Vancouver’s Shannon Mews eyeing first permit.

The application for phase one of the Shannon Estate development at 57th and Granville goes before the city’s Development Permit Board July 16.

Council approved the rezoning of the Shannon Mews site almost a year ago—at 2 a.m., July 29—following three days of contentious hearings that went late into the night. Of the 179 people registered to speak, 85 were opposed, four were classified as “other,” seven were in support and 83 didn’t speak.

Over the past few years, a significant proportion of the increasing value of commercial real estate in Vancouver has been attributed to declining capitalization rates. This so-called “cap-rate compression” has been evidenced by seemingly perpetual price appreciation in Vancouver throughout the past several years, with only a small blip in the markets in late 2008 and early 2009. Since that time, cap rates have followed the march of the bond market.

When will we witness the end of declining capitalization rates? Logic would dictate that this trend cannot be sustained; however, with continued low bond yields, debt financing can continue to be characterized as ‘cheap’, and many investors will continue to be attracted to Vancouver’s overall low-risk profile.

Yields on 5-year bonds are forecast to increase approximately 50 basis points by the end of 2013. This may have an impact on lower-tier properties and those in secondary markets, where average yields may increase by as much as 50-100 BPS. On the other hand, with continued global economic uncertainty, Vancouver may benefit from sustained low interest rates and a ‘safe’ outlook, particularly in core areas where there remains high barriers to new supply.

238 West Broadway – An eight storey, 61 unit mixed use development was recently approved by the Development Permit Board.  The project will be utilizing a density transfer from a donor site (163 West Hastings Street – the Flack Block) which will give the project a total FSR of 3.25.

1545 West 8th Avenue – An eight storey, 18 unit development with two levels of underground parking was recently approved by the Development Permit Board.  The project, by Kenstone Properties, will be 23 metres in height and will have a 3.0 FSR.

Colliers has released their Q2 2012 retail market report. The retail market in Metro Vancouver has been consistently active with many landlords, retailers and investors experiencing the benefits of a high-priced market.

Highlights from the report:

• The overall vacancy rate for Metro Vancouver increased from 2.7 percent in Q4 2011 to 3.9 percent this quarter
• Accounting for the majority of increased vacancy is Chilliwack moving from 4.3 percent in Q4 2011 to 10.9 percent this quarter, Richmond moving from 1.9 percent in Q4 2011 to 6.2 percent this quarter.
• Deal velocity remained consistent so far this year with many lower priced properties trading hands, while deal volume has slowed
• The federal government increased duty-free limits for cross-border shopping, which went into effect on Jun 1, 2012, putting further pressure on Canadian retailers

Source: Colliers International