Kelowna tops list of 2020's best Western Canadian investment towns
Kelowna is the 53rd most populous city in Canada but the Kelowna airport is the 10th busiest airport in the country, a telling statistic for a city that Western Investor has selected as the No.1 town for real estate investors over the next 12 months.
Two new hotels are now in place at the airport, and construction cranes above commercial and residential towers overhung a Western Investor walking tour of the downtown.
This construction includes the second phase of the North American Development Group’s One Water Street condo tower that, at 36 storeys, will be the highest building between Vancouver and Calgary. Closer to completion is the Ella tower by Mission Group, where the two-bedroom condos are priced from $679,900 to nearly $2 million for the last penthouse. Heading to completion early in 2020, the 116 units in the 20-storey tower are 86 per cent sold out. Investors are among the buyers at Ella, attracted by the rental potential in a city with a 1.9 per cent vacancy rate and rents that average more than $2 per square foot for apartments and even higher for condos.
In all, 12 new multi-family towers are under construction in Kelowna, including the 25-storey Brooklyn, which includes a mix of residential and commercial use as part of the $14 million Bernard Block development downtown. The Bernard Block will boast 80,000 square feet of Class A office space, supported by over 18,000 square feet of storefront retail. The residential tower will feature 217 homes.
“Bernard Block is set to become a cornerstone and gateway to our evolving city centre,” said Lisa Lock, vice president, development, Mission Group.
Kelowna’s office vacancy rate is 4.9 per cent, down from 6.5 per cent a year ago and Class A space is leasing for up to $26 per square foot. Right now there is 312,600 square feet of new office space under construction, nearly six times higher than in 2018. Yet the latest new towers – Landmark 6 with 196,000 square feet, the Innovation Centre –a high-tech incubator – and the 74,000-square-foot Macintosh Centre are 100 per cent leased.
With 3.9 million square feet of office space in the city, less than 200,000 square feet was available as of the third quarter. In September, Rogers Communications confirmed it is leasing 32,000 square feet in the Landmark complex for a new call centre that will employ up to 350 people when it opens next summer.
Kelowna is also emerging as an investor draw for office and industrial strata, with office space selling for $361 per square foot and new industrial buildings cresting over $280 per square foot.
Commercial strata is a cornerstone of Kelowna’s Packing District, emerging on the edge of downtown. This year, Vancouver-based PC Urban Properties began its fourth Kelowna project there with the Powerhouse, a 56,000-square-foot complex that will offer small-bay, commercial flex strata for retail on the main floor and upper floor office space with pricing starting at $379,000.
Kelowna’s industrial sector is “on fire,” Hudson said. The industrial vacancy rate is at record low of 0.7 per cent. This has attracted nearly 180,000 square feet of new construction, but it has also driven industrial land prices higher. Prime sites are selling for up to $1.3 million an acre.
When PC Urban transformed the former Enterprise Steel site into light industrial strata space, it pre-sold at approximately $300 per square foot.
Over the past several years, Kelowna has concentrated on its downtown, extending a lakefront park and walkway, replacing sewer lines, improving streets and using progressive zoning to attract developers. It has paid off.
“It’s gratifying to see the city’s long-term vision for this area becoming a reality,” said Kelowna Mayor Colin Basran. “The mixture of commercial, industrial and residential properties create a dynamic and attractive hub of development where people can work, live and enjoy leisure time all in one spot.”
B.C.’s third-largest city outside of the Lower Mainland is a prime destination for western investors.
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