This document provides an overview of commercial real estate market conditions in Atlantic Canada in Q2 2016. It notes that office and industrial vacancy rates varied across major markets like Halifax, Moncton, and St. John's. Limited new construction and a relatively small number of buyers kept regional office markets quiet. For industrial, construction slowed in Halifax's Burnside area as vacancy rose above 15%. The multi-residential sector saw some large transactions and rent increases in most markets year-over-year. Private equity also became more active in retail markets.
2. 1
Atlantic Canada market overview
Office Vacancy Rates: Q2, 2016 Industrial Vacancy Rates: Q2, 2016
Charlottetown
21.0% 7.8% 15.2% 10.8% 11.3%
Fredericton Halifax Moncton St. John’s Charlottetown Fredericton Halifax
Burnside Park
Moncton St. John’s
5.0% 15.6% 16.4% 13.9% 9.6%
Office
• Limited product availability keeps regional markets quiet
• Relatively limited number of active buyers as investors
segregate product quality
• Private equity makes plays in smaller markets
• Overall cap rates stable
Office Vacancy Rates: Q2, 2016
Industrial
• Construction activity slows in Halifax as Burnside market vacancy
exceeds 15%
• Major players consider cull of portfolios
• YTD Investment grade trades virtually non-existent in regional markets
• Divergence in cap rates pronounced based on product quality
Industrial Vacancy Rates: Q2, 2016
3. 2
Halifax
2011
2.4
3.0 3.2
3.8
3.4
2012 2013 2014 2015
Moncton
2011
4.3
6.7
9.1
8.7
7.4
2012 2013 2014 2015
Fredericton
2011
2.5
4.0
6.2
5.8
5.4
2012 2013 2014 2015
Saint John
2011
5.9
9.7
11.4
9.0
8.5
2012 2013 2014 2015
Charlottetown
2011
3.3
5.7
7.9
0.0
4.2
2012 2013 2014 2015
St. John’s
2011
1.3
2.8
3.2
4.6 4.7
2012 2013 2014 2015
Overall Multi-Residential Vacancy Rate, 2011 to 2015 (%)
Source: CMHC
Multi-Residential
• Largest closed transaction to date saw Killam
acquire remaining 51% interest in Garden Park
in Halifax
• Active market in 2016 for small scale local and
regional buyers.
• CAPREIT reported Q1 2016 NOI growth of
9.2% in Charlottetown and .4% in Halifax
year-over-year
• Northview Apartment REIT reported occupancy
in their Atlantic Portfolio of 92.9% in Q1 2016
compared to 93.1% in Q4 2015.
• Killam REIT reported rent growth of 1.9% in
Halifax, 0.3% in Moncton, 2.0% in St. John’s
and 1.2% in Charlottetown year-over-year.
Retail
• Private equity makes a resurgence in many
markets
• Strategic acquisitions in Halifax result in
historically low cap rate for retail strip
• Pension fund acquires Bayers Lake Wal-Mart
Sales
Park West Centre, 278 Lacewood Drive, Halifax
Sale Date: June 2016
Price: $29,000,000
Canadian Tire, 10 Radcliffe Drive, Halifax
Sale Date: June 2016
Price: $14,150,000
Wal-Mart, Bayers Lake, 220 Chain Lake Dr, Halifax
Sale Date: February 2016
Price: $22,080,000
Westphal Plaza, 100 Main/10 Gordon St, Dartmouth
Sale Date: January 2016
Price: $12,350,000
Overall Multi-Residential Vacancy Rate, 2011 to 2015 (%)
Source: CMHC
4. 3
Altus Group is currently engaged
in Loan Monitoring services for
The Nova Centre Project located at
Argyle Street, Halifax, Nova Scotia.
The Nova Centre Project is a one
million sq. ft. mixed use development
that occupies two city blocks
bounded by Sackville, Market, Prince
and Argyle Streets in downtown
Halifax. The development consists
of approximately 298,000 sq.ft. of
convention space, 300,900 sq.ft.
of office space, 52,500 sq.ft. of
retail and 425 parking spaces. The
development also includes a 149,000
sq. ft. hotel. Measurements are in
accordance with BOMA Standards.
The project is designed to achieve
LEED Gold certification.
After completion of the initial due
diligence report used to obtain
project financing, Altus Group is
now working alongside the Bank of
Montreal (the administrative agent)
and Argyle Developments (the
developer) to verify the cost of work
in place each month after receipt of
the monthly progress draw for the
contract costs.
Altus conducts monthly site visits
to confirm the costs, reviewing all
invoices/certificates and ensuring
holdbacks are being correctly
withheld and released. We are also
available to resolve any contractor
claims, change orders or other
contractual issues that may arise from
time to time.
