Arbutus Village Commercial Development Opportunity And Impact Study Vancouver, B.C.
Prepared for: The City of Vancouver
As of December 2008
Cushman & Wakefield LePage, Inc. Valuation, Advisory & Property Tax Services 700 West Georgia Street, Suite 700 Vancouver, B.C. V7Y 1A1 (604) 683-8181
C&W LePage File ID: W8-51 TABLE OF CONTENTS
T A B L E O F C O N T E N T S
S I T E A N D D E V E L O P M E N T C O N T E X T 5 1.1 SITE AND LOCATION 5 1.2 TRANSPORTATION, ACCESS AND VISIBILITY 8 1.3 DEVELOPMENT CONTEXT 9
R E T A I L M A R K E T O V E R V I E W A N D S U P P L Y 1 3 2.1 CLASSIFICATION OF SHOPPING CENTRES 13 2.2 NEIGHBOURHOOD SHOPPING CENTRES 16 2.3 RETAIL DEVELOPMENT TRENDS 19 2.4 METRO VANCOUVER RETAIL MARKET 20 2.5 RETAIL MARKET OUTLOOK 26 2.6 RETAIL SUPPLY 26
R E T A I L D E M A N D 3 5 3.1 INTRODUCTION 35 3.2 DELINEATION OF THE TRADE AREA 35 3.3 POPULATION PROJECTIONS AND DEMOGRAPHICS 36 3.4 RETAIL DEMAND PROJECTION 40
O F F I C E M A R K E T O V E R V I E W 4 3 4.1 INTRODUCTION 43 4.2 BUILDING CLASSES 43 4.3 OFFICE-USING EMPLOYMENT 44 4.4 THE OFFICE BUILDING MARKET 45 4.5 THE OFFICE MARKET VACANCY RATE 47 4.6 ASKING RENTS 48 4.7 LEASING ACTIVITY AND ABSORPTION 49 4.8 OFFICE DEVELOPMENT 50 4.9 OFFICE MARKET OUTLOOK 50 4.10 THE OFFICE MARKET WEST OF GRANVILLE STREET 51 4.11 OFFICE SPACE ABSORPTION AT THE SUBJECT SITE 52
D E V E L O P M E N T A N D I M P A C T A N A L Y S I S 5 5 5.1 INTRODUCTION 55 5.2 RETAIL IMPACT 55 5.3 OFFICE IMPACT 55
A D D E N D A C O N T E N T S 5 8 ASSUMPTIONS AND LIMITING CONDITIONS APPENDIX I QUALIFICATIONS OF CONSULTANTS APPENDIX II
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. EXECUTIVE SUMMARY I
E X E C U T I V E S U M M AR Y
This development opportunity and impact report, and retail and office market study on Arbutus Village Shopping Centre was commissioned by the City of Vancouver and was completed between October and “Arbutus ” envisions a mixed use December 2008. The recently approved Centre Policy Statement development of approximately 110,000 sq.ft. of retail and office space, approximately 650 residential units and a possible Neighbourhood House. The proposed retail component would be located at grade level among four separate buildings, a food store of about 40,000 sq.ft., a mix of street fronting Commercial Retail Units (CRU) totalling 40,000 sq.ft. (including a liquor store, financial institution, personal services and restaurants), plus office space of at least 30,000 sq.ft., most of which would be on the second level.
The objective of this report is to determine whether any increases of retail and/or office space can be achieved in this location, and if so, what the economic impact would be. Provision of optimal yet still local serving commercial is a principle objective. The project should not detract from or negatively impact any other existing commercial centres.
LIMITS TO EXPANSION The objectives of this study are to establish the optimal and economically viable scale of commercial development and to simultaneously establish the range of potential impact of the centre on the existing retail infrastructure. In a collaborative manner, the analysis would find the balance point between the ideal type and scale of project and some acceptable level of impact. Several important issues have a major impact on commercial development potential at Arbutus Village.
No expansion on grade level is possible, so any additional space over and above the proposed 80,000 sq.ft. is above grade level, on levels 2 and 3 or higher.
The subject site is not on a major traffic intersection, and access and visibility are very poor as compared to virtually any comparable commercial development in western Canada.
The site has a 7 meter slope to both the south and the west, which has a severe negative impact on the grade level site plan, restricting project size.
The project is not on a major arterial such as Broadway or Granville Street, but rather it is on a secondary arterial with only moderate and local traffic volumes. This highly localized location limits the number of potential customers and thus the potential scale.
The existing project is not a normal or even an average commercial property and it has performed very poorly for many years despite minimal commercial competition within the trade area.
It is highly likely that the past and proposed size of Arbutus Village is already optimal. An increase in size on such a small sloping, mid-block site means that additional space would be above grade retail space, and that is not feasible at any but the busiest locations. Even if some large and popular anchor tenant was able to locate on level 2, it would violate the condition of being local serving as it would need to draw sales from residents across the entire west side.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. EXECUTIVE SUMMARY II
Even if the site were larger, flat and had better access, a larger development would not necessarily be warranted. The current proposed development is already at the upper limit of scale for a neighbourhood centre according to all industry standards. If this project were expanded beyond 110,000 sq.ft., it would be one of the largest neighbourhood shopping centres in all of Canada. Such an exceptionally large project exceeding industry standards would only be feasible at an exceptionally busy commercial location.
The possible expansion scenarios beyond 110,000 sq.ft. are as follows:
SCENARIO 1: 135,000 SQ.FT. (ADDITIONAL 25,000 SQ.FT.) Level 2:
25,000 sq.ft. destination retail anchor on level two, likely over the supermarket. This would be an anchor such as Winners, Best Buy or other mid-sized box store. Retail on the second level is not viable economically or financially, and even if an anchor was possible, the centre would have to be a regional destination in order to produce sufficient sales for a destination retailer to be viable. A series of small shops would not be viable on a second level as inconvenient vertical access and limited visibility would not allow the tenants to attract sufficient sales to remain in business.
OR
25,000 sq.ft. of office space (in addition to the proposed 30,000 sq.ft.). An overview of the market clearly indicates that an office building on the secondary arterial road could not exceed the 30,000 sq.ft. already proposed. If the developer were compelled to build this, this would be the only reasonable expansion scenario and the scenarios which consider an even greater scale should not be considered.
SCENARIO 2: 160,000 SQ.FT. (ADDITIONAL 50,000 SQ.FT.) Level 2:
50,000 sq.ft. of office space (in addition to the proposed 30,000 sq.ft.). This is too large for the market and location.
SCENARIO 3: 185,000 SQ.FT. (ADDITIONAL 75,000 SQ.FT.) Level 2 and 3:
75,000 sq.ft. of office space (in addition to the proposed 30,000 sq.ft.). This is too large for the market and location.
RETAIL IMPACT Additional retail expansion over the 80,000 sq.ft. proposed is not technically, economically or financially feasible. The subject site is simply not suitable for retail space over 80,000 sq.ft. and neither the market nor ’s shortcomings were somehow addressed. industry standards could support anything larger, even if the site Even if the developer was compelled to expand the retail space by 25,000 sq.ft., the small scale and limited local serving stores of the potential retail expansion would have negligible sales which would preclude any possible negative impact on existing west side retail.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. EXECUTIVE SUMMARY III
OFFICE IMPACT As it has been determined that the retail space cannot be expanded, any possible expansion would thus have to focus on office space. As there is already 30,000 sq.ft. of office space proposed, the scenarios are:
55,000 sq.ft. of office space (25,000 sq.ft. proposed in addition to the 30,000 sq.ft. planned).
80,000 sq.ft. of office space (50,000 sq.ft. proposed in addition to the 30,000 sq.ft. planned).
105,000 sq.ft. of office space (75,000 sq.ft. proposed in addition to the 30,000 sq.ft. planned).
In our analysis, the proposed 30,000 sq.ft. of office is warranted by the market, but a 55,000 sq.ft. office building, at this peripheral location, with underground parking would not be economically or financially feasible. Such an office project is not existent in any comparable location on the west side, largely because there are not a sufficient number of tenants to support such a large scale project.
If the project was forced to have a 55,000 sq.ft. office component, it would likely have a moderate negative impact on existing office buildings nearby as it would supply the market with surplus office space. It could hurt local office building owners by lowering office rents in areas such as Kerrisdale.
The impact would be on the order of perhaps an additional 3 or 4% vacancy and a 10% decline in rents in the nearest office buildings. The impact would also be negative on Arbutus Village itself as large portions of the additional local serving office space would remain unleased for the next 8 to 10 years.
In summary, the commercial development as proposed is optimal, and balances supply and ’ demand with the site s characteristics. Any expansion over the scale proposed is not economically or financially feasible.
(W8-51) VALUATION & ADVISORY SERVICES
1 S I T E
A N D
D E V E L O P M E N T
C O N T E X T
Site and Development Context
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. SITE AND DEVELOPMENT CONTEXT 5
S I T E AN D D E V E L O P M E N T C O N T E X T
The objectives of this study are to establish the optimal and economically, financially and physically viable scale of commercial development proposed for Arbutus Village. Once this is done, the report should establish the range of potential impact of the centre on the existing retail and office infrastructure. This is only required however if the centre size exceeds the 110,000 sq.ft. proposed by the developer. In a collaborative manner, and if applicable, the analysis should find the balance between the ideal type and scale of commercial project and some acceptable levels of economic impact.
’s location and physical characteristics This section of the report outlines the site , as well as the proposed development context. This is a unique impact study in that in all other instances, the proponents want expanded commercial space. Commercial space is very valuable and if it is not being maximized, the reasons why must be understood. This modest scale may have something to do with physical site limitations such as a small property, a significant slope, lack of a corner location, poor access or some other impediment to an expanded commercial development.
1.1 SITE AND LOCATION Arbutus Village Shopping Centre is located at 4255 Arbutus Street in Vancouver, B.C. It is a neighbourhood- scale shopping centre located on the west side of Arbutus Street at Nanton Avenue, midway between West 25th and West 30th Avenues in the Arbutus Ridge area. It was developed as part of the redevelopment of a large tract of surplus CPR land to the southwest of West 25th Avenue and Arbutus Street. In the early 1970s the majority of the site became multiple dwellings. The commercial centre opened in 1974 and was anchored ’s Food Floor (now Safeway), along with one level of shops, an upper floor of office space and by Woodward a partial lower floor with some commercial space and a recreation centre for area residents.
It is conveniently accessible to pedestrians via the adjoining multi-family residential community and small pathways.
Vehicular access to the site is very difficult however as it is not on the main traffic intersection. The site has limited and unsignaled access from Arbutus Street. Vehicles making a left turn have great difficulty when traffic is busy. Based on access problems alone, this is not a good or logical location for retail space, primarily because it is not on the corner of two main roads.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. SITE AND DEVELOPMENT CONTEXT 6
FIGURE 1.1 REGIONAL LOCATION
The shopping centre site area is 7 acres in size and the building has a total leasable area of 110,000 sq.ft. It was expanded in 1985 by 15,640 sq.ft. and in 1991 by 2,153 sq.ft. The centre is now fully enclosed and has some 40 shops in addition to Safeway, a liquor store, Petcetera and 493 parking stalls. The site is fully developed to the extent of the existing CD-1 bylaw, with an FSR of 0.49.
Each renovation and expansion was an attempt to improve the centre, however the developer(s) have not been successful. The expansion of the centre to this scale was done to make it more of a destination, but without a greater attraction than a typical Safeway supermarket, it is unable to generate significant or even sufficient levels of retail customer traffic to support so many small stores. It is too small to have been enclosed, and too large and inconvenient to be an open centre.
The local community is dominated by single family residential buildings with some multi family nearby and to the south. The Arbutus Club is located to the east of subject site.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. SITE AND DEVELOPMENT CONTEXT 7
FIGURE 1.2 SITE LOCATION
FIGURE 1.3 LOCAL SITE AREA
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. SITE AND DEVELOPMENT CONTEXT 8
1.2 TRANSPORTATION, ACCESS AND VISIBILITY The location is generally poor for a commercial project primarily as it is not on a major corner. Almost every significant mall in Canada is on a corner and has signalized access or access from two streets. The corner of Arbutus Street and King Edward Avenue West has a very high hedge of trees and there is no indication that there are any commercial facilities. The centre has very poor visibility and access compared to any other comparable shopping centre in Metro Vancouver.
Arbutus Street is an arterial road but a minor one. It does not connect with routes to the suburbs and in large sections it is only two lanes. Thus it has only moderate traffic volumes of approximately 28,000 total vehicles travelling northbound and southbound per day on Arbutus Street at West King Edward Avenue. This is compared to well over 40,000 vehicles per day near Oakridge Centre, for example.
