As Vancouver home prices surge, businesses are starting to feel the financial squeeze as well. Commercial real estate prices are surging in Vancouver and companies are starting to worry that they are not only losing young talent but also the opportunity to build and develop in the pricey metro Vancouver area.
RealNet Canada Inc. completed a long-term analysis of investment properties in Metro Vancouver and investment properties grew at a value of 7.7%, with some types of properties gaining strength and others sectors struggling to gain value. Retail and office properties posted strong growth in value. The retail sector in particular has benefitted from joint growth with residential properties – often with retail developed in conjunction with residential as a mixed-use building.
While the retail and office sector saw growth, the industrial real estate sector saw less positive progress. Older industrial properties are declining in value and newer industrial properties are often going for top dollar. With industrial properties estimated to contribute more than $20 billion to the national economy, this industrial sector clearly brings income, and employment, to the local economy as well. Nevertheless, the cost of business real estate is hitting companies hard with big expenses.
High land value is the first hurdle for many new business real estate developments, whether a company is relocating to Vancouver from elsewhere or moving across town. Factoring in income taxes, property taxes, brokerage fees and property management expenses, the cost of setting up business becomes sky high. Tight construction codes mean more costs to business owners to develop a property. While this boosts the income to the construction industry, it hurts the pockets of business owners. With a lack of land options dwindling and local building and development codes swelling, the strict regulations and mounting costs could push businesses away from Vancouver, seriously affecting the local job market.
Even though Vancouver is desirable for business owners – especially the industrial sector due in part to local transit, access to the United States, and shipping routes through the port – the red tape they are required to go through is putting a strain on new business development. Tedious municipal codes require the hiring of specialists, from environmental to architectural to seismic, and often slow down the development of new business real estate, further mounting the costs. Factoring in the increasing outlays for labor and construction, it is clear that new businesses are up against an enormous number of challenges when choosing to do business in Vancouver.
With higher taxes levied to businesses, some are concerned that this cost will pass on to homeowners, creating an even more difficult real estate market for potential homebuyers. In addition, this cost would influence potential employees for local businesses. There is no doubt that Vancouver is not only one of the most expensive places to live in Canada, but it is also proving to be one of the most expensive places to do business as well.
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