Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Mid Island Q1 2012 Apartment Real Estate Report


Published on

  • Be the first to comment

  • Be the first to like this

Mid Island Q1 2012 Apartment Real Estate Report

  1. 1. SPRING 2012 | MULTIFAMILYmid-island british columbiacolliers international | REAL ESTATE report UNITED STATES NORTHWEST YUKON TERRITORY TERRITORY NUNAVUT Mid-Island Apartment Investment Overview CANADAMid Vancouver Island multi-residential market displayed a consistent level of activity The throughout 2011 with a total of 16 sales transactions, one transaction more than the year NEWFOU previous. Notwithstanding the aforementioned, there was a significant increase in total sales& LABR BRITISH COLUMBIA Hudson Bay volume, $38.4M in 2011 compared to $19.4M in 2010. These figures may not include sales in ALBERTA the form of share transfers, acquisitions of bare trustees or non arm’s length transactions and, Fortas a result, total numbers could be slightly higher. SASKATCHEWAN McMurray Analyzing the 2011 market data in further detail reveals that there were increased levels of QUEBEC MANITOBA acquisitions by REIT’s. Specifically, Northern Property REIT acquired three separate properties; Edmonton of which are located in Nanaimo and one in Courtenay, for a total sales volume of $12.6M. two Vancouver ONTARIO Comparing all Mid-Island markets, Nanaimo remains the most active multifamily market in the St region with a total 2011 sales volume of $13.3M. Calgary Saskatoon MontréalNanaimo Kelowna Ottawa Winnipeg The multifamily market has remained a “safe haven” for investors and as such, has seen an Victoria increase in demand in recent years. This demand, combined with a limited supply of available Regina Waterloo Region Surrey product, has put downward pressure on capitalization rates. The recent sale of 1651 Dufferin Toronto Crescent epitomized this trend, selling for a 5.05% capitalization rate. However, we note thatBC MARKET: Colliers has five offices in BritishColumbia: Vancouver, Kelowna, and Surrey on UNITED STATES capitalization rates associated with multi-residential, as well as all other overall returns, orthe lower mainland, and Nanaimo and Victoria on investment grade real estate categories, is reaching the lower limits of market tolerances.Vancouver Island. Burlington2011 market indicatorsVACANCY 6.3% 2011 Apartment Sale Breakdown by Total Dollar VolumePRICE PER SUITE $82,000SALES VOLUME $38.4M Campbell RiverCAP RATES 6.0% Chemainus Courtenay Ladysmith2011 highlights Lake Cowichan Nanaimo> Higher sales volumes Parksville> Increased vacancy levels Port Alberni> Lack of available product Port Hardy> Increase in demand
  2. 2. real estate report | spring 2012 | multifamily | mid-island Vacancy overview CMHC, in its most recent Fall 2011 Rental Market Report released in early December, states an overall apartment vacancy rate in the Nanaimo Census Area (CA) of 6.3% overall, a marked increase from the 3.3% vacancy level contained in the October 2010 CMHC report. Most submarkets in the Mid-Island region experienced increased vacancy, with the exception of Campbell River and Courtenay, registering 6.9% and 3.4% vacancy rates respectively. The City of Parksville had the lowest vacancy rate of 2.0% of all the submarkets on Vancouver Island. Additionally, Duncan’s vacancy rate was 6.4% and Port Alberni’s was 7.2%. market rental rates2011 market drivers CMHC rental rate figures for each Mid-Island market can be obtainedHistorically low interest rates continue to drive demand in the multi- upon request. Nanaimo figures are shown below. Average rentals forresidential market segment. The other significant market drivers for 1 Bdrm and 2 Bdrm units in 2011 are compared with 2010 increasesthe multi-residential rental market segment are directly related to 3 in the Table below. Legislated rental increases for 2010 were 3.2%,drivers manifested in this product segment, namely: 2.3% for 2011 and for this year, 4.3%. 1. Income predictability. Average Rental Rates By Apartment Type 2. Market security and stability relative to other PERCENT investment grade real estate options. APARTMENT TYPE 2010 RENTS 2011 RENTS INCREASE/DECREASE Bachelor 519 538 3.5% 3. Liquidity – there is a significant level of capital in 1 Bedroom 648 661 2.0% the hands of investors targeting this product category. 2 Bedroom 789 802 1.6%Notwithstanding the current lending environment, this property 3 Bedroom + 957 955 -0.2%category has proven to be a consistently popular investor target Source: Fall 2011 CMHC Rental Market Reportwith a capable purchaser pool ready to pursue properties within theacceptable market envelope. Nanaimo Apartment Vacancy Rate Increases 7.0 6.0 5.0 4.0 Percent 3.0 2.0 1.0 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YearSource: Canadian Mortgage & Housing Corporation p. 2 | Colliers International
  3. 3. real estate report | spring 2012 | multifamily | mid-island Market Transactions PROPERTY # STREET CITY CLOSED SALE PRICE # OF SUITES CAP RATE SALE PRICE/SUITEEvergreen Court 1085 Piercy Avenue Courtenay 1/6/2011 $800,000 10 - $80,000The Highlands 2502 Highland Boulevard Nanaimo 2/9/2011 $2,440,000 21 6.29% $116,190Riverbend Terrace 659 Rosehill Street Nanaimo 3/31/2011 $2,913,000 - - -Regal Manor 600 South Island Highway Campbell River 4/14/2011 $2,360,000 - - -Roselind Apartments 515 Hecate Street Nanaimo 4/29/2011 $500,000 6 - $83,333Town Park Apartments 7205 Pine Drive Port Hardy 5/3/2011 $1,842,117 71 - $25,945Cypress Gardens 265 Moilliet Street Parksville 5/4/2011 $2,500,000 31 5.69% $80,645Dufferin Heights Apartments 1651 Dufferin Crescent Nanaimo 6/1/2011 $7,500,000 63 5.05% $119,048 $100,781*Ascot Gardens 240 Back Road Courtenay 7/14/2011 $3,225,000 32 - additional SFD not included 110 