Access is difficult as the site is not on the corner of two arterial roads. There is a dedicated right in and right out on Arbutus Street and only a basic uncontrolled left turn lane. Not having a signal severely limits ’s potential customer base and convenience and thus the centre thus size. There is no access to Nanton Avenue, which is a side street. Given the lack of a corner location, the sloping topography and the poor access, this site has very poor commercial characteristics.
The subject site is accessible by public transit (bus). Bus routes are illustrated in Figure 1.4 by yellow and green. The site is located along the #16 bus route which runs between 63rd Avenue at Granville Street and 29th Avenue Skytrain station via Downtown. King Edward bus service is 2 blocks north and is not convenient, and the centre is not even visible due to the hedges and multi-family housing on the corner.
FIGURE 1.4 LOCAL TRANSIT MAP
Subject Site
Source: Translink
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. SITE AND DEVELOPMENT CONTEXT 9
1.3 DEVELOPMENT CONTEXT “Arbutus Centre Policy Statement” envisions a mixed use development of The recently approved approximately 110,000 sq.ft. of retail and office space, approximately 650 residential units and a possible Neighbourhood House. The retail and office would be located at grade level among four separate buildings, a food store of about 40,000 sq.ft., a mix of street fronting Commercial Retail Units totalling 40,000 sq.ft. (including but not limited to a liquor store, financial institution, restaurant), plus office uses of at least 30,000 sq.ft. The preliminary and generalized land use and site plan is illustrated in Figure 1.5.
Given the poor commercial location features of the site, it is not likely that any major retailers other than supermarkets and drugstores would be interested in this location. Nor would many large scale office tenants, as their clients, customers and suppliers all need and want better regional access and a more prestigious “Broadway” address such as . This is a local site for small scale retail and small scale office, both designed to serve the local area only. The limits of the site match the zoning and the small scale development.
Unlike the subject, King Edward Mall located to the east is an example of a well designed and typical neighbourhood mall. Located on the corner of two arterial roads at King Edward Avenue West and Oak Street, it has excellent parking and access with ample traffic volumes on two major roads, however, it falls well below the 0.75 FSR threshold. The site is flat and all tenants are readily visible from across the property and from both major streets.
Below is the outline of the approved development at the subject site. The intention is to create a commercial streetscape. This would be done without the benefit of high volumes of drive by traffic, as it is an internal grid road. Parking will be largely located underground. If it is well designed and well lit, consumers are even more accepting of structured parking.
FIGURE 1.5 PROPOSED DEVELOPMENT
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. SITE AND DEVELOPMENT CONTEXT 10
APPROVED: 110,000 SQ.FT. RETAIL/OFFICE SPACE (AT GRADE LEVEL) – 40,000 sq.ft. food store (Safeway) Building A at the northeast corner, grade level.
– 40,000 sq.ft. Commercial Retail Units Building B at the southeast corner, grade level.
– 30,000 sq.ft. office Building B at the southeast corner, grade and above grade levels
Buildings C and D both have very small space on the internal grid road corners. These buildings have been allotted only minor commercial space in order to animate the main corner and the intersection.
RESTRICTIONS ON RETAIL SPACE As the City wishes to determine whether any increases of retail and office space can be achieved on the subject site, three scenarios were selected to be assessed. It is important to note that an increase in size on such a small site means several development conditions:
Above grade retail space.
An unusually large neighbourhood shopping centre, breaking all industry standards of scale, role and function.
Additional retail and office space would be so big it would have to serve the regional west side area, not the just the local community.
Based on real estate standards, none of these conditions is advised. Second level retail space is not viable at this location or anywhere except very busy commercial destinations. Second level space is barely viable in high density locations such as downtown Vancouver, and could not work here. In addition, the only type of additional retail would be an anchor tenant as the project could not support more small shops. An anchor is not viable as it would have to be a destination, such as Winners, and that tenant would serve much more than the local area.
EXPANSION SCENARIOS
SCENARIO 1: 135,000 SQ.FT. (ADDITIONAL 25,000 SQ.FT.) Level 2:
25,000 sq.ft. destination retail anchor tenant on level two. As more small shops are not possible, this would be an anchor such as Winners, Best Buy or other mid-sized box store. While technically feasible, this store would make the centre a regional destination with customers coming from all across the west side. The development would not be feasible, due to the limited access, poor visibility, small and unusual scale of the project and structured parking.
OR
25,000 sq.ft. office. This would make the office component 55,000 sq.ft., likely on levels 2 and 3.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. SITE AND DEVELOPMENT CONTEXT 11
SCENARIO 2: 160,000 SQ.FT. (ADDITIONAL 50,000 SQ.FT.) Level 2:
Small or large retail tenants are not viable at virtually any scale over the proposed 80,000 sq.ft.
50,000 sq.ft. office. This would make the office component 80,000 sq.ft. on 3 or 4 levels. This would be a major office building, one of the largest located west of Granville Street.
SCENARIO 3: 185,000 SQ.FT. (ADDITIONAL 75,000 SQ.FT.) Level 2:
75,000 sq.ft. of office. This would make the office component 105,000 sq.ft., likely spread over 4 or 5 levels. This is a massive office project over many levels, likely accommodated in a mid rise concrete tower.
In essence, the only commercial space which could even be considered for expansion is office space.
Retail space is excluded from any area over 80,000 sq.ft., because it is not feasible to have retail on upper levels, and also by definition it is not feasible to have a neighborhood (local area serving) retail mall over 80,000 sq.ft. Nor is it feasible to exceed an anchor to CRU floorspace ratio of 50%. In other words the small shops cannot be expanded unless Safeway is expanded by an approximately equal amount.
(W8-51) VALUATION & ADVISORY SERVICES
2 R E T A I L
M A R K E T
O V E R V I E W
A N D
S U P P L Y
Retail Market Overview and Supply
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 13
R E T AI L M AR K E T O V E R V I E W AN D S U P P L Y
This section of the report outlines various aspects of the retail industry and retail supply. While it would be technically and logically very difficult to add any retail to the current proposed development, this study outlines retail market conditions to explore whether further expansion could be physically or economically possible.
2.1 CLASSIFICATION OF SHOPPING CENTRES It is important to have an understanding of the basic nature of retail areas and shopping centres. Recent retail development trends have focussed on open shopping centres, street-front retail, high density mixed use ’s floorspace is occupied by the centres and freestanding large scale stores. In general, 50% of each centre anchor tenant and 50% by small shops and store. The ratio is lower for busy locations such as downtown and higher at remote locations which need the anchors to act as a destination and bring customers to the site.
An anchor tenant is a large scale typically chain store which has a AAA covenant (a solid financial firm where there is little or no risk of default) and generates extra customer traffic for nearby stores (i.e. supermarket or liquor store).
At Arbutus Village, the anchor tenant to small tenant size ratio should stay within industry parameters and not be below 40%. This rule limits scale by defining the role and function within the logical parameters of expected customer volumes. The Safeway store is a critical anchor as it generates surplus traffic for other stores and it has a AAA covenant. The existing PetCetera is not a real anchor as it does not generate surplus customer traffic and it does not have a AAA covenant.
The standard mall classifications are as follows:
Strip Centre: A strip centre is an attached row of stores or service outlets managed as a coherent retail entity, with on-site parking conveniently located in front of the stores.
Neighbourhood Centre: This centre is designed to provide convenience shopping for the day-to-day needs of consumers in the immediate neighbourhood and is typically anchored by a supermarket.
The subject site is this type of retail facility now and under any of the retail development scenarios. Virtually all neighbourhood centres in Canada are under 100,000 sq.ft. unless they have a huge drugstore or are a hybrid type centre with some additional anchor tenant and serve a larger regional market.
By any industry standards, Arbutus Village is already at the high end of its possible size range.
Community Centre: A community centre typically offers a wider range of apparel and other soft goods than does the neighbourhood centre. It is anchored by a supermarket and small proportional department store. The problem with this type of project is that it is not focussed. It is not convenient yet and it is not large
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 14
enough to be a destination. Most of these centres have been redeveloped into smaller retail facilities with only a supermarket and the surplus land turned into housing, such as Champlain Mall, Middlegate Mall and others.
Lifestyle Centre: A centre that generally imitates a traditional street front retail district with sidewalks, streets and pedestrian areas. This is typical in new suburbs where consumers want alternatives to standard power centres and large unattractive parking lots. These centres try to offer a more appealing shopping destination with interesting stores and architecture. They mix food, personal services and convenience shopping with apparel and accessories. There are few of these in Canada to date, such as a small portion of Park Royal Shopping Centre in West Vancouver, but many are planned and in general they are feasible if they have a large trade area and retain neighbourhood appeal with food and drug anchor tenants.
Regional Centre: This centre type provides general merchandise (a large percentage of which is made up of apparel retailers) and services in full depth and variety. The anchor tenants are typically full-line department stores, promotional department stores, supermarkets and various big box tenants. Oakridge Centre is a small regional shopping centre.
Super-regional Centre: Similar to a regional centre, but because of its larger size, a super-regional centre has more anchors, a deeper selection of merchandise, and draws from a larger population base. Pacific Centre fulfills this role and function in the City of Vancouver.
Fashion/Specialty Centre: A centre composed mainly of upscale apparel shops, boutiques and craft shops carrying selected fashion or unique merchandise of high quality and price. These centres do need to be anchored, although sometimes restaurants or entertainment can provide the draw of anchors. The physical design of the centre is very sophisticated, emphasizing a rich decor and high quality landscaping.
Power Centre: A centre dominated by several large anchors, including discount department stores, off-price ”. stores, warehouse clubs, or "category killers
Theme/Festival Centre: These centres typically employ a unifying theme that is carried out by the individual shops in their architectural design and, to an extent, in their selection of merchandise. The biggest appeal of these centres is for tourists, as restaurants and entertainment facilities can anchor them. These centres, tend to be adapted from older, sometimes historic, buildings, and can be part of mixed-use projects. The locations tend to have some sort of natural feature such as water, or a tourist attraction. Granville Island is an excellent local example and it is close enough to compete with the subject site.
Outlet Centre: Usually located in rural or, occasionally, in tourist locations, outlet centres consist mostly of manufacturers outlet stores selling their own brands at a discount price. These are not a factor in Canada as such malls have not been established.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 15
In terms of street-front retail districts they tend to be in the following general categories:
o Historic Heritage District and Retail Area. These tend to be tourist-oriented such as Gastown.
o Neighbourhood Commercial Street. These retail centres are typical of urban areas across North America, and are where local residents obtain most of their food, services and other convenience needs.
The west side of Vancouver has some of the most vibrant commercial streets in North America, and they are very strong competitors for Arbutus Village. They offer excellent visibility and access and a wide selection of stores and services.
o Fashion District. These areas have overcome the initial negative competitive impact of enclosed malls and many are now thriving. It is the strength of these street front retail areas which inspires Lifestyle mall developers who are trying to emulate the best elements of streetscapes in a single master planned project.
o Entertainment District or precinct with cinemas, restaurants/cafes, and nightclubs.
o Business-Serving Retail such as on many downtown streets. These areas are dominated by restaurants and personal or business services. The project could capture some of the economic activity generated by the hospital and this would enhance its more traditional role by increasing the number of customers and expanding the sources of customers to include non-destination shoppers such as local employees.
The following table provides an overview of each type of shopping centre. Neighbourhood centres have an average size of 90,000 sq.ft. across North America, including the United States where most centres are larger. They never exceed 150,000 sq.ft. in size including all office space.
Each commercial property has a role and function and fits within a certain category. This hierarchy is important as it clearly shows Arbutus Village would be outside any normal size range if it were expanded beyond the current proposal. This problem of incorrect scale is made more difficult by the poor location and sloping topography, and retail expansion is virtually impossible.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 16
TABLE 2.1 – SHOPPING CENTRE TYPES AND CATEGORIES NORTH AMERICA
Source: International Council of Shopping Centers
2.2 NEIGHBOURHOOD SHOPPING CENTRES As explained, neighbourhood shopping centres such as Arbutus Village provide merchandise for daily living needs, such as convenience goods like food, drugs, financial services and personal services. A supermarket is the principal tenant in this type of shopping centre, often complemented by a drugstore. Unless it is not permitted by the supermarket as is the case for Arbutus Village.
