Seal the deal and 'avoid the lockout' in 2013: NAIOP

Seal the deal and avoid the lock-out was the message delivered by Vancouver industrial real estate leaders as they looked into 2013, a year looming with supply challenges.
That message – using the NHL lockout as an analogy – was a common theme at a Vancouver NAIOP panel discussion.
“We had a great 2012,” said Mark Renzoni, moderator of the January 17 Vancouver NAIOP breakfast meeting panel discussion and chief operating officer and executive managing director for CBRE Canada Limited. “It was the Year of the Dragon and, as we forecast, 2012 was hot stuff.”
Renzoni said he liked to theme the various years and that NHL lock-out negotiations brought a salient reminder to the industry of high-stakes four-month deals, MOUs, disputes, missed deadlines, and no clear winner. “Finally, a broker was brought in to get the deal done,” he said.
As the industry settles into a tighter year in industrial sales, the lessons learned from the NHL dispute are clear. “Avoid the lock-out and close the deal,” said Renzoni.
2013 won't be any easier
Panelist and executive vice-president of Colliers International, Darren Cannon agreed. “2013 is not going to be easier – it’s back to the grind,” said Cannon, who handles mainly large-scale sales and lease transactions in Vancouver and the Lower Mainland.
The Metro Vancouver market has slowed because of a constrained supply of product and land, and, much of new capacity has been pre-sold or pre-leased and old properties offer limits on size and ceiling height. New developments are pushing into the Fraser Valley where land is more readily available.
Cannon said the industry was not going to see the size of deals that occurred last year with five large $20 million or more deals closed. He did say that institutions, a core sector, could generate some deals in the $5-$20 million range in 2013.
RealNet Canada Inc. posted 2012 figures showing 391 deals less than $5 million for a total of $397 million, 15 deals ranging in size from $5-$10 million for a total of $109 million, nine deals ranging from $10-$20 million for a total of $112 million, and five deals greater than $20 million for a total of $225 million.
Triovest Realty Advisors Inc. vice-president of investment, Jarvis Rouillard, said the industry was “going up the risk curve” in 2013. But that also provides the opportunity “to get creative” in deal-making and looking at options such as land leasing, he added.

Smaller scale opportunities expected
Opportunities still exist, but they will present themselves on a smaller scale, agreed Rouillard, who led the 2012 $81.3 million acquisition of the Modalink Distribution Centre portfolio in Richmond on behalf of a Triovest pension fund client.
Rouillard said that 2013 might still see industrial assets come onto the market, however, there will not be major portfolio turnovers as seen in 2012. Instead, the industry could expect to see “strategic portfolio shifts.”
Going forward, new developments would follow the availability and affordability of industrial land around larger centres. Panelists discussed the growing problem of Metro Vancouver’s lack of large sites and escalating prices compared to Edmonton and Calgary, where land prices were also rising. Steeper land prices – and the lack of finding lease space with higher ceilings in existing older properties – were resulting in strata-style industrial development.
“There is not the opportunity for an owner to get his own land and do his own buildings,” Rouillard said, yet the market still exists for the owner who wants to own rather than rent or lease. (Stata ownership also offers equity returns to the owner over renting or leasing).
The Beedie Group has been successful with strata projects in B.C. and was “very successful” with several new developments introduced into the Alberta market, Rouillard pointed out.
“Generally, land prices are increasing right across the country,” said Hopewell Development’s executive vice president Murray DeGirolamo, who agreed that Vancouver was becoming “a very challenging market for us” although land prices in Alberta were also escalating. DeGirolamo oversees the company’s acquisitions and dispositions across Canada and is also involved with developing new business with potential investors, clients, brokers and current partners.
Joint ventures used to control land prices
Joint ventures with partners were looming as a means of controlling land prices. “This is where the owner does not have the development expertise,” DeGirolamo said.
Panelists discussed the impact of the impending B.C. election, which offers the possibility that B.C.’s Liberals will be ousted by the NDP. Panelists said that the political climate might temporarily stall some corporate leasing and make investors wary initially as they determined how the NDP would deal with businesses. However, DeGirolamo pointed out that his company worked right across Canada and was “working well” with NDP governments in other provinces.
“There are bigger forces than politics,” he said, as Canada is part of a global economy and issues such as the European debt crisis could impact the domestic economy to a greater degree.
Looking at what factors were spurring industrial growth going into 2013, the panel members identified e-commerce, consumer big-box shopping, and rekindled demand for lumber by the U.S., as contributing factors. E-commerce was noted to have an interesting effect as more shoppers turned to the Internet to purchase good, enjoying the convenience of having them shipped to their home.
Colliers Cannon said these large e-commerce organizations often advertise that goods can be delivered with 24 to 48 hours. “Their warehouses have to be closer to the customer,” he said. (Amazon Canada announced a fulfillment centre on Annacis Island in September 2012).
Deals treated like art
Rounding out the discussion, moderator Renzoni said 2013 will emerge as one where industry members will hone “the art of deal making” as agreements may have to be “redone three times before you get a deal.” But, the bottom line on deal-making in 2013 is to make a sale and understand “where your product is sitting compared to the competition,” he said.
Rouillard agreed the process to reach a deal in 2013 is going to take longer. “It will take more hair (loss) but we will get through it,” he said, urging that deal makers should set a firm deadline in order to keep the play moving. He also urged the hiring of a “good and reasonable lawyer and hope the other side has one as well.”



Ann launched RENX in 2001 as a part-time venture and has grown the publication to become a primary source of online news for the Canadian real estate industry. Prior to…

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Ann launched RENX in 2001 as a part-time venture and has grown the publication to become a primary source of online news for the Canadian real estate industry. Prior to…

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