Kelowna remains a haven for investment and one of the best places for real estate development, according to a new study on commercial real estate.
Authors of the newly released 2018 HM Commercial Report, Jeff Hudson, Marshall McAnerney and Meghan O’Mara of HM Commercial Group, see the positive impact of the Amazon effect which is driving innovation in land-use and urban planning, throughout the Okanagan Valley.
“Retail businesses in Kelowna are becoming more and more sophisticated, with a push for culture and experience in contrast to traditional retail plazas and big box stores,” said Hudson. “Mixed-use developments are a continuing trend in Kelowna, with a focus on live, work and play.”
HM Commercial Group reached out to the industry’s top leaders for their crystal ball predictions on the Amazon effect in the Okanagan.
A market leader in shopping centre management, Patrick Sullivan, chief operating officer of Primaris Management and owner of the Orchard Park Shopping Centre, has seen changes resulting from the closure of some of Canada’s largest retailers.
“Over the past 25 years, there have been few enclosed malls developed in Canada and retailers have steadily reduced their store count in most markets,” Sullivan said. “Large tenant failures, such as Target and Sears, coupled with the growth of e-commerce during the last few years, has accelerated this movement. Retailers have realized the importance of maintaining bricks and mortar, recognizing that market coverage can be achieved by operating fewer stores while having an online presence. Other retail developments must differentiate themselves from competing projects, either through the introduction of alternative uses, such as food and entertainment, or by creating a mixed-use project.”
Greg Appelt, developer of The Shore, a mixed residential, office and retail development at Gyro Beach agrees. “Shopping malls and box store developments will be the hardest-hit, but these are the sites that tend to have the best locations,” says Applet. “The seismic shift in retail will create opportunities for those with the vision and courage to fill or densify property.”
Avtar Bains, President of Premise Properties, believes retail needs to evolve in harmony with its community.
“Undoubtedly, e-commerce has changed the outlook and landscape of the retail business; brick and mortar retail assets are not dead, they are evolving,”Bains said. “Many retail assets reside on the very best locations in their sub-markets, particularly from a transportation perspective. Our recent acquisition in Kelowna is our bet on the ‘art of the possible.’”
In March, Premise Properties joined with Peterson Group in an $85 million acquisition of Dilworth Shopping Centre in Kelowna and Vernon Square, the most significant investment in the Okanagan Valley in the past year. With a vacancy rate of only six percent, Kelowna has 251,300 square feet of retail space available while pre-lease is a growing trend for new construction.
Craft beer and cannabis are also leading retail trends in Kelowna. Craft Beer Market renovated the former Paramount Theatre in the 200 block of Bernard in Downtown, and the rush is on to secure locations for recreational cannabis dispensaries.
“Large cannabis retail corporations are now securing high-profile locations,” said O’Mara. “These companies are looking all over Kelowna for spaces that suit their needs. The emergence of the cannabis sector is spilling over into the industrial market as well, with large format growing facilities and R&D facilities looking for space.”
HM Commercial reports the vacancy rate in Kelowna’s industrial market has dropped to 1.4 percent, the lowest vacancy rate of all sectors. Demand has pushed developments to the outskirts of Kelowna, and north towards Winfield, to an area now coined the North Kelowna Industrial Park. Recently, a 32,000-square-foot strata development sold out in advance of the completion of construction.
Involved in many of the largest and notable transactions in the Okanagan, HM Commercial Group has sold more than $500 million in real estate over the past few years. A boutique commercial real estate team, they specialize in investment properties, land for development, and commercial leasing. HM Commercial Group is licensed with Macdonald Realty Kelowna.
The 2018 HM Commercial Report was unveiled to a large group of property owners, developers and investors at a presentation at the Innovation Centre Thursday. The report is available online at hmcommercial.com/reports
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