The following table represents the operating results and other data for 21 Canadian neighbourhood shopping centres. The average Canadian neighbourhood centre is 61,452 sq.ft. with the largest ones being 86,775 sq.ft. including office space. It is neither advised nor possible for a neighbourhood centre at this location to exceed 80,000 sq.ft. of retail space. The current proposal of 110,000 sq.ft. is 80% larger than average and any increase would defy all industry standards and precedents. This would be particularly difficult at such a marginal location.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 17
TABLE 2.2 CANADIAN NEIGHBOURHOOD SHOPPING CENTRES CENTRE SIZE, SALES AND OPERATING RESULTS
Number of Centers in Sample: 21 Lower Upper Lower Upper Number Average Median Decile Decile Median Decile Decile Reporting
Center Size Square Feet Total floor space (GLA and all other floor area) 61,452 57,021 36,129 86,775 21
Center Sales Dollars per Square Foot of GLA All tenants $501.60 $504.89 5
Operating Results Dollars per Square Foot of GLA Percent of Total Receipts $ $ $ $ % % % Total Operating Receipts 18.68 17.86 11.26 26.93 100.00 100.00 100.00 21 Total rent 12.76 11.33 7.97 18.44 69.60 54.05 77.09 21 Total common area charges 4.06 3.43 1.41 8.33 18.19 10.75 37.23 21 Total other charges 2.79 2.90 1.08 4.06 15.46 8.16 21.71 1 Total miscellaneous income 0.12 0.09 0.01 0.29 0.44 0.05 1.52 14 Total Operating Expenses 6.94 6.90 3.30 10.24 39.93 30.21 46.96 21 Total maintenance and housekeeping 1.98 2.13 0.86 2.80 9.66 6.60 17.33 20 Total advertising and promotion 0.09 0.06 0.21 5 Total real estate taxes 3.41 3.55 1.98 5.35 17.41 15.05 27.33 21 Total insurance 0.13 0.13 0.08 0.24 0.61 0.40 1.52 21 Total general and administrative 1.29 1.10 0.43 2.57 6.72 2.86 14.97 20
Net Operating Balance 11.84 11.11 6.60 17.36 60.07 53.04 69.79 21
Note: GLA for operating results is adjusted as described in Chapter 2.
Note: Because data are means, medians, and deciles, detailed amounts do not add to totals. No median figures are shown if fewer than five values were reported for any income or expense category, and no lower and upper decile amounts are shown if fewer than ten values were reported. Source: The Urban Land Institute
A typical neighbourhood centre is approximately 60,000 sq.ft. in size and generates sales of just over $500 per sq.ft. of gross leasable area. The average net rent is $11.84 per sq.ft.
The table below summarizes a typical tenant mix in neighbourhood shopping centres. The figures on the right represent the typical share of floorspace per retail category.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 18
TABLE 2.3 NEIGHBOURHOOD SHOPPING CENTRES COMPARED TO ARBUTUS VILLAGE
Typical Neighbourhood Centre Arbutus Village (Current) Tenant No. in Median GLA % No. of Total Size % % Classification Sample in sq.ft. Share Stores in sq.ft. Share Difference General Merchandise 51 8,000 4.7% 0 0 0.0% -100.0% Food - Supermarket 127 32,020 46.5% 2 40,500 48.8% 5.0% Food service 440 1,799 9.0% 5 3,000 3.6% -60.0% Clothing and Accessories 48 4,000 2.2% 0 0 0.0% -100.0% Shoes 10 2,950 0.3% 0 0 0.0% -100.0% Home Furnishings 30 4,214 1.4% 0 0 0.0% -100.0% Home Appliances/Music 20 2,400 0.5% 0 0 0.0% -100.0% Building Materials/hardware 23 4,100 1.1% 0 0 0.0% -100.0% Automotive 24 4,032 1.1% 0 0 0.0% -100.0% Hobby/Special Interest 29 1,700 0.6% 0 0 0.0% -100.0% Gifts/Speciality 43 4,000 2.0% 4 1,200 1.4% -26.4% Jewerly 28 1,494 0.5% 1 500 0.6% 26.0% Liquor 34 3,196 1.2% 1 8,000 9.6% 676.2% Drugs 45 12,544 6.5% 0 0 0.0% -100.0% Other Retail 252 2,050 5.9% 1 17,000 20.5% 246.9% Personal Service 523 1,400 8.4% 7 3,200 3.9% -53.9% Entertainment/Community 50 3,000 1.7% 0 0 0.0% -100.0% Financial 165 1,518 2.9% 1 3,500 4.2% 47.3% Offices (Other than Financial) 168 1,855 3.6% N/A 6,100 7.3% 106.4% Total 22 83,000 100%
Food stores such as supermarkets comprise almost half (46.5%) of neighbourhood shopping centre floorspace and Arbutus Village is very close to average.
Other categories are food service (9.0%), personal service (8.4%), drugstores (6.5%), other miscellaneous retail (5.9%), and general merchandise stores (4.7%). Anchor tenants and particularly supermarkets such as Safeway require that the landlord sign an exclusive use clause before they will sign a lease. This means that the landlord cannot lease space to any tenant in a business with a similar product line. The exclusive use clause in the Safeway anchor lease means that no other food stores or drug stores would be permitted on site, yet those would be the most viable types of tenants. The clause is a common practice between the anchor tenants and the landlord.
Compared to an average North American neighbourhood shopping centre, Arbutus Village has a high proportion of liquor, office, financial (banks), and other retail.
Arbutus Centre lacks many tenant categories such as general merchandise, clothing and accessories, shoes and home furnishings. It is too small to carry such products and such tenants are not typical of neighbourhood centres.
Office space at Arbutus Village is already relatively high at 7.3% of the GLA. It is expected to grow to – approximately 27% of the total proposed development far more than in any other project. If it is expanded in any scenario it would become virtually unique in western Canada.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 19
Based on industry standards for scale and mix, 80,000 sq.ft. of retail and 30,000 sq.ft. of office is already at the very highest size range.
2.3 RETAIL DEVELOPMENT TRENDS
SALIENT RETAIL TRENDS As with any retail market study of value, it is important to address a number of important retail development trends influencing the subject market:
Regional enclosed malls have lost retail market share over the past 15 years. They tend to be costly to operate and inconvenient to shop at for the majority of customers. This is due to such factors as their lack of ’s large regional trade area. This is a declining form of retail convenience for many residents within the mall development and very few have been developed in North America since 1990. Despite this they have maintained dominance over some segments of the industry, particularly in the apparel categories. Without a large apparel section this type of retail development is not effective. Without full line department store anchors this type of development is inconvenient without the end benefit of shopping there.
Malls can be ineffective premises for retailers due to their inconvenient locations and/or inconvenient space within mall area plans. Internal-only locations with weak exposure to major arterials do not offer sufficient visibility for retailers seeking the maximum exposure to potential consumers. Weak locations tend to become relatively weaker over time, while strong locations tend to increase in strength. This trend is benefiting some street-front commercial areas and at the same time highlighting the inherent weaknesses in other areas. Internal mall corridors and mall entrances should make tenant premises convenient to consumers not inconvenient.
Commercial streets are increasingly attractive locations for retailers as they offer maximum customer convenience and independence from mall landlords. They also allow retailers to become an integral part of ’ ever more differentiated lifestyles. Mas customers s marketing is growing less effective than in the past and customers seek more unique and socially diverse experiences.
Street-front retailing is making a major comeback, in part, because it is convenient and it offers a number of unique and interesting owner-operator tenants. The large chains are all trying to get locations on good, high traffic streets in order to get closer to their customers, both physically and in terms of their lifestyle. This trend is only expected to grow as it gains its strength from the ever more pressing need for convenience with respect to the local population base. The Arbutus Village redevelopment is imitating street-front retail and getting away from traditional mall design characterized by a large surface parking lot.
There is strong demand from supermarkets for in-fill sites in inner-urban areas. The supermarkets tend to thrive with the associated denser population base and higher traffic volumes that such locations provide. This would spin off benefits to the immediate area and make related businesses viable.
The categories that will reflect the lowest degree of potential impact are food retail (i.e. supermarkets) and fashion clothing stores.
Big-box specialty retail anchors which sell product lines such as: books, crafts, toys, office supplies, computers, electronics, sporting goods, shoes, pet supplies, home furnishings and furniture, and home
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 20
improvement merchandise, have grown to dominate shopping centre development. The big-box stores now seek out some street-front retail locations in urban markets and can modify their floor plans.
Modern malls have high anchor-to-CRU (commercial retail unit) ratios. This trend is evident in virtually every recent development. Street-front commercial districts, with their more numerous, finer grain retail, are being differentiated from malls, and offer a favourable and complementary shopping alternative.
Neighbourhood centres anchored by supermarkets and drugstores play a very strong role within the local community. They generate high and consistent rental revenue and have low associated leasing risk.
Most new retail projects are inner urban, mixed use and high density. Virtually all new urban projects have a substantial multi-family component. In general, retail is highly specialized and should be focussed on specific customer needs.
2.4 METRO VANCOUVER RETAIL MARKET In general, the retail market in the region is strong with high sales and rents and a low vacancy rate. The west side of Vancouver in particular has only limited retail supply and ample demand.
TENANT ACTIVITY Chain retailers continue to enter the region with new leases signed in the second quarter by businesses such ’s Drug Mart, Canadian Tire, Royal Bank of Canada as Shopper , and the Bank of Montreal.
Non-residential construction remained robust in the first half of 2008, with the most substantial project underway being the $883 million Vancouver Convention Centre Expansion project. Developments such as the $600 million Sea-to-Sky Highway improvements and the 19 km Canada Line rapid transit system which links downtown Vancouver to central Richmond and the Vancouver International Airport will encourage retail development and expand customer target markets. The South and North Fraser Perimeter Roads and widening of Highway 1 will allow ever more development in the suburbs.
Kripps Pharmacy will leave their landmark location at Granville and Nelson after 60 years and move to Kerrisdale. Westminster Centre is currently under redevelopment and will expand, while Anthem refreshes the old Cloverdale Mall in Surrey. A new shopping centre at UBC will add a large new PriceSmart supermarket to the west side of Vancouver.
’s retail development is occurring as part of mixed Much of the market -use new or redevelopment of existing, underdensified urban and suburban locations. Westminster Centre South is an excellent example of repositioning existing retail and office space in New Westminster. Evidence shows that big-box retailers continue to seek urban locations, with the largest transaction (in terms of square footage) registering as Rona ’s purchase of 109,300 Inc. sq.ft. at 2580 Glenmore Avenue in Burnaby.
Along with Canadian retailers, U.S. retailers are increasingly entering the Metro Vancouver retail scene after the proven success of stores like Wal-Mart, Home Depot and Best Buy. In addition, the fashion and upscale retail market segments are booming, with companies like H&M, Mango, Abercrombie & Fitch, Hollister, Williams-Sonoma, Crate and Barrel, Lucky Brand Jeans, Tiffany and Hermes entering the market.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 21
RENT LEVELS As construction of the Canada Line nears completion, rents have already seen an increase as speculative buying and leasing starts to occur. At year-end 2007 rents in the Broadway/Cambie location rose from a range of $35 and $80 per square foot (per sq.ft.) increasing to an average of $35 and $105 per sq.ft. Rental rates across all classes (low, medium and high end product) in the Broadway/Cambie submarket increased in 2007 and have continued that upward trend through 2008. The retail rental rates in Metro Vancouver are indicated below.
th Average net rents in Kerrisdale and West 4 Avenue, which are on south and north of the site respectively, are $45 per sq.ft. This is roughly twice as high as Arbutus Village, whose combined average rent is well below $20 per sq.ft.
Rents on South Granville are very high at over $60 per sq.ft. however they are still moderate on much of Broadway at only $30 per sq.ft. Some key locations do have higher rents.
Rents at Arbutus Village are low, and that is with ample surface parking. Sales and rents may decline slightly when the existing convenient surface parking is removed and customers start to use less convenient structured parking. Customers will have to drive a farther distance through parking lot circulation and then travel by elevator, often with groceries. The vertical movement of customers is particularly difficult for supermarkets as purchases tend to be heavy and escalators and stairs are less useful. Despite this, structured parking is becoming ever more accepted by consumers.
In addition, structured parking is very expensive to build, and even today, rarely warranted by retail values outside the city centre unless justified by high rents. Developers typically can get sufficient ’ and the developers’ best rent when commercial supply is limited. This is often in both the cities interest not to let supply exceed demand. Thus if the scale of the project fits and not exceeds demand then rents and sales should be able to warrant the cost of structured parking. Additional space would only dilute sales and reduce average revenue while costs would remain constant.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 22
TABLE 2.4 METRO VANCOUVER NET RENTAL RATES – PRIME RETAIL RENTS 2Q08
LOCATION RANGE Broadway / Cambie $35 - $105 Broadway / MacDonald $25 - $35 Commercial Drive $20 - $55 Denman - Davie $40 - $70 Granville - Downtown $40 - $80 Hastings - Boundary / Gilmore $20 - $35 Kerrisdale $30 - $60 Kingsway - Willingdon / Royal Oak $15 - $35 Kingsway / Collingwood $15 - $25 Kingsway / Metrotown $25 - $40 Langley City $18 - $35 Main Street $20 - $50 New Westminster - Downtown $14 - $35 New Westminster - Uptown $16 - $35 No. 3 Road $20 - $45 North Surrey $18 - $30 North Vancouver (Lonsdale) $25 - $45 North Vancouver (Marine Drive) $25 - $65 Robson - Burrard $140 - $220 South Granville - Broadway / 16th $45 - $80 South Surrey $22 - $45 West 10th - Discovery / Tolmie $20 - $35 West 4th - Burrard / Vine $30 - $55 Yaletown $40 - $60 Source: Cushman & Wakefield LePage Inc.
Only Broadway/Cambie, Main Street and North Vancouver submarkets saw increases in average rental rates in the first half of 2008. Continued residential construction downtown has also served to expand the shopping district beyond just Robson Street. This has served to calm rental rates increases recently as retail entrants to the market consider alternatives on former side streets to this retail hub. The Robson-Burrard area is still achieving rents between $140 and $220 per sq.ft., and projections are for rates to remain stable or increase slightly.
Rental rates in the West 4th region also saw small declines while the rest of the City of Vancouver remained stable. The short-term forecast for the remainder of 2008 is conservative with little increase expected.
ANCHOR TENANTS In the retail industry, anchor tenants are a critical component of any retail development. For example, without Safeway it is doubtful any retail or commercial space at Arbutus Village would be feasible. The nearby unanchored retail strip one block south of Arbutus Village has struggled with vacancies and low rents for many years.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 23
A selection of some of the prominent modern retail anchor tenants operating in British Columbia and their typical size requirement (in square feet) is provided below. Some of the lower value and smaller scale furniture, used goods and liquidation chain stores have not been included.
It is important to note that virtually none of these stores with the exception of supermarkets and drugstores could locate on the subject site. Safeway will not permit a suitable store like Shoppers Drug Mart to locate on this site. These tenants need regional visibility and exposure and ease of access and a busy street or a large destination mall to generate high traffic volumes and high velocity sales. Arbutus Village cannot offer any destination type tenant enough potential customers and it could not offer suitable or viable retail space with the requisite access and visibility.
In addition, an anchor tenant such as Winners would have to draw customers from across the west side and become a regional destination which is not intended by the zoning which stipulates local serving development only.
Below is a list of major retail chain anchor tenants operating or expected in B.C. In the case of Crate & Barrel, it is actively seeking potential sites but has not yet announced its first store.
As shown, few, if any, anchor tenants could locate at Arbutus Village. The ideal additional anchors, Shoppers ’s exclusive use restriction on any food or drug retail. Drug Mart and Pharmasave, are excluded by Safeway
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 24
TABLE 2.5 MAJOR RETAIL CHAIN ANCHOR TENANTS OPERATING OR PENDING IN BC ANCHOR LIST TYPICAL SQ.FT. BEST BUY 45,000 BUY LOW 26,000 CANADIAN TIRE 80,000 CHAPTERS 30,000 CINEPLEX 110,000 COSTCO 140,000 CRATE AND BARREL 20,000 EXTRA FOODS 38,000 FIELDS 16,000 FUTURE SHOP 30,000 H & M 20,000 HMV 8,000 HOME DEPOT 120,000 HOME HARDWARE 8,000 HOME SENSE 2 8,000 IGA 35,000 IKEA 140,000 JYSK 2 0,000 LINEN AND THINGS 30,000 LONDON DRUGS 30,000 LOWES 140,000 MIKASA 30,000 OFFICE DEPOT 30,000 OLD NAVY 16,000 PETCETERA 20,000 PETSMART 20,000 PIER ONE IMPORTS 15,000 PRICE SMART FOODS 40,000 R.C. SUPERSTORE 120,000 RONA 8 0,000 RESTORATION HARDWARE 20,000 SAFEWAY 45,000 SAVE ON FOODS 44,000 SEARS 120,000 SEARS HOME CENTRE 30,000 SHOPPERS DRUG 18,000 SPORT CHEK 20,000 SPORTS MART 10,000 STAPLES OFFICE 22,000 T & T SUPERMARKET 35,000 THE BAY 120,000 THE BRICK 40,000 THRIFTY FOODS 35,000 TOYS R US 20,000 URBAN BARN 1 0,000 URBAN OUTFITTERS 8 ,000 WAL-MART 130,000 WILLIAMS SONOMA- POTTERY BARN 16,000 WINNERS FASHION 30,000 ZARA 1 5,000 ZELLERS 120,000
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 25
The Metro Vancouver retail market highlights are summarized in the tables below. There is virtually no new construction west of Granville Street except for the new neighborhood shopping centre at UBC. This centre was carefully designed to be an optimal neighborhood centre just large enough for local shopping and the ideal size to have everything convenience shoppers want, yet still small enough not to have any impact on existing retailers on nearby 10th Avenue. The scale is 80,000 sq.ft. of retail, virtually the same ideal scale as Arbutus Village.
TABLE 2.6 RETAIL MARKET HIGHLIGHTS Q2 2008 SIGNIFICANT 2Q08 NEW LEASE TRANSACTIONS BUILDING SUBMARKET TENANT SQ FT BLDG CLASS 20645 Langley Bypass Langley Outdoor Play Company Inc. 12,169 -- – 1261 1295 Seymour Street Vancouver Shoppers Drug Mart Inc. 12,000 -- Burger King, General Paint & Bridgeport West Richmond 11,000 -- B&D Technologies 2222 Burrard Street Vancouver Canadian Tire 11,000 -- 990 Homer Street Vancouver RBC Royal Bank of Canada 7,900 --
SIGNIFICANT 2Q08 SALE TRANSACTIONS BUILDING SUBMARKET BUYER SQ FT PURCHASE PRICE Rona Inc. - 4246551 Canada 2580 Gilmore Avenue Burnaby 109,300 $11,832,487 Inc. – Capilano Village 801 Marine Dr North Vancouver 0817741 B.C. Ltd. 32,630 $14,900,000 10232 East Whalley Ring Road Surrey Whalley Ring Road Holdings 52,900 $13,600,000
SIGNIFICANT 2Q08 CONSTRUCTION COMPLETIONS BUILDING SUBMARKET MAJOR TENANT SQ FT COMPLETION DATE Rona Inc., Winners, Big Bend Crossing Burnaby 300,000 Q2 2008 Homesense – Cactus Club restaurant Bentall 5 Vancouver 5,000 Q2 2008 pavilion First Capital Realty Nanaimo Convention Centre Nanaimo 15,700 Q2 2008 (developer)
SIGNIFICANT 2Q08 PROJECTS UNDER CONSTRUCTION Building Submarket MAJOR TENANT Sq Ft Completion Date – Vancouver UBC UBC Price Smart 80,000 Spring 2009 Endowment Lands – ’s Food Market Contemporary Arts Building SFU, Nestor , Gastown 125,000 Fall 2009 SFU (Woodwards Development) TD Canada Trust Crossroads Vancouver West Whole Foods, London Drugs 120,000 Fall 2009 Grocery store, Shoppers Capilano Square North Shore Drug Mart, CIBC, Royal 100,000 Summer 2009 Bank, Perfect Lies Omni Group of Companies Suter Brook Village Port Moody 95,000 Fall 2008 (developer) Intergulf Development Group Expressions Port Coquitlam 17,000 Spring 2009 (developer) London Drugs, TD Canada Westminster Centre South New Westminster ’s -- -- Trust, Subway, McDonald Cloverdale Mall Surrey Anthem (developer) -- -- Newton Home Centre Surrey 22,000 Spring 2009 Shangri-La Burnaby Ki, Burberry, Urban Fare 60,000 Spring 2009 Richmond Oval Richmond 33,000 Fall 2008 River Rock Casino Resort Richmond -- Winter 2009 – Sullivan Square Phase II Surrey 80,000 Fall 2009 Source: Cushman & Wakefield LePage Inc
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 26
2.5 RETAIL MARKET OUTLOOK With a slowdown in the worldwide economy and perhaps a protracted recession, it could be expected that any foreign retailers will moderate their Canadian expansion program. Net impact of the slowdown will likely lead to a several year delay in demand.
The high-growth regions of the Abbotsford, Coquitlam, Langley and Surrey will likely offer further development opportunity; it was forecasted at the end of 2007 that 65% of growth in Metro Vancouver and the Fraser Valley over the next 25 years will occur in these four cities, which will amount to an average growth rate of 20,000 people per year or 500,000 new residents over the next 25 years.
It is expected that mature markets such as the west side of Vancouver will remain stable.
2.6 RETAIL SUPPLY The following two tables list and summarize a typical street retail tenant mix. Street retail is dominated by food service (restaurants, coffee shops, etc.) and service (beauty salons, drycleaners, travel agencies, etc.) tenants. Office and financial such as banks and medical clinics also have strong presence. Food and drug retail and items associated with everyday necessities are also evident.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 27
TABLE 2.7 TYPICAL STREET RETAIL TENANT LIST
FOOD AND DRUG RETAIL HOUSEHOLD / FURNISHINGS SUPERMARKET HOUSEWARES GROCER/PRODUCE SMALL APPLIANCES GROCER SPECIALTY/ETHNIC LARGE APPLIANCES CONVENIENCE STORE HARDWARE STORES/HOME IMPROVEMENT FISH MARKET GARDEN SUPPLIES MEAT MARKET ELECTRONICS / HOME ENTERTAINMENT BAKERY FURNITURE / HOME FURNISHINGS PHARMACY DURABLE GOODS/PAINT & WALLPAPER VITAMINS / HERBS AUTOMOTIVE DRUGSTORE GAS STATION FOOD SERVICE TIRES/PARTS/ACCESSORIES LICENSED RESTAURANT SERVICE FAST FOOD AUTO / MOTORCYCLE SALES RESTAURANT ETHNIC SPECIALTY RETAIL SPECIALTY COFFEE/TEA SPORTING GOODS / SERVICES OTHER FOOD RETAIL / NIGHT CLUB BICYCLE SHOPS SERVICE BOOKSTORES BARBER, BEAUTY, NAILS, HAIR TOYS/HOBBIES TRAVEL AGENCY OFFICE SUPPLIES VIDEO RENTAL HEALTH & BEAUTY ITEMS SHOE REPAIR CARDS & STATIONARY DRY CLEANER/LAUNDRAMAT BEDDING & LINEN PRINTING / COPY ART GALLERY/FRAMING ENTERTAINMENT CAMERAS / FILM / PHOTO FITNESS CENTRE ANTIQUES VETERINARIAN/PET GROOMING GIFTS OTHER OPTICAL GENERAL MERCHANDISE PETS & PET SUPPLIES JUNIOR DEPARTMENT STORE LIQUOR STORE / BEER - WINE MAKING GENERAL STORE FLORIST VARIETY/DOLLAR STORE RECORD & TAPE STORES TOURIST STORE / SOUVENIRS MUSICAL INSTRUMENTS OTHER CELLULAR TELEPHONES APPAREL AND ACCESSORIES OTHER MEN'S APPAREL OFFICE/FINANCIAL LADY'S APPAREL STREETFRONT MEDICAL/DENTAL UNISEX INSURANCE/REALTOR/INVEST. BROKER CHILDRENS" APPAREL FINANCIAL/BANK/CREDIT UNION FABRIC ACCOUNTING/LEGAL/NOTARY BRIDAL BUSINESS SERVICES MATERNITY OPTOMETRIST THRIFT/SECOND-HAND MERCHANDISE OTHER UNIFORMS OTHER APPAREL JEWELLERY SHOES
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 28
TABLE 2.8 TYPICAL STREET RETAIL TENANT MIX MERCHANDISE MIX SUMMARY AVERAGE TOTAL COMMERCIAL DISTRICT RATIO FOOD AND DRUG RETAIL 9.3%
FOOD SERVICE 21.4% SERVICE 21.0%
OFFICE/FINANCIAL 16.3% GENERAL MERCHANDISE 1.0%
APPAREL AND ACCESSORIES 7.3% HOUSEHOLD / FURNISHINGS 4.9%
AUTOMOTIVE 1.6% SPECIALTY RETAIL 9.6% VACANCY RATE 7.7% TOTAL 100.0%
A typical commercial street resembles a neighbourhood shopping centre in terms of tenants, and is thus competitive.
