As we ring in the New year, an analysis of the REBGV’s Housing Price Index for apartment/condo’s on Vancouver Westside, including Downtown, shows that pricing has been flat for over two years now.

Resales values have likely been suppressed amid a large amount of new inventory coming to market; particularly in areas like Southeast False Creek and Cambie Corridor.

It’s been a great 5 years for owners of the City’s older office buildings. Amid near-record low vacancy and high rents, B and C Class buildings have enjoyed all-time high valuations in 2013, particularly those located in ‘hip’ areas like Yaletown and Gastown. This trend has been exhibited in a number of recent sales, including: 576 Seymour Street, 1445 West Georgia Street and 1112 West Pender, all of which sold at cap rates roughly half of what they would have been just 7 or 8 years ago. Are owners of older office buildings looking to cash out on gains? Well, not really….yet. While many would likely agree that there are risks to the outlook for office leasing fundamentals going forward, vacancy and rental rates are only beginning to feel negative pressure. Here’s a look at some trends in the leasing market:

B Class buildings in particular are expected to feel pressure as the upward movement of tenants throughout the market is fuelled by the new construction of AAA Class buildings downtown.

Compare that with the run-up in values over the past ten years:

Ten years ago, half-empty older downtown buildings often sold for as low as $100 per SF, and now they are trading often as high as new product in other markets. Cap rate compression in this subset has also reflected the market at large.

As leasing fundamentals are expected to show a more pronounced weakening around the same time that interest rates finally show upward movement (ie. early 2015), expect to see more activity in this subset of the commercial real estate market, with more sellers looking to cash out on existing tenancies, as well as renewed pressure for conversion to hotel or residential.

Conversion in particular is a much more difficult strategy than it was a decade ago, when the loss of older commercial space prompted the City of Vancouver to initiate a moratorium on the conversion or demolition of commercial space in core areas (the Metro Core Jobs Study).

Next week, City of Vancouver Council will consider an action plan to update and strengthen the City’s Heritage Conservation Program. The action plan recommends a number of “quick start” changes for immediate action, as well as more comprehensive medium and long-term changes.

Immediate Actions:

#1 – Clarify Direction on Conditional and Discretionary Zoning

The action proposed here is to make it clear that the Director of Planning and/or the Development Permit Board will not look favourably on applications seeking a conditional use or density in the zoning, where there is degradation or demolition of a heritage asset, or a property with heritage value. For example, in the C-3A zone where the outright density is 1.0 FSR, if the Property in question contains a heritage building, it will only be able to reach the conditional approval density of 3.0 FSR if the heritage resource is preserved in some fashion.

#2 – Streamline Rezoning, Development Permit and HRA Approval Processes for Heritage Retention Applications

One idea proposed is to eliminate the requirement for a review of the developer’s proforma for applications under a certain size. General administrative simplifications are also proposed.

#3 – Increase Demolition Fees for Pre-1940 Houses

A number of disincentives will be incorporated to prevent the loss of buildings constructed pre-1940, including significant increases in permit fees and waste disposal.

#4 – Solicit Senior Government Support For Rehab Tax Incentives

The City will lobby the federal government to endorse recommendations supporting heritage conservation through incentives.

#5 – Update the Vancouver Heritage Register

The City is proposing to update the Heritage Register over the next 18 months. As of 2013, there were a total of 2,200 buildings on the Register, with a total of 58 added over the past 6 years. Which buildings are likely targets for placement on the Register? The City is targetting themes that are presently under-represented on the Register such as First Nations sites and places with cultural and social meaning to communities (see: The Waldorf Hotel debate?)

Vancouver’s Heritage Register

Medium to Long Term Actions

#6 – Amend RS Zoning to Encourage Heritage Retention

This seeks to replicate the model in newer RT zoning by providing incentives in RS zones to preserve character and heritage buildings.

#7 – Review and Update the First Shaughnessy Official Development Plan

The idea is to address the issues of an increase in the number of demotion proposals in Shaughnessy. The City is recommending that it be changed to a Heritage Conservation Area (HCA) similar to what is common in some of Victoria’s older neighbourhoods.

#8 – Extend Existing Incentive Programs in the Downtown Eastside

Staff are recommending a two-year extension to the two incentives currently available in the DTES: the Heritage Building Rehabilitation Program (HBRP) and Heritage Facade Rehabilitation Program (HFRP).

#9 – Examine Incentive Program for Applicability Elsewhere

A general review will be undertaken to determine the applicability of heritage incentives in all areas of Vancouver. Incentives are presently limited to the DTES.

#10 – Develop an Enhanced Deconstruction Strategy

#11 – Improve Public Awareness of Amendments to Facilitate Heritage Conservation

#12 – Develop an Energy Retrofit Program for Existing Buildings

#13 – Identify Cultural Facilities in Heritage Buildings

#14 – Greater Protection of Trees and Landscapes

Source: http://former.vancouver.ca/ctyclerk/cclerk/20131204/documents/ptec8.pdf