Argyle Developments chooses Altus Group
for loan monitoring services
The Nova Centre development
is being constructed over two
blocks in the Halifax CBD after the
municipality agreed to sell a section
of Grafton Street so the facility could
be built over the street. The city
retains rights over the surface street
which will function as a service
entrance and provide event space
and access to retail tenants.
The project includes the new
convention centre, funded by
all three levels of government,
which will be operated by Halifax
Convention Centre, a crown
corporation. The complex will also
provide office, retail and hotel space
constructed in two towers on the
site. BMO Bank of Montreal has been
announced as the lead office tenant
moving their regional headquarters
to the building.
It is estimated that the Nova
Centre will be completed by
the end of April, 2017
5. 4
Aformer apartment complex was
converted to condominium
units and sold to absentee investors.
The condominium corporation was
dysfunctional and running a deficit.
The corporation eventually fell into
receivership and was administered by
a trustee.
The receiver had control of
approximately 57% of the units. In
addition, the original investors who
paid top dollar for the condominiums
were defaulting on their mortgages
as the equity of their units had
eroded due to market conditions.
A number of bank listings were on
the market that had put downward
pressure on other units within the
development due to an abundant
supply and low market demand.
Altus Group provided a valuation
brief to assessment officials
convincing them that the bank sales
were representative of the market
and that the original investor sales
were not representative of current
market conditions.
The brief included a Direct
Comparison analysis and an Income
Approach to value. The appeal of the
100 units resulted in a collective tax
savings of $89,800 for the current
year.
Furthermore, the assessor agreed to
reduce the values the following year
based on market evidence that has
occurred subsequent to our appeal.
The client benefited from additional
tax savings for future years.
Case study: Property tax
Altus Group lead appeal results in significant tax savings for client.
6. 5
Altus Geomatics creates 3D model for new exhibit
If it’s visible, it can be
scanned and modeled with
High-Definition Surveying
(HDS) Laser Technology. 3D
Scanning captures highly
accurate detail in a fraction
of the time it takes using
conventional survey methods.
This unobtrusive survey is safe,
thorough and cost-efficient;
reducing facility downtime,
and return visits to the site.
Utilization:
• “As-Built” Surveys of Oil and
Gas, Civil and Mechanical
Installations
• High-Definition Surveys of
Plant Sites and Compression
Installations
• Construction Inspection
• Project Design and Planning
• Measurements of
Inaccessible or Unsafe Areas
(Scanning up to 300m Away)
• Quantity Surveys,
Earthworks and Volumetric
Reporting
• Objects and Architecture
with Historic or
Archaeological Importance
• Accident Investigation and
Analysis
One of Parks Canada’s current
infrastructure projects is
replacing the four theatre Tides
of History program at Citadel Hill
with a modern, flagship exhibit to
present the stories of Citadel Hill in
new interactive ways. The federal
government has awarded a multi-
million dollar contract to retrofit
a major attraction at the Halifax
Citadel National Historic Site to
Kubik Inc., a Toronto-based exhibit
space designer. The new space will
replace text panels with an exhibit
that is interactive, fun, engaging,
meaningful, and profound.
In order to design this space Kubik
Inc. asked Altus Geomatics to provide
a 3D model of the existing space. This
space is an unusual shape with pillars,
different roof elevations and irregular
walls. Kubik Inc. will use the 3D
model to design panels and prefab
parts and determine exactly how
everything will fit together.
Altus Geomatics used the Leica C10
3D laser scanner along with Leica
cyclone software to complete this
job. Altus Geomatics completed
twelve scans to acquire a point cloud
and produce a model with relative
accuracy of 2-4 millimeters.
This will allow Kubik Inc. to design
every prefab part knowing it will fit
without any field modifications. Using
this prefab process enables Kubic Inc.
to complete the process on time.
The new exhibit is scheduled to open
by March 2017, in time for Canada’s
150th anniversary.
7. The leading source of
real estate intelligence in
Atlantic Canada
In order to serve you better, Altus Group has five offices located across Atlantic
Canada. Here, our regional experts work together, as one integrated office, to
provide Atlantic Canadians with the most diverse services and solutions for all
their commercial real estate advisory needs.
Altus Group’s five offices located across Atlantic Canada comprise experts that
work together as one integrated office, to provide the most diverse, and the
best in services and solutions that will meet all your commercial real estate
needs, from start to finish.
Atlantic Canada Offices
Halifax 902 420 8880
St John’s 709 726 4059
Charlottetown 902 368 3177
Moncton 506 858 2787
Fredericton 506 450 7150