The following areas are a reasonable distance from the existing Arbutus Village Shopping Centre site. This report is supposed to measure the impact of the retail expansion scenarios on the ability of existing ’s on neighbourhood -street shopping areas and shopping centres to continue to fulfill their role in their neighbourhoods. It is a simple, direct and obvious statement that only anchor tenants can have a measurable impact as little stores are simply too small.
TABLE 2.9 IMPACT ASSESSMENT RETAIL AREAS
1 10th & Alma W. 10th: Highbury to east of Alma Alma: lane south of W. 10th to lane north of W. Broadway W. Broadway: west of Alma to Dunbar 2 Dunbar St. North W. 16th north side, Alma to Dunbar, and south side opposite Dunbar: W. 17th to W. 19th 3 Dunbar St. Centre Dunbar: lane south of Kind Edward to W. 30th 4 Dunbar St. South Dunbar: W. 39th to lane south of W. 41st W. 41st: Dunbar to Collingwood 5 4th & MacDonald W. 4th: west of Bayswater to Trafalgar 6 West Broadway Broadway: Collingwood to Larch 7 16th & MacDonald W. 16th west of MacDonald to east of Stephens 8 4th Ave Burrard to Balsam 9 Broadway/Arbutus Broadway: Vine to Arbutus Arbutus: Broadway to W. 12th 10 16th & Arbutus Arbutus: W. 15th to W. 16th 11 Kerrisdale W. Boulevard: W. 37th to W. 49th E. Boulevard: lane north of W. 41st to W. 49th W. 41st: Larch to Maple 12 South Granville Granville: Broadway to W. 16th 13 Oak & 16th Oak: lane north of W. 15th to W. 16th 14 Oak & 25th Oak: W. 21st to south of King Edward (including King Edward Mall)
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 29
FIGURE 2.1 IMPACT ASSESSMENT AREAS
10TH AVENUE AND ALMA STREET is located approximately 2.5 km northwest of the subject site. It is anchored by a Chevron gas station and a moderate number of stores. The area is characterized by many cafes, restaurants and retail stores such as book stores and florists. It is relatively small, being only three city blocks in size. It serves an entirely different market than Arbutus Village.
DUNBAR STREET NORTH is located 2.2 km northwest of the subject site. This area runs along Dunbar Street from West 17th Avenue to 19th Avenue, and West 16th Avenue from Alma Street to Dunbar Street. It is anchored by the B.C. Liquor Store and several restaurants.
DUNBAR STREET CENTRE is located 2 km west of the subject site. This area runs along Dunbar Street from King Edward Avenue West to West 30th Avenue. This area is anchored by an estimated 18,000 sq.ft. Stongs supermarket as well as Shoppers Drug Mart. It is characterized by a variety of stores including financial institutions, beauty salons, food retail, food service and medical offices.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 30
DUNBAR STREET SOUTH is located 2.3 km southwest of the subject site. This area is comprised of Dunbar Street from West 39th Avenue to West 41st Avenue, and West 41st Avenue from Dunbar Street to Collingwood Street. It is anchored by IGA and both a Chevron and Shell gas station. This area has a financial institution as well as personal service businesses such as a drycleaner and beauty salon.
4TH AVENUE AND MACDONALD STREET is located 2.5 km north of the subject site. This area runs along West 4th Avenue from Bayswater Street to Trafalgar Street. It is anchored by Chevron. This area is characterized by restaurants, food retail stores and beauty salons. Many of the shops and restaurants in this small neighbourhood are locally-owned and unique.
WEST BROADWAY is located 2 km northwest of the subject site. This area runs along West Broadway from Collingwood Street to Larch Street. This long commercial strip stretches 10 blocks. The anchors ’s and include many financial institutions such as TD Bank and Royal Bank, as well as Blockbuster, McDonald an estimated 48,000 sq.ft. Safeway. This strip contains many restaurants, food retail stores and several clothing stores.
This is one of the most vibrant and attractive commercial streets in Canada.
16TH AVENUE AND MACDONALD STREET is located just 1.4 km northwest of the subject site, and it runs along West 16th Avenue from MacDonald Street to Stephens Street. It is anchored by an estimated 18,000 sq.ft. Choices, and is characterized by many coffee shops and restaurants.
4TH AVENUE is located 2 km north of the subject site. This long strip of commercial area runs along West 4th Avenue from Burrard Street to Balsam Street. This area has many retail anchor tenants including Petro Canada, Capers, Safeway, and Shoppers Drug Mart. This strip has a wide variety of businesses, including restaurants, beauty salons, food retail stores, clothing and shoe stores, and home furnishing stores.
This is one of the most vibrant and attractive commercial streets in Canada.
BROADWAY AND ARBUTUS STREET is located 1.6 km north of the subject site. It includes West Broadway from Vine Street to Arbutus Street, and Arbutus Street from West Broadway to West 12th Avenue. It is anchored by an estimated 22,000 sq.ft. IGA and London Drugs and Rogers Video, and is characterized by medical and dental clinics. The old IGA is expected to close soon and become condominiums with retail at grade level. The area is also an office building node.
16TH AVENUE AND ARBUTUS is located less than a kilometer north of the subject site, and includes Arbutus Street from West 15th Avenue to West 16th Avenue. The area is anchored by Meinhardt, a high end ’s and the Ridge Theatre. It also includes a bowling alley and a few small restaurants. food store, McDonald
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 31
KERRISDALE is located approximately 1.5 km south of the subject site. It includes all businesses along West and East Boulevard from West 37th Avenue to West 49th Avenue, as well as along West 41st Avenue from Larch Street to Maple Street. It is characterized by many small boutique stores, cafes and restaurants. ’s, HILLS of Kerrisdale and many financial Its anchors include Shoppers Drug Mart, London Drugs, McDonald institutions such as BMO, TD, and the Royal Bank.
Although this area lacks the presence of a supermarket, it still acts to limit the southern extent of the subject ’s trade area. site
This is an excellent commercial district, very attractive and vibrant.
SOUTH GRANVILLE is located 1.5 km northeast of the subject site. This strip includes all businesses along Granville Street between West Broadway and West 16th Avenue. South Granville has evolved into one of the most prestigious shopping districts in the City of Vancouver. The anchor tenants on this strip include Chapters, Pottery Barn, Williams-Sonoma, Restoration Hardware and Meinhardts, although Meinhardts may close due to a new store opening nearby on West 16th Avenue at Arbutus Street.
This area was once filled with numerous art galleries, but it has become very fashion oriented with ever more quality restaurants. It also has many clothing and home furnishing stores, as well as dental and medical offices.
This is an attractive and vibrant commercial district.
OAK STREET AND 16TH AVENUE is located 2 km northeast of the subject site. This small area is located along Oak Street from West 15th Avenue to West 16th Avenue. It is small scale and is anchored by Blockbuster, and has small businesses such as food retail, beauty salons, pet stores, dry cleaning and restaurants. This area is distant from the subject site with very little or no competitive influence.
OAK STREET AND 25TH AVENUE is located 1.8 km east of the subject site. This strip runs along Oak Street between West 21st Avenue and King Edward West. It is anchored by the King Edward Mall, which includes an estimated 34,000 sq.ft. Safeway, Starbucks, Royal Bank and some restaurants. The area also ’s Safeway, and has several medical and dental clinics. This Safeway clearly competes with the subject site limits the eastern extent of the trade area to Granville Street.
It is clear that Arbutus Village has very strong, mostly street front retail and office competition. Such strong competition reduces any potential impact and reduces the potential scale of Arbutus Village. Most tenants wishing to serve this area have great location alternatives to a premise in Arbutus Village.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 32
WEST SIDE SUPERMARKETS A key competitive aspect of this analysis is the supermarket infrastructure.
The following table and map indicate the supermarkets and supermarket-anchored retail developments in the surrounding region. There are seven Safeway stores and many competitors such that the Safeway anchor at this mall, while viable, is not unique or particularly attractive and it cannot generate ample additional customers for numerous small shops.
TABLE 2.10 SUPERMARKETS IN VANCOUVER WEST Size sq.ft. Supermarket Location (Estimated) Safeway (Subject) Arbutus at Nanton 40,000
Buy-Low 4th at Alma 18,000
Choices 16th at MacDonald 12,000
Choices W. Boulevard at 57th 8,000
Choices Cambie at 19th 5,000
IGA Dunbar at 41st 32,000
IGA Broadway at Yew 22,000
Meinhardt Granville at 14th 10,000
Meinhardt Arbutus at 16th 10,000
PriceSmart Foods 16th at Wesbrook 35,000
Safeway 10th at Tolmie 32,000
Safeway Broadway at MacDonald 48,000
Safeway 4th at Vine 28,000
Safeway Granville at 70th 32,000
Safeway King Edward W. at Oak 34,000
Safeway Cambie at 12th 25,400
Safeway Cambie at 41st 50,000
Stongs Dunbar at 30th 18,000
Whole Foods Broadway at Cambie 35,000
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL MARKET OVERVIEW AND SUPPLY 33
FIGURE 2.2 SUPERMARKETS IN VANCOUVER WEST
’s primary As seen on Figure 2.2, there is a void in the area to the west and south, and this is Arbutus Village trade area. The vast majority of sales clearly come from the west and south of the site and from the area in relatively close proximity.
(W8-51) VALUATION & ADVISORY SERVICES
3 R E T A I L
D E M A N D
Retail Demand
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL DEMAND 35
R E T AI L D E M AN D
3.1 INTRODUCTION This section of the report outlines consumer demand for all categories of retail stores including supermarkets at the subject site. The analysis is based upon a relatively small geographic trade area as the location serves only a small area within the west side of the city. This is expected as it is only a neighbourhood centre fulfilling a local retail function.
In order to describe the consumer market and how the subject site would capture a share of potential sales, retail demand conditions must be determined. This section of the report outlines the level of retail demand within the trade area. Demand for retail goods is essentially a function of the trade area population and average consumer spending on retail goods, modified if necessary, by resident age and income characteristics.
3.2 DELINEATION OF THE TRADE AREA When determining the geographic extent of the retail trade area, it is important to define the proposed shopping facility and contrast the anchors with other competitors in the region. Their size and the types of anchor tenants they offer define shopping centres and commercial districts.
PATTERNS OF RESIDENTIAL DEVELOPMENT The patterns of residential development are considered on a macro scale only. Given the regional and local accessibility of the site, the trade area clearly entails part of the area west of Granville Street and south of 16th Avenue.
NATURAL AND MAN MADE BARRIERS The most important barriers that define the trade area are the extent of urban development, significant retail infrastructure, and transportation patterns.
DELINEATION OF THE REGIONAL TRADE AREA ’s trade area (shown The proposed retail development in Figure 3.1) has the following approximate boundaries:
– East to Granville Street all residents east of Granville Street travel north, south or east to much larger and more convenient stores and shopping districts.
th – th North to 16 Avenue all residents north of 16 Avenue travel east, west and north to larger and more convenient stores and shopping districts.
th – South to West 49 Avenue all residents travel south and east to larger and more convenient stores and shopping districts.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL DEMAND 36
– West to Pacific Spirit Park this far western area has little supply but a new mall at UBC will soon reduce surplus demand.
The west side is understored and the Arbutus Village trade area reflects the lack of competition to the west and south.
FIGURE 3.1 THE TRADE AREA
3.3 POPULATION PROJECTIONS AND DEMOGRAPHICS Population trends, particularly immigration, form the core of the demand side of the real estate equation. Population growth can be related directly to retail and housing demand and can serve as a proxy for broad economic statistics.
Population projections are based upon all salient information from provincial, regional and municipal levels of government. The population of the trade area is approximately 51,621 currently, based on the most recent census.
The total trade area is expected to grow very slowly by approximately 0.5% annually up to 2016. This means that the population will reach 52,395 by 2011 and 53,686 by 2016 as summarized below. The new residents are expected to live in new multi family housing planned for various sites and on sites on arterial roads.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL DEMAND 37
The trade area population is expected to show average net growth of 260 persons per year over the next 8 years. This includes almost 100 persons per year locating within Arbutus Village itself. In addition, it includes potential new multifamily on other sites on portions of major arterial roads located within the trade area (e.g. Dunbar Street, Arbutus Street, 41st Avenue). The population within the existing single family housing stock is typically still in a slow decline as average household sizes continue to shrink.
