Secret sauce is the key ingredient to making an ordinary dish an extraordinary dish. This delicious concoction causes one’s mouth to water with the anticipation of an explosion of joy for your taste buds. If you are like me, after I have tasted and experienced an appetizing dish that has a specific secret sauce, I then re-create that dish in my mind and literally start to salivate. Try it! Think about your favorite dish with that extra special secret sauce… Are you salivating?
When it comes to investing in real estate, is there a secret sauce? Do you salivate over an investment opportunity or a market that has a secret concoction of opportunity? The current real estate market has been on fire for the last couple of years, and it continues to set new highs in sale prices and volume of sales, as well as new lows in inventory.
So, what is the secret sauce that is driving the current market? Experts and non-experts alike would say that it is a combination of the foreign buyers, low inventory, strong GDP, low unemployment, lack of available development land, immigration, and migration, pent up demand, low interest rates, government policies (Federal, Provincial, and Municipal), and the list goes on. These are all ingredients to the secret sauce that is fueling today’s seller’s market. However, like all secret sauces, a sauce must start with a base, followed by adding in key ingredients—now you have your secret sauce.
Many investors would say that the list given in the prior paragraph are the key ingredients or the base that makes for a strong market, but the long-term legacy wealth investor would look deeper into the fundamentals of what is truly the secret sauce. A true secret sauce has ingredients that cannot be duplicated or counterfeited. It would also never have an expiry date or fall out of favor of the investment world. It would be able to help sustain almost any real estate cycle change and it would help maintain a strong investment environment.
Ready for the secret ingredient? Industrial land. What is so special about this ingredient, you ask? It is land that creates jobs, hope, prosperity, and most importantly, futures for young working families. In turn, this ultimately creates a strong real estate investment environment as it is where long-term legacy wealth investors focus. They do business in municipalities and regions that have huge tracks of vacant land set aside for industrial use; land developed for small, medium, and large businesses for manufacturing, distribution, packaging, and other industrial uses. Many of these companies are looking for affordable space to do business, but they are also looking for affordable housing for their employees. In the end, they are looking at creating a win-win for their company and employees.
If industrial land is the secret sauce base, what municipality has the most vacant land available? The Lower Mainland is starving for industrial land. In fact, most areas on the north side of the Fraser River have no industrial land available. The south side of the Fraser River has the majority of the vacant industrial land. Along with the available land, the region also has good transportation routes with four border crossings for north and south movement, as well as many highway options for east and west movement, plus the Fraser River for barge transport.
Two areas of the Fraser Valley that have huge areas of opportunity are Chilliwack and Abbotsford. These two municipalities have affordable industrial land and affordable housing; however, the inventory of vacant industrial land is quickly diminishing and before long, we will be in need of more. Abbotsford’s Mayor Braun and the City Council understand the importance and the dynamics of industrial land. Currently there are approximately only 200 acres of vacant land in Abbotsford. For some, this may sound like a great deal of land, but in the grand scheme of things, it unfortunately is not. For example, a large logistic company may need 40 or 50 acres on one site, and a large manufacturer may need up to 10 acres. In just a short amount of time, all 200 acres are developed and the future is put on pause. In 2004, the City of Abbotsford approached the Agriculture Land Commission (ALC) to exclude 925 acres, but the city received just 445 acres. Fast forward to 2017, Mayor Braun and the Council are seeking another exclusion from the ALC for another 696 acres. This is an absolute necessity and is the secret sauce to a strong and sustainable city and community.
Some would argue that turning agriculture land into industrial land is wrong. They would argue that we are trading our land, our farmers’ livelihood, and a sustainable future for concrete warehouse jungles and capitalism. I disagree with this argument. I believe that much of the land is not productive agriculture land. I also believe that this land can be used in a productive way to building a stronger and more sustainable city that will enable it to have a bigger and brighter future. The Mayor and Councils’ intention is to use this exclusion for industrial use only and not for residential use. They are seeking the land exclusion to create more jobs. The City’s residential focus will be on densification and creating more affordable housing for the many future families that will have new opportunities from the newly developed industrial lands. Densification is the future as it creates a more compact city, reduces the cost of infrastructure, and creates a stronger investment environment.
This secret sauce with the key ingredient of industrial land should make the long-term investor salivate over the real estate investment opportunities. The commitment that the City of Abbotsford and City of Chilliwack have in creating more industrial land and affordable housing is going to make for a bright future for both communities, and in turn, makes for a bright future for the legacy wealth builder, too.
The Vancouver and Fraser Valley market continues to roll, even with the affordability issues making headlines on a daily basis. Strata properties (townhomes and condominiums) continue to lead the charge throughout Vancouver and the Fraser Valley. With lack of affordability, it is no surprise that the more affordable Tri-Cities (Port Moody, Port Coquitlam, and Coquitlam) are the most active sub markets in the Vancouver Region. Single family homes throughout this region have been gaining strength, and Port Moody has the lead with a sell through rate (STR) of 38%. Townhome sales have also been strong in the Tri-Cities with all three areas averaging a crazy 57% STR. New Westminster led the condominium sales with a 57% STR, followed by Port Moody at 53%. The sub markets that are not experiencing strong STR numbers are the most expensive areas, such as West Vancouver where the single family market was at 10% STR. White Rock, the most expensive submarket in the Valley, is echoing what is happening in West Vancouver with a lowest STR number in the region at 19% STR.
The Fraser Valley region is once again experiencing some new highs in STR numbers. Cloverdale and Langley continue to be the STR high number winners as single family for the month of May averaged 42% STR, and townhomes and condominiums were between 51-58% STR! But, Maple Ridge townhomes set a new record for townhomes at a 62% STR. For as long as I have been compiling these statistics, I have never seen anything close to this number.
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STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales