and distribution facilities. Manageable new supply of both office and industrial property should avert supply driven vacancy challenges. Overall commercial property looks well positioned to close out a solid year in 2012 and continue on the same path through 2013. B.C. & CENTRAL OKANAGAN ECONOMIC OVERVIEW Kelowna is the largest city in Southern B.C. with a population of 117,300 and a total population of approximately 180,000 in the Central Okanagan. Diversification remains the Central Okanagan’s greatest economic strength. Agriculture, finance, manufacturing, professional services and technology are all important industries. BC MARKET: Colliers has five offices in British Columbia: Vancouver and Surrey are both located The top three occupations (sales & service / trades, transport, equipment operators / in the Lower Mainland; Kelowna is located in the business & finance) in the Central Okanagan account for 60% of total employment. Okanagan Valley and Nanaimo and Victoria are on Vancouver Island. Economic growth in the Central Okanagan had been strong up until 2008 when economic conditions changed globally. According to the 2010 B.C. Financial and Economic Review published by the provincial government, B.C.’s economic growth in 2008 was modest at 0.2% but contracted in 2009 at -2.3%. The Ministry of Finance and BC Economic MARKET INDICATORS Forecast Council indicated that 2010 saw a 3.3% growth, but 2011 growth was closer to 2.2% and 2012 is forecast to grow between 2.0% and 2.2%. Real GDP growth is Q3 Q3 expected to increase in 2013 to approximately 2.6%. 2011 2012 BC Unemployment Rate - 2008 to 2012 . VACANCY   NET ABSORPTION   CONSTRUCTION   RENTAL RATE   www.colliers.com/canada
  • 2. MARKET REPORT | Q3 2012 | OFFICE | KELOWNAKELOWNA OFFICE 2003 to 2012 new Office ConstructionAt the end of 2011, total office inventory was 3,026,000 square South Pandosy Vs. City of Kelownafeet with approximately 128,000 square feet of vacancy.This represents absorption of 27,000 square feet from Q1 South Pandosy Sq. Ft.to Q4 of 2011. During the third quarter of 2011, there was OK Health Building 36,00011,750 square feet of office space under construction whichrepresents office buildings located at 1445 – 1447 Ellis Street 474 West Avenue 3,000and 436 Cedar Avenue. 3295 Lakeshore Road 15,000 3975 Lakeshore Road 14,550In 2012 and still under construction, totalling almost 300,000 436 Cedar Avenue 9,500square feet, are SOPA, Landmark VI, the Shaw Building, andthe new Credit Union at Rutland Road and Hwy 33. Office 2900 Pandosy Street 10,066construction that commenced in 2012 includes the new 550 West Avenue 27,870building at Mission Park Shopping Centre and the Osprey TOTAL: 115,986/ Raymer strata units in the South Pandosy area. In the (Approx. 28%)planning stages are: Manhattan II and 546 Leon Avenue.We estimate that over the past 5 years, approximately 30,000 City of Kelowna Sq. Ft.square feet of new office construction has been absorbedinto the market, per year. Landmark IV 92,959 Prospera Credit Union 10,500Kelowna has 3 distinct office districts: Downtown / Landmark V 109,699Landmark / South Pandosy. Overall office vacancy within 1658 Commerce Avenue 17,000all districts is 4.07% Interior Savings - Glenmore 8,000We estimate that approximately 25% of the overall office TD Canada Trust - Glenmore 4,520market in Kelowna is Class A space. A few of these buildings CIBC -Orchard Park 6,000include: The Manhattan, The Core, Landmark Centre, 1630Pandosy Street, 1658 Commerce Avenue and all recent The Manhattan 35,000construction in the South Pandosy area. 1630 Pandosy Street 26,484 1353 Ellis Street - The Core 38,000Office lease rates have stabilized over the past year withClass B rents in the range of $10.00 to $16.00 per square 1790 KLO - William Centre 6,200foot and Class A in the range of $17.00 to $22.00 per square 1445 - 1447 Ellis Street 7,000foot. 2300 Leckie (Shaw Cable) 60,000*The asking rents at Landmark VI range from $14.00 on the TOTAL: 420,972 (Apprx. 72%)second floor to $24.50 per square foot on the sixteenthfloor. The developer is also offering a $10.00 per square *Expected to be occupied in 2012 (owner/user)foot tenant improvement allowance. Under Construction 2012 Total Sq. Ft. Planned Construction Total Sq. Ft. Landmark VI 204,000 Manhattan II 88,000 SOPA 18,000 554 Leon Avenue 25,600 150 HWY 33 West 14,400 555 McKay Avenue 44,500 Osprey/ Raymer (Worman) 1 of 4 12,400 Osprey/Raymer (Worman) 3 of 4 37,200 buildings buildings and future commercial development KPMG Building Mission Park Est 34,000 KLO Crossing 3,131 Shaw Cable Building 60,000P. 2 | COLLIERS INTERNATIONAL