TABLE 3.1 TRADE AREA POPULATION PROJECTIONS
2008 2011 2016 Trade Area 51,621 52,395 53,686
Source: Statistics Canada, Cushman & Wakefield LePage
TRADE AREA DEMOGRAPHICS The following tables and charts outline the demographic characteristics of the residents of the trade area. ’ age and income. The two key issues for retailers are residents While certain data may reveal spending patterns in detail, it is age and income that have the most important influence on retail demand and spending patterns.
Both the average and median household incomes are well above the provincial figures (Table 3.2). These indicators of relative wealth and purchasing power suggest that trade area residents are wealthy and that they have more disposable income than an average BC resident. This is confirmed by Figure 3.2, which shows that income is very skewed towards the higher income groups with incomes well above $100,000. The trade area has a clear shortfall of lower and middle income residents with respect to the province. The median income is 35% above the B.C. average.
It is important to note that the average value of dwellings in the trade area is $1,021,369, which is worth over 4 times as much as an average BC dwelling. A clear majority of residents over and above the provincial average own their homes This also emphasizes that communities within the trade area are well established.
’s population skews towards the Generally, although it generally mimics the provincial trend, the trade area 45+ age bracket, which indicates a strong presence of retirees and an aging population. The trade area has a large proportion of young children and young adults (0-24 yrs) reflective of the province-wide figures. However, the 25-44 year old bracket is significantly underrepresented. This group tends to be focused in areas such as Kits and downtown where there is more multi-family development and more single person residents.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL DEMAND 38
TABLE 3.2 TRADE AREA DEMOGRAPHICS
Demographics Trade Area B.C. 2006 Population 50,042 2011 Population 52,395 2016 Population 53,686 2006 Population Age Groups Under 15 Years 8,230 16% 16% 15 to 24 years 7,764 16% 14% 25 to 34 years 4,566 9% 13% 35 to 44 years 7,458 15% 16% 45 to 54 years 8,239 16% 16% 55 to 64 years 6,175 12% 12% 65 years and over 7,853 16% 14% Median Age 41.6 39.7 2006 Household Income Households 18,293 Under $19,999 2,544 14% 17% $20,000 - 39,999 2,823 15% 21% $40,000 - 59,999 2,518 14% 19% $60,000 - 79,999 1,815 10% 14% $80,000 - 99,999 1,426 8% 13% $100,000 and over 6,764 37% 17% Median Income $ 70,629 $ 5 2,448 Average Income $ 119,216 $ 6 3,048 Employment income 73% 76% Government transfer payments 5% 12% Other 22% 12% 2001 Dwellings 18,313 Owned Dwellings 13,113 72% 66% Rented Dwellings 5,168 28% 33% Single detached houses 10,063 55% 55% Semi-detached/row/duplex 3,100 17% 16% Apartments 5,250 29% 26% Average value of dwellings $ 1,021,369 $ 2 30,645 Persons per household 2.7 2.5 2006 Education Total Population 15 years and over 41,400 Without university degree 18,935 46% 82% With bachelors degree or higher 22,125 53% 18% Source : Statistics Canada, Mapinfo, Cushman & Wakefield LePage
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL DEMAND 39
FIGURE 3.2 TRADE AREA INCOME AND AGE
2006 Household Income Distribution
$100,000 and over
$80,000 - 99,999
$60,000 - 79,999 BC Trade Area $40,000 - 59,999
$20,000 - 39,999
Under $19,999
0% 5% 10% 15% 20% 25% 30% 35% 40%
$20,000 - $40,000 - $60,000 - $80,000 - $100,000 and Under $19,999 39,999 59,999 79,999 99,999 over BC 17% 21% 19% 14% 13% 17% Trade Area 14% 15% 14% 10% 8% 37%
2006 Population by Age Group
65 years and over
55 to 64 years
45 to 54 years
BC 35 to 44 years Trade Area 25 to 34 years
15 to 24 years
Under 15 Years
0% 5% 10% 15% 20%
Under 15 15 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 years Years years years years years years and over BC 16% 14% 13% 16% 16% 12% 14% Trade Area 16% 16% 9% 15% 16% 12% 16%
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL DEMAND 40
3.4 RETAIL DEMAND PROJECTION Retail demand is the average retail spending by trade area residents multiplied by the current and future population. This spending represents the future sales available to the existing and planned stores located within the trade area. Average per capita retail spending in B.C. in 2008 is just below $12,500 per year in the selected categories of stores.
In order to ensure a conservative projection and to minimize subjective judgement, this analysis employs the B.C. average and with no adjustment of spending to reflect age or income. Income levels impact spending in “elastic”. different ways and demand is The categories of supermarkets and pharmacies are considered necessities and are inelastic, where spending difference between groups is more moderate. Per capita spending projections, by retail category, are summarized in Table 3.3.
TABLE 3.3 RETAIL SPENDING PER CAPITA IN B.C.
2007 British Columbia Expenditure by Trade Group (x$1,000) 2008 2011 2016 Total, all trade groups $ 12,932 $ 1 3,127 $ 1 3,459 New car dealers $ 2,227 $ 2 ,260 $ 2 ,318 Used and recreational motor vehicle and parts dealers $ 463 $ 4 70 $ 4 82 Gasoline stations $ 1,511 $ 1 ,534 $ 1 ,573 Furniture stores $ 293 $ 2 97 $ 3 05 Home furnishings stores $ 236 $ 2 40 $ 2 46 Computer and software stores $ 57 $ 5 8 $ 5 9 Home electronics and appliance stores $ 481 $ 4 88 $ 5 00 Home centres and hardware stores $ 662 $ 6 72 $ 6 89 Specialized building materials and garden stores $ 193 $ 1 96 $ 2 01 Supermarkets $ 2,269 $ 2 ,303 $ 2 ,362 Convenience and specialty food stores $ 218 $ 2 22 $ 2 27 Beer, wine and liquor stores $ 668 $ 6 78 $ 6 95 Pharmacies and personal care stores $ 712 $ 7 23 $ 7 41 Clothing stores $ 563 $ 5 72 $ 5 86 Shoe, clothing accessories and jewellery stores $ 176 $ 1 78 $ 1 83 General merchandise stores $ 1,405 $ 1 ,426 $ 1 ,462 Sporting goods, hobby, music and book stores $ 419 $ 4 25 $ 4 36 Miscellaneous store retailers $ 381 $ 3 86 $ 3 96 Total excluding new, used and recreational motor vehicle and parts dealers $ 10,243 $ 1 0,397 $ 1 0,660
Per capita spending estimates multiplied by the trade area population describes core retail demand within the trade area. This demand, projected to the years 2011 and 2016, is summarized in Table 3.4.
The trade area accounts for over $667 million in retail expenditures. Retail demand will keep pace with population growth and is expected to reach $708 million by 2011 and $751 million by 2016.
The specific demand for supermarkets within the trade area is approximately $117 million and is expected to rise to over $124 million by 2011 and $131 million by 2016.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. RETAIL DEMAND 41
TABLE 3.4 TRADE AREA RETAIL EXPENDITURE POTENTIAL Trade Area Expenditure Potential by Trade Group 2008 2011 2016 Total, all trade groups $ 667,583,388 $ 708,746,000 $ 751,891,507 New car dealers $ 114,955,577 $ 122,043,638 $ 129,473,147 Used and recreational motor vehicle and parts dealers $ 23,885,592 $ 25,358,356 $ 26,902,068 Gasoline stations $ 78,023,177 $ 82,834,018 $ 87,876,609 Furniture stores $ 15,119,992 $ 16,052,278 $ 17,029,474 Home furnishings stores $ 12,185,713 $ 12,937,074 $ 13,724,629 Computer and software stores $ 2,930,584 $ 3,111,281 $ 3,300,683 Home electronics and appliance stores $ 24,805,776 $ 26,335,279 $ 27,938,461 Home centres and hardware stores $ 34,158,878 $ 36,265,085 $ 38,472,752 Specialized building materials and garden stores $ 9,964,008 $ 10,578,380 $ 11,222,348 Supermarkets $ 117,135,557 $ 124,358,034 $ 131,928,433 Convenience and specialty food stores $ 11,271,806 $ 11,966,816 $ 12,695,306 Beer, wine and liquor stores $ 34,475,583 $ 36,601,317 $ 38,829,453 Pharmacies and personal care stores $ 36,754,020 $ 39,020,241 $ 41,395,631 Clothing stores $ 29,074,229 $ 30,866,921 $ 32,745,971 Shoe, clothing accessories and jewellery stores $ 9,063,283 $ 9,622,117 $ 10,207,872 General merchandise stores $ 72,522,383 $ 76,994,050 $ 81,681,127 Sporting goods, hobby, music and book stores $ 21,609,227 $ 22,941,633 $ 24,338,224 Miscellaneous store retailers $ 19,647,992 $ 20,859,470 $ 22,129,307 Total excluding new, used and recreational motor vehicle and parts dealers $ 528,742,207 $ 561,343,992 $ 595,516,278 Source : Statistics Canada, Mapinfo, Cushman & Wakefield LePage
It can be said with confidence that there is a significant amount of retail demand in the trade area; however, much of that demand is served by stores, shops and commercial districts which offer much more than a small local serving centre like Arbutus Village could ever offer. The focus of the demand analysis is the supermarket, and as it generates over $117 million (enough to support over 170,000 sq.ft. of supermarket space) in demand, the Safeway anchor is clearly busy and successful and enjoys much higher than average sales.
(W8-51) VALUATION & ADVISORY SERVICES
4 O F F I C E
M A R K E T
O V E R
Office Market Overview V I E W
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. OFFICE MARKET OVERVIEW 43
O F F I C E M AR K E T O V E R V I E W
4.1 INTRODUCTION This section of the report examines the office market in the city of Vancouver, as well as in Metro Vancouver as a whole. The background information, research and analyses of office space supply and demand provide an important context to the development and are particularly relevant as additional retail space is not viable. .
The market for office space is becoming increasingly more dynamic as certain businesses relocate away from traditional centres such as downtown Vancouver to more suburban locations for economic and physical reasons. The effect of workplace trends adjusting to new technologies, live/work styles and new types of businesses is also an important contributing factor to this phenomenon.
In general, Metro Vancouver has a small office market compared to most cities such as Seattle, for example, where they have twice as many sq.ft. of office space per capita. Most jobs in this region are still industrial, commercial or institutional, and the region lacks large hi-tech or biomedical firms or head offices. Office demand on the west side of Vancouver is generally moderate local serving and there has been very little new inventory, reflecting the lack of demand.
This land use is proposed for approximately 35,000 sq.ft. of the subject project. The issue is whether an additional 25,000, 50,000 or 75,000 sq.ft. of office space is possible.
4.2 BUILDING CLASSES The following outlines the classification definitions of each of the building class.
“ ” CLASS AAA OFFICE SPACE ’s most prestigious or select Class “A” buildings, they are typically the newest and most technologically A city advanced, with the highest level of finishes and tenant amenities. Generally, these buildings are further distinguished due to their dominance and recognition as the highest profile office buildings in the city. These are not typically suburban and certainly not for local tenants.
“ ” CLASS A OFFICE SPACE “A” office buildings typically have a modern and superior quality of exterior curtain walls, state of the art Class mechanical, electrical and life safety systems and a high quality interior finish. These more prestigious office ’s premier office users and have a definitive market presence. buildings are typically occupied by the city “A” buildings command premium rents. Given all the above, Class This category applies to most standard new office space.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. OFFICE MARKET OVERVIEW 44
“ ” CLASS B OFFICE SPACE “B” office buildings commonl Class y have acceptable (but not outstanding) curtain wall finishes, adequate (but not state of the art) mechanical, electrical and life safety systems and a mid-quality level of interior finish. “B” buildings compete for a wide range of users, at average Class rents for their market area. These buildings are typically older or dated and not new.
The office space at Arbutus Village would fall under Suburban Class B category. It is local serving with doctors, dentists, legal, accounting and financial tenants as well as small local business owners. The location limits it to local serving only, and as the local area is not growing, demand for office space is also not growing. The trade area is mature and it would require massive population growth to warrant more local office space demand from local serving tenants.
Even when Arbutus Village is newly developed, it will remain Class B space. The scale, the location and the mixed use project itself all ensure that office space here could never be Class A. As such, due to the location and scale, this must be purpose built for local serving tenants only. Regional office tenants would not find this a suitable location, regardless of the type and scale of development.
“ ” CLASS C OFFICE SPACE “C” buildings are generally The curtain walls and the mechanical, electrical and life safety systems of Class somewhat outdated and the quality of the finish is often below average. These buildings commonly compete for tenants requiring functional space at below average rents. These buildings are typically old and only maintained to a minimal standard.
