Secondary markets have been the center of attention over the past year thanks to high capitalization rates, which make more sense in the current financial environment. Even if interest rates begin to fall, signaling rate compression, it will take time for this change to be felt in the market. Meanwhile, the influx of people and businesses into secondary markets continues as high real estate costs prompt investors and renters to seek more affordable opportunities.

While there are many cities that could be considered prime secondary markets, including the South Okanagan, the major changes are occurring in core cities located on the fringes of major metropolitan areas. In British Columbia, this includes Nanaimo and Chilliwack, satellites of Vancouver.

On the Prairies, Calgary is the destination of choice for the influx of migrants to Alberta, driving investment in surrounding communities. Alberta’s strong growth prospects mean there is room for opportunity.

But investment, although often focused on residential real estate, is also returning to commercial and industrial assets. Lethbridge is a good example, but further east, Saskatoon and Winnipeg are reaping significant benefits from industrial investment. Residential markets north of Saskatoon are growing alongside BHP Billiton’s plans for the world’s largest potash mine at Jansen, while CentrePort Canada is seeing renewed investment from industrial players in the RM of Rosser thanks to to its strategic location and transport links.

Although many of these centers have been leading cities in the past, the current combination of falling interest rates and normal conditions for business activity positions them well for growth.

Nanaimo

Proximity to Vancouver has long made Nanaimo a preferred destination for value-conscious buyers. Although significant investments in downtown civic infrastructure have created problems for residents over the past two years, the improvements prepare the city for long-term growth driven by both University of Vancouver Island and by new commercial developments such as Seacliff Properties’ massive Sandstone development to the north. The downtown area is expected to have 2,200 residential units and up to three million square feet of industrial space.

Being a strategically located secondary market, Nanaimo is a popular destination for multifamily investors as well as retail business owners. This year, four multifamily properties hit the market in the city in the first six months, one more than for all of 2023, with three additional offerings in WestUrban’s portfolio hitting the market in the second half. Marcus & Millichap sold Metral Station, a fully leased shopping center anchored by Starbucks, Trail Appliances and Browns Social House, which sold in September following multiple offers for the total asking price of nearly $15.9 million. “Originally owned by a Vancouver-based investor, it was ultimately purchased by a buyer from the interior of British Columbia, highlighting the diverse interest from various buyer groups across British Columbia” , reported Marcus & Millichap.

Despite the consistently high level of attention Nanaimo receives, only 21 per cent of local residential properties are owned by investors, which is lower than the British Columbia average of almost 23 per cent. This points to continued opportunities for the foreseeable future as the city’s growth continues.

Chilliwack

Chilliwack came into the spotlight as housing affordability in Vancouver became even further out of reach a decade ago, and the pandemic focused the attention of residential buyers on what has become a boomtown. transformation. Like Nanaimo, the city has yet to see investors dominate local residential transactions, but that is partly because many other opportunities exist as population growth sets the city on a path to a gain of 40 percent to reach 132,000 inhabitants by 2035.

“Chilliwack’s convenient access to major transportation routes and proximity to the U.S. border makes it easy for investors to monitor their assets,” emphasize Marcus & Millichap. “Coupled with a steady influx of residents and ongoing community development initiatives, Chilliwack provides a vibrant market for investment. » Recent developments include Red Bull’s purchase of land for a new manufacturing facility on the heels of major investments from Molson Coors and Trouw Nutrition that enhance the city’s industrial and agricultural base. Development north of Highway 1 at Lickman Road also reflects the city’s transformation as developers look to the eastern Fraser Valley for opportunities. With the prospect of new recreational facilities in the form of a ski area supported by Indigenous partners, the town has the makings of an affordable community where people can live, work and play.

Edmonton

Calgary has made headlines as Alberta’s population has exploded over the past two years, thanks in large part to an influx of new residents from eastern Canada. The number of newcomers to Alberta has exceeded the economy’s capacity to absorb them, with impacts on multi-family properties.

But the dormant opportunity in the province has been Edmonton, which has also seen an influx of new residents and new investment in new multi-family housing. Recent transactions, such as that of Killarney Manor, a 56-year-old building sold in May for $91,429 per apartment (a fraction of the cost of assets in major centres), highlight the interest and upside potential of assets in key neighborhoods. In Greater Edmonton, Marcus & Millichap places Spruce Grove, west of Acheson, with its prime industrial spaces offering well-paying jobs, among the key markets for investors thanks to competitive pricing and development initiatives in course. Re/Max also highlights the livability of St. Albert, making these areas critical for investors looking to follow the path of future demand.

Saskatoon

Re/Max flags four Saskatoon neighborhoods as attractive due to their family-friendly rates and proximity to schools: Brighton, Nutana, Silverspring and River Heights. But the city’s benefits extend beyond single-family opportunities to multi-family housing, with the Heritage Heights development hitting a record price earlier this year of $231,855 per unit. However, with work intensifying on BHP Billiton’s potash mine, city center office space offers entrepreneurs the opportunity to reimagine workspaces in tandem with the city’s downtown reinvention plans in an events and entertainment district. At the same time, land on the outskirts of the city offers residential and agricultural opportunities. Saskatchewan farmland prices have seen strong growth this year, and demand for well-located residential and industrial assets has made land a local opportunity as the province rides the commodities wave.

Rosser

Recent investments in CentrePort Canada properties in Rosser highlight the area’s popularity with industrial investors. Statistics Canada points out that the municipality is also popular with residential investors, with more than double the rate of investor-owned properties here than in Winnipeg itself. Although the rate of 37 per cent (compared to 16 per cent in Winnipeg) is far from low, Rosser attracts investors who see the potential of a development-friendly community. Major projects in turn have a positive impact on surrounding neighborhoods in Winnipeg itself, a city ripe for reinvestment, as recent projects in the city’s downtown clearly demonstrate. Centrally located in Canada on a key north-south trade route, Rosser is emblematic of the opportunities within the Winnipeg metropolitan area.

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