Drew Hasselback | December 22, 2015 1:18 PM ET
VANCOUVER — You see a lot of stories about residential real estate in Vancouver. Less gets written about the commercial market, even though Vancouver-based business lawyers say they’re practising in what could be remembered as the “golden era” for commercial real estate.
Deals involving office buildings, retail locations, high-density condo projects, and industrial lands have been booming for a few decades. Many lawyers peg Vancouver’s Expo 86 as the moment that got the ball rolling. The boom has continued due to the development of the Expo ’86 lands after the event, the construction and expansion of a rapid transit system, the 2010 Winter Olympics, and an influx of investment from China, Japan, Europe, the U.S. and the big Canadian pension funds.
According to the Real Estate Board of Greater Vancouver, commercial real estate sales hit a five-year, third-quarter high of 550 transactions for a total $1.9 billion, up from 471 sales for $1.42 billion in the same period of 2014.
The simmering market has made real estate the “must-do” practice for young lawyers interested in practising business law, says Keith Burrell, a partner in the Vancouver office with McCarthy Tétrault LLP, and according to Chambers Canada 2016, one of the best real estate lawyers in both Vancouver and Canada. “In Vancouver real estate attracts good practitioners.”
Those who’ve taken the plunge have had no regrets. Scott Smythe, another McCarthy partner in Vancouver who has been ranked by Chambers, says deciding to practise real estate law was a “no brainer” because there was so much opportunity. “It turned out to be the right thing to do because it happened to coincide with what I’m sure we’re going to look back on as really a golden era in British Columbia in terms of real estate. It’s been a great market for a long time real estate lawyer.”
The traditional explanation for Vancouver’s hefty real estate prices is that geography constrains the supply of land. The western edge of the city is bounded by the sea, while it’s hemmed in by mountains in the north and the U.S. border in the south. The city and its suburbs have gradually expanded eastward into the Fraser Valley, but that growth faces limits due to an agricultural land reserve and some transportation bottlenecks.
Some Vancouver lawyers say that old explanation has given way to a new driving force: fresh capital. Institutional investors from Central Canada are now much more familiar with the Vancouver marketplace. International investors also see the potential. Chinese investors last Fall paid $122-million or roughly $600 a square foot to buy a B-class office tower called the United Kingdom Building.
And the international interest goes well beyond mainland China, says Peter Tolensky, aChambers-ranked real estate lawyer.
who heads Lawson Lundell LLP’s real estate practice group. U.S. investors are also keen on B.C., particularly because of the exchange rate, he says. “Keep in mind that with the Canadian dollar where it is right now, a lot of people would view B.C. as basically a 20 to 30 per cent discount off the top if they’re coming in with U.S. dollar buying power.”
Population growth and the improved transit infrastructure that came with the Vancouver 2010 Winter Olympic games are also helping demand, Tolensky says.
“That Olympic boom spurred a lot of transit-related development, with the addition of the Canada Line (rapid transit line) along Cambie Street. That certainly was the first big transit change, and real estate and transit go very well together. So densification along transit lines is certainly a growing trend here,” Tolensky says.
John Sampson of Bull, Housser & Tupper in Vancouver, another ranked real estate practitioner by Chambers Canada, echoes those sentiments. He has seen how the addition of transit links has triggered the development of several mixed use projects along expanded transit corridors in the greater Vancouver area. Visitors to Vancouver who want to see what he means should stop by the massive Marine Gateway project at the corner of Cambie Streets and South West Marine Drive, not far from Vancouver International Airport.
“As far as commercial real estate is concerned, I would say it’s as busy as ever. Vancouver is still a very competitive and a very busy commercial real estate market,” Sampson says. It’s the big projects that draw Vancouver’s real estate lawyers into the business, such as Ross MacDonald, a partner with Stikeman Elliott LLP in Vancouver.
MacDonald once planned to become a woodworking teacher. A university friend dared him to take the LSAT, and he did well enough to get into law school. Three decades later, Chambers ranks him as one of the top real estate lawyers in Vancouver and he’s the managing partner of Stikeman’s Vancouver office.
As he looks back, he believes the big real estate drive began when lawyers and developers did the deals that carved up the Expo 86 lands. The commercial and legal agreements that developed those lands have over the years been refined and perfected, and have served as the foundation for a generation’s worth of commercial real estate development. He worked on some of those first deals — pioneering work he now describes as “exciting and terrifying at the same time.”
That’s probably why he and his partners prefer working on big long-term development projects, rather than quick transactions, he says. “We like it more. It’s more interesting. It’s longer term. You get to know the people better. You get to understand the business of real estate development. You can’t be an effective real estate development counsel unless you understand real estate development.”