4.3 OFFICE-USING EMPLOYMENT While the Metro Vancouver economy has traditionally been resource-based and continues to prosper from this sector, in recent years it has diversified to include areas such as technology and financial services.
The Metro Vancouver economy is dominated by several large sectors that include: manufacturing, retail and wholesale trade, transportation and warehousing as well as FIREL (Finance, Insurance, Real Estate, Leasing), and health and welfare services. As FIREL has traditionally employed the largest number of people; it is also expected to remain the leader of economic growth and strength. Specifically, office-using employment has increased as new companies have been introduced to the market and existing tenants have expanded their space and taken advantage of early renewals.
According to Statistics Canada (represented in figures 4.1 and 4.2), Metro Vancouver's unemployment rate is 4.0%. With growth of 2.8% in 2007 and a forecasted 2.4% in 2008, employment is growing faster than the population (1.0% in 2007 and 1.3% in 2008). Strong domestic demand is expected to keep the services sector healthy which should ensure continuing demand for office space.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. OFFICE MARKET OVERVIEW 45
FIGURE 4.1 METRO VANCOUVER EMPLOYMENT GROWTH BY INDUSTRY (2007-2008F)
12.0% )
1% 0.0% ( Primary h t 8.0% Public Administration w
o Commercial Services r 6.0% Trade
G
t Construction n
e 4.0% Transportation
m Finance, Insurance & Real Estate y 2.0% o
l M anufacturing p Non-Commercial Services m 0.0%
E Utilities
-2.0%
Source: Statistics Canada
FIGURE 4.2 CANADIAN EMPLOYMENT GROWTH BY INDUSTRY (2006-2007)
15.0% Utilities Public Administration
) Information, Culture and Recreation
% 10.0%
(
Construction h t Professional, Scientific and Technical Services w
o Transportation r 5.0% G Other Services
t
n Natural Resources e 0.0%
m Health Care and Social Assistance
y o
l Trade p Accomodation and Food Services m -5.0% E Educational Services Finance, Insurance, Real Estate -10.0% Business, Building and Other Support Services Source: Statistics Canada Agriculture
4.4 THE OFFICE BUILDING MARKET Absorption figures were down in the third quarter of 2008, with negative absorption posted in the Class C markets of both the Central Business District (CBD) and Suburban areas. Total absorption for the quarter was 27,000 sq.ft., with the Class B market offsetting the negative absorption posted in Class C space. With 150,000 sq.ft. of new supply added to the Metro Vancouver office market in Q3 2008, total vacancy increased to 4.6%. The following table summarizes the primary Metro Vancouver office market statistics.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. OFFICE MARKET OVERVIEW 46
TABLE 4.1 METRO VANCOUVER OFFICE MARKET STATISTICS Overall YTD YTD YTD No. of Vacancy Leasing Under Construction Overall Market/Submarket Inventory Bldgs. Rate Activity Construction Completions Absorption Downtown Vancouver 23,800,187 184 2.39% 82,000 0 147,385 1,675,563 Broadway Corridor 5,364,458 93 1.94% 80,000 0 -114,695 Burnaby 7,252,055 89 5.55% 1,065,613 327,435 368,663 Richmond 4,000,666 72 9.80% 65,000 146,000 94,533 North Shore 1,411,825 31 2.22% 1,860,351 0 0 9,844 New Westminster 1,238,871 27 9.86% 54,000 0 70,070 Surrey 3,110,638 42 15.80% 24,000 0 25,689 VANCOUVER TOTAL 46,178,700 538 4.58% 3,535,914 1,420,613 473,435 601,489 *Source: Cushman & Wakefiield LePage Inc.
Market vacancy remained stable in both CBD and Non-CBD markets. The figure below shows the overall rents and vacancy in Metro Vancouver, in both the CBD and non-CBD.
FIGURE 4.3 OVERALL RENT VS. VACANCY
CBD-Rent Non-CBD-Rent CBD-Vacancy Non-CBD-V acancy
$40 15.0%
$30
10.0%
r y / f $20 s p
5.0%
$10
$0 0.0% 2005 2006 2007 1Q08 2Q 08 3Q08 Source: Cushman & Wakefield LePage Inc
Construction began on 310,000 sq.ft. in the Suburban area in Q3 of 2008. An approximate 1,420,000 sq.ft., will be added to supply over the next three years.
As overall vacancy is still low, asking rental rates remain stable. However, combined with Q3 absorption down noticeably and a foreseeable short-term drop in overall market leasing demand, it appears any further rate growth is unlikely to occur. Constrained supply and limited new construction in both the CBD and Non- CBD areas should help offset any pressure to see them significantly decline.
Since 2005, average net asking rates in Metro Vancouver rose over 100% in the CBD, while increasing 41.5% in Non-CBD areas. Global market volatility will of course play a role in the scope of this event as ’s market conditions continued uncertainty in debt and equity markets persist. A potential reality given today
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. OFFICE MARKET OVERVIEW 47
will be the increase in sublease offerings not surrendered back to the landlords as was the case in previous quarters.
Q3 2008 market highlights are summarized below. It is important to note that there are virtually no private sector office buildings planned for development west of Granville Street in the City of Vancouver. UBC has tried to expand its office base on low cost land, and has been unsuccessful. As the market is not growing, there is no indication of any source of new demand like there would be in the more distant suburbs.
TABLE 4.2 METRO VANCOUVER MARKET HIGHLIGHTS Q3 2008 SIGNIFICANT 3Q08 NEW LEASE TRANSACTIONS BUILDING SUBMARKET TENANT SQ FT BLDG CLASS Discovery Green Burnaby HSBC Bank Canada 148,513 A 1075 West Georgia Vancouver Fluor Corporation Canada 41,543 A 1188 West Georgia Vancouver The Government of BC 25,000 B Raffles (811 Cambie) Vancouver Next Level Games Inc. 24,016 A Production Court Burnaby Canpages Inc 22,223 A
SIGNIFICANT 3Q08 SALE TRANSACTIONS BUILDING SUBMARKET BUYER SQ FT PURCHASE PRICE Crestwood Corporate Centre Richmond GWL Realty Advisors 756,916 $209,350,000 887 Great Northern Way Vancouver Discovery Parks Holdings Ltd. 170,000 $65,500,000 Lake City Centre (3292 Industrial Alliance Pacific Production Way) Burnaby Insurance 117,000 $35,000,000 Yaletown Centre (1040 Hamilton) Vancouver 1040 Hamilton Holdings Inc. 43,352 $20,500,000 6500 River Road (Ritchie ASPAC Developments Ltd. Brothers Bldg.) Richmond (Oval 8 Holdings Ltd.) 51,300 $18,500,000
SIGNIFICANT 3Q08 CONSTRUCTION COMPLETIONS BUILDING SUBMARKET MAJOR TENANT SQ FT COMPLETION DATE Lake City Centre Burnaby Speculative 108,966 September 2008 Glenlyon Business Park Burnaby Speculative 40,927 August 2008
SIGNIFICANT PROJECTS UNDER CONSTRUCTION BUILDING SUBMARKET MAJOR TENANT SQ FT COMPLETION DATE Metrotower III Burnaby Speculative 400,000 May 2011 – Willingdon Park Bldgs 8 & 9 Burnaby Speculative 180,000 April 2010 Discovery Green Building Burnaby Speculative 155,248 March 2009 Commerce @ Citi Burnaby Speculative 110,000 May 2009 CrossRoads Vancouver The City of Vancouver 80,000 November 2008 Broadway Tech. Bldg 5 Burnaby Speculative 75,000 January 2010 Broadway Tech. Bldg 7 Burnaby Speculative 75,000 January 2010 Source: Cushman & Wakefield LePage Inc
4.5 THE OFFICE MARKET VACANCY RATE Employment gains in the region's public administration and services sectors have largely driven demand for office space. Coupled with relatively minimal new supply entering the market over the past five years, Metro ’s overall vacancy rate is only 0.1 percentage point above its lowest level in 2001. Vancouver
In the third quarter of 2008, overall vacancy rates increased to 4.6%. The central area vacancy remained steady at 2.3%, and suburban rates also remained steady at 8.5% this quarter.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. OFFICE MARKET OVERVIEW 48
While overall central and suburban vacancy rates remained level, fluctuations did occur between asset classes. A drop in Class A central vacancy from 2.3% to 2.0% in the quarter was offset by an increase in Class B and Class C vacancy. Conversely, a large increase in Class A suburban vacancy from 10.1% to 11.3% in the quarter was counteracted by a large drop in Class B and C vacancy.
Sublet space as a percentage of vacant space increased substantially to 13.8% in the third quarter of 2008 from 4.8% in the second quarter.
’s historic vacancy rates are illustrated below, classified by area and building class. Metro Vancouver
FIGURE 4.4 METRO VANCOUVER VACANCY RATE TREND
25%
20%
15%
10%
5%
0% Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008
Central Class A Central Class B & C Suburban Class A Suburban Class B & C Source: Cushman & Wakefield LePage Inc.
New supply in Metro Vancouver will lead to an increase in vacancy rates. Uncertain economic conditions have yet to filter into commercial real estate statistics, as the full impact of the recession has yet to be known. However, it is clear that the net impact of the economic slowdown will likely cause a several years delay in demand. There is clearly sufficient demand to warrant new office tower(s) downtown, low rise office projects near rapid transit stations and on low cost employment lands in the suburbs. Demand for the west side of Vancouver is very difficult to estimate as the market is so small, limited to local serving businesses and it is also mature with little growth of demand for growth. Few office space users other than local medical, dental or professional could locate west of Granville Street on a small arterial road like Arbutus Street.
4.6 ASKING RENTS Asking rents in the Metro Vancouver area have been increasing since 2005, reaching an average of $23.73 per square foot in the third quarter of 2008 as shown below. New supply should impact this, reducing achievable rents.
In order to warrant the cost of structured parking, office rents should be on the order of $30 per sq.ft. and that is not readily achievable at the Arbutus Village location as indicated by the blue line in the figure below. Despite this, there is demand for the proposed 30,000 sq.ft. but an even higher value of space would mean lower average rents. The scale of office space suitable for the site is limited economically and financially.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. OFFICE MARKET OVERVIEW 49
FIGURE 4.5 CENTRAL & SUBURBAN ASKING NET RENTAL RATE TREND
$45
) $40 r y / f $35 s / $
( $30
t n $25 e R
t $20
e
N $15 $10 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 Central Class A Central Class B & C Suburban Class A Suburban Class B & C Source: Cushman & Wakefield LePage Inc.
Rental rate increases were felt in all submarkets and asset classes in the third quarter of 2008. Class A central rental rates continued to increase, reaching $41.48 per square foot in the third quarter, the highest rate in the nation. Class B and Class C rent also increased to $25.94 per sq.ft. This is likely the target rent that office space could secure at Arbutus Village.
Suburban rental rates also increased, with Class A rents rising from $20.79 per sq.ft. in the second quarter to $22.12 per sq.ft. Class B and Class C asking rents also rose $0.30 per sq.ft. to $16.39 per sq.ft.
With almost 1 million square feet of new supply slated to come to market in 2008 and 2009, rental rates in the suburban office market are expected to stabilize and then decline as supply outpaces demand.
4.7 LEASING ACTIVITY AND ABSORPTION After a slower year in 2007, absorption and leasing activity picked up in 2008. In the third quarter, leasing activity remained high while absorption slowed.
Year-to-date absorption increased to nearly 730,000 square feet in the third quarter of 2008. However, only 27,000 square feet of this total occurred in the last quarter. The market is clearly slowing.
The suburban market accounted for over 75% of total positive absorption in the Metro Vancouver market during the third quarter. 20,000 square feet of absorption occurred in the suburban area, which was fully attributable to Class B and Class C space. The remaining 7,000 square feet of absorption from the central area is a result of over 40,000 square feet of positive absorption in Class A space but negative absorption in the Class B and Class C market.
Leasing activity reached a healthy level of almost 1.1 million square feet on Q3 2008, indicating strong demand for office space, both downtown and in the core.
This is a long term project, and short term economic issues do not apply. The limited future population growth in the market does however apply, and office absorption on the mature west side will be very moderate and slow.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. OFFICE MARKET OVERVIEW 50
4.8 OFFICE DEVELOPMENT The Metro Vancouver office market saw an increase of new supply in 2007 that will continue in 2008 and beyond. While the majority of new space is being constructed in the suburban markets, several downtown developments have begun or are awaiting approval. 1.6 million square feet of new supply is currently under construction in the Metro Vancouver office market.