Esplanade Avenue Ladysmith 7/28/2011 $852,000 15 6.65% $56,800Gulf View Estates 385 Davis Road Ladysmith 8/1/2011 $3,865,000 28 5.85% $138,036Cathedral Place 3855 11th Avenue Port Alberni 8/1/2011 $4,852,500 50 5.36% $97,050Chahalis Apartment 374 3rd Street Courtenay 9/29/2011 $875,000 8 - $109,375Louval Apartments 9930 Daniel Street Chemainus 11/1/2011 $775,000 11 6.32% $70,455The Pines Apartments 1055 10th Street Courtenay 11/15/2011 $2,201,494 33 6.17% $66,712North Shore Manor 28 North Shore Road Lake Cowichan 11/30/2011 $850,000 14 - $60,71416 Transactions $38,351,111Source: Colliers Research. Please note that these totals may not include share transfer transactions and includes sales greater than $500,000.Capital Markets & Mortgage FinancingAs the global economy continues its slow recovery, we expect Colliers Capital Markets division is sourcing both conventional andinterest rates to increase into 2013. Positive economic news from the CMHC insured first mortgage apartment financing at the followingUSA (improving unemployment rates and an increase in consumer interest rates (indication only):spending), along with a calming in the Euro Debt storm in recent First Mortgage Apartment Financingweeks, has boosted investor confidence and created a surge in longer Lenderterm bond yields, resulting in a marginal increase in interest rates. Type of Financing Term Bond Yield Spread Interest RateIt is important to note that although we forecast an increase, interest Conventional 5 1.65% 2.15 3.80%rates will remain very low when compared to historical levels. These 10 2.14% 2.50 4.64%sustained record-low rates, combined with liquid balance sheets, CMHC Insured 5 1.65% 1.05 2.70%have investors on the sidelines ready to make strategic real estate 10 2.14% 1.13 3.27%acquisitions, creating a continued demand for high quality, well-locatedCanadian real estate. Please contact our Capital Markets team if you would like current indication rates, or to discuss refinancing for the purpose ofBased on current Government of Canada Bond Yields (effective May improving cash flow, making capital improvements, or additional2, 2012) and recent quotes from a number of institutional lenders, real estate acquisitions. Colliers International | p. 3
  4. 4. real estate report | spring 2012 | multifamily | mid-island 512 offices in 61 countries on six continents United States: 125 Canada: 36 Latin America: 18 Asia Pacific: 32 EMEA: 117Market Forecast 2012 • • $1.53 billion in annual revenue 978.6 million square feet under managementNanaimo’s rental pool will increase by approximately 146 total units, one of the first increases • More than 12,500 professionalsin approximately 20 years. The Molnar Group will be finalizing their new 121 unit apartmentblock, comprised of 1 to 3 bedroom units, located at 775 Terminal Avenue, just north ofdowntown Nanaimo. Furthermore, Great West Developments Ltd. will be completing theNanaimo Student Housing project, located along Wakesiah Avenue comprising 25 units and 37 contact informationbeds. Additionally, a mixed-use residential and commercial development at 560 Third Streetis currently in the rezoning stages and, once complete, will comprise a five storey student Dave Ganongresidence with 50 units. Overall student enrollment at Vancouver Island University has Managing Director | Victoria DIRECT: +1 250 414 8388increased to approximately 11,000 students and ample and available rental accommodations dave.ganong@colliers.comare becoming increasingly scarce. Growth in student population is expected to continue overthe long term and, as such, increased demand for rental housing in the University District, Brad Archibaldalong with other regions in the City of Nanaimo is forecast. Associate Broker & Multifamily Specialist | VictoriaWe anticipate that demand for Nanaimo rental units will grow because of an increase in DIRECT: +1 250 740 1060 ext. 2224employment opportunities associated with the awarding of the Federal Government ship brad.archibald@colliers.combuilding contracts, a portion of the total $8B which will flow to the Nanaimo Shipyards Group.However, as mentioned, there are two significant additions to purpose built rental that will be Jason Wintondelivered this year and could negate the economic impacts of the federally granted contracts. Managing Broker & Multifamily Specialist | VictoriaThat being said, we foresee the Nanaimo vacancy rate leveling out over the course of 2012. DIRECT: +1 250 740 1060 ext. 2223As far as investment activity, the market currently has a strong appetite for consistent jason.winton@colliers.comincome producing properties and, combined with continued low financing rates, this trend is Tyler Dolanprojected to continue. As a result, capitalization rates will continue to compress slightly in Assistant Vice Presidentthe Nanaimo and Mid-Island regions. Capital Markets | Victoria DIRECT: +1 250 414 8378Colliers Apartment Investment Division tyler.dolan@colliers.comWe invite apartment owners and investors alike to contact our Colliers Victoria and Nanaimo Christina DhesiApartment Specialists Divisions. Our specialists, in the person of Ken Cloak in Victoria Research & Market Analyst | Victoria DIRECT: +1 250 414 8371and Jason Winton, and Brad Archibald in Nanaimo, will be pleased to apply our specialized christina.dhesi@colliers.comexpertise to owners looking to maximize the value of their apartment assets.This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees,representations or warranties of any kind, express or implied, regarding the information including, but not limited to, warranties of content, accuracy andreliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocallyall 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). © 2012. All rights reserved. Accelerating success.