Multi-Family Industrial Real Estate Booming in Kelowna Despite Rising Mortgage Rates
The Bank of Canada made another big increase in its key interest earlier this week, the second in two months, and with that some believe the housing market will slow further from its record pace of the year. last.
The central bank raised the rate by half a percentage point to 1.5% on June 1, warning rates will need to rise further to contain inflation. The increase should have an impact on mortgage rates which, at more than 4%, are higher than they have been for more than a decade.
READ MORE: Bank of Canada raises policy rate by 0.5% amid stubbornly high inflation
Despite rising interest rates, Kelowna realtors are seeing customers line up.
“Industrial and multi-family asset classes remain extremely strong,” said MCL Property Group Director Kris McLaughlin. “Inventory levels continue to remain at historic lows. Prices per square foot are rising.
Raw industrial land is approaching the $3 million per acre mark.
“It’s not there yet but I anticipate it will come,” McLaughlin said.
It’s still shy of the $5 million per acre the Lower Mainland is approaching, but it’s seeing increased interest from industrial clients for lower-priced land in places like Edmonton and Calgary. Even other parts of the Okanagan don’t compete with Kelowna because cities like Penticton and Vernon are even more expensive than Alberta.
READ MORE: Study finds non-homeowners pessimistic about buying a home despite falling prices
Much of the demand is for businesses in areas like construction that need lots of storage space as well as a retail outlet.
“You have these guys from cabinets to floors to countertops,” McLaughlin said. “It becomes a bit of a cluster in the airport business park with these different types of uses, because you can walk in there and pay $17 to $18 a square foot for base rent.”
By comparison, similar light industrial sites on Baron, Banks, and Enterprise roads cost between $19 and $26.
When it comes to multi-family sites, there is a lot of interest in grouping several properties together.
McLaughlin expects more than 60 to 90 four- to six-story apartment buildings. This is especially the case near downtown Kelowna, but he is working on a few clusters of land in the Rutland neighborhood that could end up being this size.
He’s also working on a consolidation in Lake Country, even though they don’t have high-density multi-family zoning regulations yet.
“It’s likely that this project I’m working on will be one of the first high-density multi-acre residential applications Lake Country has seen,” he said.
As for retail, strip malls are not on the horizon as zoning regulations in Kelowna encourage mixed commercial and residential use.
READ MORE: Destination shopping districts are changing the face of retail in Kelowna and beyond
This means that new downtown skyscrapers feature commercial spaces on the ground floor with residences above. Interest in such a space is strongest in specific areas.
“Anytime you go to an area of town that is in high demand for retail – take it downtown, along Bernard Avenue or, as we go along, along from Clement Avenue or the Pandosy Corridor, 1,000 square feet for retail is very hard to come by and there is a list of people sitting backstage and waiting for some of them to open,” said said McLaughlin.
— With files from The Canadian Press
To contact a reporter for this story, email Rob Munro or call 250-808-0143 or email the editor. You can also submit photos, videos or news tips in the press room and be entered to win a monthly raffle.
We appreciate your comments and opinions on our stories, but play well. We will not censor or delete comments unless they contain off-topic statements or links, unnecessary vulgarity, false facts, spam or obviously fake profiles. If you have any concerns about what you see in the comments, email the editor in the link above.