Significant completions in the third quarter of 2008 included Westminster Centre South and Glenlyon Business Park. The largest development to be completed this quarter was the Lake City Centre with 100,000 square feet of additional inventory. Another 145,000 square feet of new supply is expected before the end of 2008 in Metro Vancouver.
New supply and development in Metro Vancouver should have a moderating effect on the office market. With tight supply and steady demand characterizing the market in recent years, the influx of new office space should alleviate some of the pressure on low vacancy rates. Large increases in suburban space provide an alternative to companies unable to afford the high rental rates in the downtown CBD.
The current global financial market crisis will likely reduce financing for new projects in the near future. In addition, as the market slows and mortgage rates start to increase, no significant new construction announcements are expected. Below is the list of projects under construction.
TABLE 4.3 SIGNIFICANT NEW OFFICE DEVELOPMENT – SIGNIFICANT DEVELOPMENT PIPELINE VANCOUVER AREA BUILDING NAME SUBMARKET SQUARE COMPLETION FEET DATE CrossRoads Broadway Corridor 80,000 Q4 2008
Airport Executive Park - Bldg 6 Richmond 65,000 Q4 2008
Discovery Green Building Burnaby 155,248 Q1 2009
Commerce @ Citi Burnaby 110,000 Q2 2009
Jameson House Financial Core 60,000 Q1 2010
Total : 470,248
Source: Cushman & Wakefield LePage Inc.
4.9 OFFICE MARKET OUTLOOK The Metro Vancouver office market maintained its low vacancy and increasing rental rates through the third quarter of 2008, and while absorption fell from the previous quarterly figure of 400,000 sq.ft., the supply of available space remained near historic lows and leasing activity was strong, at over 1 million sq.ft.
2008 has also witnessed construction on 464,000 sq.ft. of new product largely being built on a speculative basis. With almost 1.5 million sq.ft. of new supply expected to hit the market in the near term, all Non-CBD space, and representing 3% of total inventory, vacancy can be expected to increase modestly, and rental rates are likely to stabilize.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. OFFICE MARKET OVERVIEW 51
There could however, be a temporary pause in leasing demand as firms evaluate the repercussions of the current financial market turmoil.
4.10 THE OFFICE MARKET WEST OF GRANVILLE STREET The map below indicates the share of office space inventory by area within the City of Vancouver west of Granville Street. The total inventory is approximately 3.4 million sq.ft. of which just over 200,000 sq.ft., or only 8%, is in the central area where the subject site is located. It is clear that that central area is only made up of a few small buildings, even though it includes Kerrisdale.
The market west of Granville Street and south of Broadway is entirely different than any other area in the City of Vancouver. It is isolated as opposed to Cambie for example which is central and has rapid transit.
FIGURE 4.6 OFFICE SPACE INVENTORY BY AREA
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. OFFICE MARKET OVERVIEW 52
As shown below, Arbutus Village and most of the west side is not suitable for office buildings over 40,000 sq.ft. in size. All buildings of that size must have a regional location serving a targeted tenant base such as the hospital or university, or a wider tenant base such as firms who want a South Granville address.
FIGURE 4.7 OFFICE BUILDINGS 40,000 SQ.FT. AND OVER
Figure 4.7 clearly indicates that a large office building on a small arterial road like Arbutus Street is not viable. Tenants sufficient to till such large space require a much more prestigious, convenient and visible location.
4.11 OFFICE SPACE ABSORPTION AT THE SUBJECT SITE It is very difficult to project office space absorption in the area west of Granville Street as the market is so very small. The market analysis has revealed that the existing office space is composed of dated B class office buildings and tenanted by local serving businesses. There are no A class buildings, and with the possible exception of a few insurance companies on Broadway and research firms in UBC, there are no region serving tenants.
In essence, this means that office demand west of Granville Street is limited to the space required by such businesses as medical, dental, health services, personal services, financial services, accounting, legal services and a selection of small businesses owned by persons who live in the area. Office demand would
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. OFFICE MARKET OVERVIEW 53
only grow if there is population growth as that is what the office tenants will serve. If there is minimal population growth, then there is minimal office growth and that is the case for the subject site.
It must be again emphasized that Broadway or Granville Street or near rapid transit are much preferred locations for office space, and Arbutus Village would be at a competitive disadvantage regardless of how well the building is designed.
(W8-51) VALUATION & ADVISORY SERVICES
5 D E V E L O P M E N T
A N D
I M
Development and Impact Analysis P A C T
A N A L Y S I S
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. DEVELOPMENT AND IMPACT ANALYSIS 55
D E V E L O P M E N T AN D I M P AC T AN AL Y S I S
5.1 INTRODUCTION It is clear that this small and difficult development site could not support more commercial space than proposed. Additional retail is limited as it operates on grade level space and that is limited by the size. Additional office space would oversupply the market and could not be leased at an economic rent.
Described below is the impact the new proposed development is expected to have on the existing directly comparable and competitive commercial buildings in the area. This is an unusual study in that expansion of the project beyond the proposed scale is not viable and thus impact is not really an issue.
5.2 RETAIL IMPACT Additional retail expansion over the 80,000 sq.ft. proposed is not technically, economically or financially feasible. The subject site is simply not suitable for retail space over 80,000 sq.ft. and neither the market nor ’s shortcomings were somehow addressed. industry standards could support anything larger, even if the site Even if the developer was compelled to expand the retail space by 25,000 sq.ft., the small scale and limited local serving stores of the potential retail expansion would have negligible sales which would preclude any possible negative impact on existing west side retail.
5.3 OFFICE IMPACT As it has been determined that the retail space cannot be expanded, any possible expansion would thus have to focus on office space. As there is already 30,000 sq.ft. of office space proposed, the scenarios are:
55,000 sq.ft. of office space (25,000 sq.ft. proposed in addition to the 30,000 sq.ft. planned).
80,000 sq.ft. of office space (50,000 sq.ft. proposed in addition to the 30,000 sq.ft. planned).
105,000 sq.ft. of office space (75,000 sq.ft. proposed in addition to the 30,000 sq.ft. planned).
In our analysis, the proposed 30,000 sq.ft. of office is warranted by the market, but a 55,000 sq.ft. office building, at this peripheral location, with underground parking would not be economically or financially feasible. Such an office project is not existent in any comparable location on the west side, largely because there are not a sufficient number of tenants to support such a large scale project.
If the project was forced to have a 55,000 sq.ft. office component, it would likely have a moderate negative impact on existing office buildings nearby as it would supply the market with surplus office space. It could hurt local office building owners by lowering office rents in areas such as Kerrisdale.
The impact would be on the order of perhaps an additional 3 or 4% vacancy and a 10% decline in rents in the nearest office buildings. The impact would also be negative on Arbutus Village itself as large portions of the additional local serving office space would remain unleased for the next 8 to 10 years.
(W8-51) VALUATION & ADVISORY SERVICES
– ARBUTUS VILLAGE RETAIL IMPACT STUDY VANCOUVER, B.C. DEVELOPMENT AND IMPACT ANALYSIS 56
In summary, the commercial development as proposed is optimal, and balances supply and ’ demand with the site s characteristics. Any expansion over the scale proposed is not economically or financially feasible.
(W8-51) VALUATION & ADVISORY SERVICES
ADDENDA 57
5 A D D E N
Addenda D A
VALUATION & ADVISORY SERVICES
ADDENDA 58
A D D E N D A C O N T E N T S ASSUMPTIONS AND LIMITING CONDITIONS ------APPENDIX I QUALIFICATIONS OF CONSULTANT ------APPENDIX II
(W8-51) VALUATION & ADVISORY SERVICES
ASSUMPTIONS AND LIMITING CONDITIONS
A P P E N D I X
I
–
A S S U M P T I O N S
A N D
L I M I T I N G
C O N D I T I O N S
Appendix I Assumptions and Limiting Conditions
(W8-51) VALUATION & ADVISORY SERVICES
ASSUMPTIONS AND LIMITING CONDITIONS
AS S U M P T I O N S AN D L I M I T I N G C O N D I T I O N S
This report has been prepared at the request of the client for the purpose of providing a general estimate of economic impact.
This report has been prepared at the request of the client, and for the use of the recipient as named herein and for the specific purpose and function as stated herein. All copyright is reserved to the author.
The author of this report cannot accept responsibility for legal matters, questions of survey, opinions of title, hidden or unapparent conditions of the property, toxic wastes or contaminated materials, soil or sub-soil conditions, environmental, engineering or other technical matters that might render this property more or less valuable than as stated herein. If it came to our attention as the result of our investigation and analysis that certain problems may exist, a cautionary note has been entered in the body of the report.
Any legal description of property and/or the area of the site(s) were obtained from sources that are deemed to be reliable. Further, the plans and sketches contained in this report are included solely to aid the recipient in visualizing the location of the property, the configuration and boundaries of the site and the relative position of the improvements on the said lands.
Only preliminary investigations have been undertaken in respect of matters that regulate the use of land. However, no inquiries have been placed with the fire department, the building inspector, the health department or any other government regulatory agency, unless such investigations are expressly represented to have been made in this report. The subject property must comply with such regulations and, if it does not comply, its non-compliance may affect the market value of this property. To be certain of such compliance, further investigations may be necessary.
The data and statistical information contained herein were gathered from reliable sources and are believed to be correct. However, these data are not guaranteed for accuracy, even though every attempt has been made to verify the authenticity of this information as much as possible.
Should title to the real estate presently be held (or changed to a holding) by a partnership, in a joint venture, through a co-tenancy arrangement or by any other form of divisional ownership, the value of any fractional interest associated therewith may be more or less than the percentage of ownership appearing in the contractual agreement pertaining to the structure of such divisional ownership.
Should the author of this report be required to give testimony at any administrative proceeding relating to this report, prior arrangements shall be made therefore, including possible provisions for additional compensation to permit adequate time for preparation and for any appearances that may be required. Because market conditions, including economic, social and political factors, change rapidly and, on occasion, without notice or warning, the estimate of market value expressed herein, as of the effective date of this market report, cannot necessarily be relied upon as any other date without subsequent advice of the author of this report. This applies to raw land in particular which is very volatile.
Macro economic factors such as a rise in interest rates or massive economic downturn could significantly impact these findings and have not and cannot be accounted for.
(W8-51) VALUATION & ADVISORY SERVICES
A P P E N D I X
I I
–
Q U A L I F I C A I T O N S
O F
C O N S U T A N T
–
R I
Appendix II C H
– A
Qualifications of Consultant Richard Wozny R D
W O Z N Y
(W8-51) VALUATION & ADVISORY SERVICES
Professional Qualifications
R ichard Wozny Vice President and Manager, Vancouver Valuation, Advisory & Property Tax Services, Capital Markets Group
Responsibility Richard Wozny is the Vice President and Manager of the Vancouver office of Cushman & Wakefield LePage, responsible for Valuation & Advisory operations.
Richard has conducted over 400 development and financial studies of shopping centres and commercial districts. He has worked on the development of thousands of acres of residential, commercial and industrial projects, and numerous store location and feasibility studies for retailers. Richard combines a creative and worldly project vision with pragmatic and detailed analysis.
Past Experience Richard was the Principal of Site Economic Ltd., a real estate development consulting firm from 1990 to 2000. He was previously Manager of Retail Development for Western Canada for Marathon Realty Company Ltd., 1987 to 1990 and Senior Consultant at Thomas Consultants Inc., from 1984 to 1987.
Education Masters Degree in Regional Science, University of Pennsylvania, Philadelphia, PA., 1984
Masters Degree in Religion, Temple University, Philadelphia, PA., 1982
Bachelors Degree in Philosophy, University of B.C., Vancouver, 1978.
Strategic Real Estate Services Client Groups Development Strategies; Developers;
Highest and Best Use Studies; Land Owners; Appraisal and Valuation; Retailers; Market and Feasibility Studies; Financial Institutions; Impact Studies; Architects and Planners; Rational Land Use Planning; Consultants; Tenant Site Selection;
Location Assessment, Retail & Hi Tech; Lawyers;
Shopping Centre Revitalization; Business Associations and Authorities;
Downtown Revitalization; High Tech Businesses;
Asset and Disposition strategies; Municipalities
Property Tax; and, All levels of Government;
Economic Strategies for Communities Hospital Boards, Universities, and
Transportation Authorities.
Cushman & Wakefield LePage Inc. Tel: (604) 640-5884 Valuation, Advisory & Property Tax Services Fax: (604) 683-6435 – Suite 700 700 West Georgia Street Vancouver, B.C. V7Y 1A1