Property Assessments - What To Anticipate In 2025

BCA did not provide their update presentation this year. So we have reviewed the broker’s market reports to see what change we should anticipate from 2024 assessments (July 1 2023) to July 1 2024 (2025 valuation date).

In determining cap rates BCA use higher vacancy and expense allowances, hence BCA Cap rates are lower than market.

The assessment changes suggested by the statistics below, will only be correct if BCA were correct in July 2023 (2024 assessment). If they were too high or too low in 2024 an assessment change may not be merited.

OFFICE

Negative absorption rate continued to show in multiple market reports for late 2023 and able to turn positive in early 2024; downtown office shows double digit vacancy, midtown and suburban office shows resilience. The rental rate in downtown core and suburban office trended downwards while suburban office was able to pick up.

Vacancy & Rent

Downtown Core

  • 2023 Q3: Vacancy Rate 11.9% Weighted Average Asking Net Rent $38.56

  • 2024 Q2: 11.6% and $37.71 respectively

Midtown Office

  • 2023 Q3 Vacancy Rate 6.7% Weighted Average Asking Net Rent $31.53

  • 2024 Q2 7.8% and $30.21 respectively

Suburban Office

  • 2023 Q3 Vacancy Rate 5.3% Weighted Average Asking Net Rent $25.92

  • 2024Q2 6.2% and $27.49 respectively

Vancouver's office market cap rates have generally increased across all classes from Q3 2023 to Q2 2024.

Cap Rates

Downtown Office:

  • Class A: Increased from a range of 4.50% - 5.25% in Q3 2023 to 5.25% - 6.25% in Q2 2024.

  • Class B: Increased from 4.75% - 5.75% in Q3 2023 to 5.50% - 6.50% in Q2 2024.

Suburban Office:

  • Class A: Increased from 5.50% - 6.00% in Q3 2023 to 5.50% - 6.50% in Q2 2024.

  • Class B: Increased from 5.75% - 6.50% in Q3 2023 to 5.75% - 6.75% in Q2 2024.

INDUSTRIAL MARKET

The Metro Vancouver industrial market is undergoing a significant shift from a landlord-favourable environment to a more balanced market.

Increase in Vacancy:

multiple sources have reported an increased vacancy rate,

  • from 1.2% in Q3 2023 to 3% in Q2 2024 (Colliers)

  • from 1.6% in Q3 2023 to 2.9% in Q2 2024 (AY)

This increase marks a significant departure from the historically low vacancy rates seen in previous years.

Plateauing of Rental Rates:

After an extended period of rapid rental growth, asking lease rates have begun to plateau. This stabilisation is attributed to growing competition among existing properties and a more balanced market.

The average asking net rents slightly down

  • from $21.84 in Q3 2023 to $20.91 in Q2 2024 (Colliers)

  • from $21.99 in Q3 2023 to $21.34 in Q2 2024 (AY)

Upward Trend in Cap Rates:

Cap rates for industrial properties in Vancouver are

  • 2023 Q3: Class A, low 4.25% high 4.75%; Class B, low 4.5% high 5%

  • 2024 Q2: Class A, low 4.75% high 5.5% ; Class B, low 5% high 5.75%

RETAIL

Little change is anticipated in overall values

Rents

According to the market reports by different agencies, from mid-2023 to mid-2024, City of Vancouver's urban retail market saw a general upward trend in average net rental rates.

Sub-markets such as Kerrisdale and South Granville remained stable at net rent but with increasing vacancy

  • Kerrisdale: $50-$80 psf, vacancy from 1% to 4.26%

  • South Granville (West Broadway to 15th Avenue): $60-$85 psf, vacancy from 6.08% to 7.73%

Most suburban markets showed little change in average net rental rates

Limited new supply in both urban and suburban areas contributes to the upward pressure on rental rates.

Cap Rates

Regional /Power

  • 2023 Q3: low 4.75% high 6.50%

  • 2024 Q2: low 5.00% high 6.50%

Grocery/Community

  • 2023 Q3: low 4.50% high 5.75%

  • 2024 Q2: low 4.75% high 5.50%

Neighbourhood/Strip

  • 2023 Q3: low 4.25% high 5.25%

  • 2024 Q2: low 4.50% high 5.50%

MULTI-FAMILY

Cap Rates

These have remained relatively stable from Q3 2023 to Q2 2024, experiencing only minor fluctuations.

  • High-rise apartment cap rates hovered between 3.50% and 4.50% for most of the period, briefly increasing to 3.75% - 5.00% in Q2 2024.

  • Low-rise apartments saw similar stability, ranging from 3.50% to 4.50% for much of the period, with a slight increase to 3.50% - 5.00% in Q2 2024.

Rental Market:

Rental growth has been robust, but there are signs of a potential plateauing in the latter part of 2023 and 2024. BCA rates should be similar, if not lower.

Buyers are increasingly cautious towards properties underwritten with aggressive rental rate growth scenarios, signalling a more realistic approach to future projections.

Expenses

BCA use a % of gross income, which assumes that as rents go up so do expenses. This is a fallacy and affects the cap rates.



Peter Austin, BSc., AACI, Carb

Ph:      604-733-3232

Email: paustin@telus.netur property now and in the future.

Peter Austin, BSc., AACI., C.Arb.