Regardless of the world-altering impacts of COVID-19, commercial real estate in 2020 for Kelowna continued to benefit from some powerful forces: demand for commercial real estate remained relatively strong, and interest rates remained historically low.
While other Canadian cities are grappling with record vacancy rates—particularly for offices—Kelowna remains an excellent place to establish, grow, or relocate a business. The one area that has seen the most challenges is the retail market, and the fallout from COVID-19 continues in this space. However, we still saw increased absorption in 2020, and there are signs of pent-up demand.
The overall retail space is at a bit of a wait-and-see position at the moment, as we watch for how government incentives might help the sector (particularly smaller retail establishments) survive the restrictions of the pandemic.
When it comes to office space, vacancy rates dropped slightly from 2019 levels. And although new construction was also down in 2020, the 300,000 square feet of office buildings that will be available from the Landmark Seven and The Block Downtown developments are still proceeding. This, along with the announcement from UBC Okanagan that they’ll be establishing a downtown campus, suggests a bright outlook for office space in the downtown area.
And even though more and more companies are looking at long-term work-from-home options that would otherwise increase vacancies, Kelowna continues to be a desirable place to establish offices.
Industrial development remained strong in the Kelowna area in 2020, and the owner/user market is one of the strongest. We’re seeing continued growth at Airport Business Park and North Kelowna Industrial Park in the north of the city, as well as West Kelowna Industrial Park and Carrington Industrial Business park that we expect to have a multi-user development with office and residential.
This mixed-use trend looks promising, especially as we see continued demand for rentals with the vacancy rate remaining under 3% (although it has risen since the near-0% rate in 2019).
Within the industrial market, vacancy rates increased in 2020, but new construction was also up, while absorption dropped by over 50%. Build-to-suit lease rates remained static.
The strong performance in most commercial real estate areas isn’t limited to Kelowna. From Vernon south to Penticton, commercial properties remain in demand, and development continues to proceed with these areas outside Kelowna offering some price advantages while still carrying that all-important Okanagan advantage.
Within the Kelowna area, land and availability remain a powerful force. With 38% of land in the ALR, we’ll likely continue to see strong demand—although the longer-term impacts of the pandemic on all aspects of the economy and, by extension commercial real estate, will remain unknown for some time.
Even with all the uncertainty COVID-19 brings, when it comes to investments, Kelowna remains a desirable and active market. As land prices and construction costs increase, existing buildings are still in demand. And with the stock market’s performance mimicking a roller coaster, commercial real estate is showing its colours as a much safer investment.
If you are considering Leasing, Buying or Selling Commercial Property in the Okanagan call me at 250.448.5008 or email email@example.com and I would be happy to discuss your goals with you.