  • 3. MARKET REPORT | Q3 2012 | OFFICE | KELOWNAView of South Pandosy and SOPA Construction treet Pandosy SDowntown is experiencing very little growth The South Pandosy area has created it’sin the office market. Only the redevelopment own professional office market with theof 1445 – 1447 Ellis Street (occupancy construction of 550 West Avenue; 4362011) has taken place since 2008 when Cedar; 3975 Lakeshore; 474 West AvenueThe Core (warehouse redevelopment) and and currently under construction, the 41630 Pandosy Street were constructed. story building at Raymer & Osprey. These+/- 50,000 square feet of vacancies in the buildings provide office space for the nondowntown represent about 40% of all office traditional dental / medical user whichvacancies throughout the city. this area has historically been made up of. South Pandosy has seen above averageLandmark Centre continues to grow with absorption with only 13,270 square feet ofLandmark VI under construction, scheduled vacancy remaining from a total of 51,900for occupancy spring 2013. Floors six, constructed in 2010 / 2011. Absorptionseven, eight, seventeen and eighteen have in the South Pandosy area alone representsbeen leased and rates vary according to floor over half of the yearly absorption throughout(18 story building with retail on the ground the city. Vacancies in this area are mostly 436 Cedar Avenuefloor). Current overall vacancy in Landmark limited to the new building at 550 WestCentre is 3.21%, down .05% from our last Avenue with 2,400 square feet available Strata office sales during 2012 havereporting period, while the Springfield / at 3975 Lakeshore Road. 28% of the new ranged from a high of $346 per squareSpall area represents approximately 30% of office construction since 2003, has taken foot, for built out medical space in Southall vacancies throughout the city. Other than place the South Pandosy area as noted Pandosy, to $254 per square foot forLandmark VI, there is no new construction on the table contained within this report. shell space in Downtown Kelowna. Classto report in the Springfield / Spall area. Vacancy in the South Pandosy represents B office space in the Downtown has sold approximately 12% of the cities total office between $122 and $173 per square foot. vacancy. COLLIERS INTERNATIONAL | P. 3
  • 4. MARKET REPORT | Q3 2012 | OFFICE | KELOWNASPOTLIGHT STORY: 480 offices in 61 countries on110 - 115 Highway 33 West six continents United States: 135 Canada: 39 Latin America: 17 Asia Pacific: 194 EMEA: 95 • $1.6 billion in annual revenue • 672.9 million square feet under management • More than 10,000 professionals CONTACT INFORMATION Perry Freeman Managing Director, BC Interior TEL: 250 763 2300 perry.freeman@colliers.comSite plan showing potential redevelopment of the north west and north east corners of Hwy33 and Rutland Road (Plans are subject to change at the developers discretion) Wendy Dyck Research, Kelowna DIRECT TEL: 250 861 8113 Completion of the new Valley First wendy.dyck@colliers.com Credit Union is scheduled for Fall 2012. Valley First will be occupying the majority of this new building; This report has been prepared by Colliers International for however, there are opportunities to advertising and general information only. Colliers International lease space on the second and third makes no guarantees, representations or warranties of any kind, express or implied, regarding the information including, floors. but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/ or its licensor(s). © 2011. All rights reserved. Lease Inquires, please contact: Jeff Hudson * Jack Shabbits *Personal Real Estate Corporation Sales and Leasing DIRECT TEL: 250 861 8108 DIRECT TEL: 250 861 8103 jeff.hudson@colliers.com jack.shabbits@colliers.com Accelerating success. www.colliers.com/canada