William Wright Commercial Real Estate Services is not the largest brokerage in British Columbia. Nor is it the second-largest brokerage in BC.
In fact, Business In Vancouver has William Wright Commercial tied with Macdonald Commercial as the seventh-largest brokerage in BC by the number of commercial agents, behind Colliers, Re/Max, CBRE, Cushman & Wakefield, Avison Young, NAI Commercial, and ahead of JLL and Marcus & Millchap.
Of those 10 largest brokerages, however, William Wright is by far the youngest, so its standing is really a sign of rapid growth.
Founded in 2013 by Cory Wright (whose middle name is William), William Wright is celebrating their tenth anniversary this year, and their growth continues to go steady, with the brokerage announcing the opening of their seventh office in British Columbia last week.
Their first office was opened in Vancouver, followed by offices in New Westminster, Langley, Victoria, Kelowna, and -- just in January -- Kamloops. The latest office, now open, is located in Parksville, in the central region of Vancouver Island.
In an interview with STOREYS, Founder and Managing Director Cory Wright discusses why the firm continues to focus on BC's secondary markets, what asset types are in demand, and future plans for William Wright Commercial.
Why choose the Central Island location for your seventh brokerage office? Was it a response to demand?
One hundred percent. We opened our Victoria office about three years ago and saw major, major demand over there. What I think kind of shifted a lot of that demand a couple years prior to that and was definitely emphasized after COVID, was, from a commercial real estate investor standpoint, you could get far better capitalization rates in the Greater Victoria area, for the major asset classes, at equal-to or better vacancy rates over there than we had over here [in Metro Vancouver].
So, over time, what happened was the institutional investors, REITs, and private investors saw that over there you could get a 5.5% cap rate on a multi-family building at one point in time, with a vacancy rate of sub-1.7%, while the same thing over here would be a 3% cap rate. So, over time, a lot of money shifted over there. And what we've seen over the past three to five years -- and COVID was a major player in this -- is a lot of that interest has shifted up to the mid-Island market, led by Nanaimo, Duncan, Comox, Parksville, and all those areas seem to be getting a surge of interest on the investor side.
And I think when you kind of look at the overall metrics of an investment, where the cap rates were a little more attractive, and the vacancy rates weren't terribly different than what you'd find in the Greater Victoria area, but the one thing you'd find is a lot of the lease rates for the asset classes were dramatically lower. So as demand kind of increases, and not as much supply is available, naturally, lease rates will tend to tick upwards, and that's what's happened.
Our philosophy is more offices in more markets, boots on the ground, versus the traditional commercial real estate model of one office in a hub city, and then that hub city trying to conduct business by parachuting into all the markets. We've been following the Central Island for about three to four years now, we're very bullish on it, and we thought now was the time to open our office over there, and have boots on the ground and proper representation.
A lot of the same investors -- large-scale investors, REITs -- they also own property in the Central Island, as well as Victoria, as well as Kelowna, as well as Kamloops, so it's given us the ability to offer them kind of a one-stop shop as a full-service brokerage because we're one company and we have offices in the markets where their assets are in. Tremendous response.
You mentioned the various asset classes. Is there one that's particularly in demand right now?
Industrial's been the biggest leader. At one point in time, depending on what report you read, Greater Victoria actually had the lowest vacancy rate of all industrial markets in North America. And there's been a flood of it coming to market, the absorption has been very strong, and lease rates in some areas -- in the Langford area especially -- are north of $20 a foot now for industrial spaces. You could find stuff six or seven years ago probably in the $6 to $7 range so, for a percentage gain, it's grown tremendously.
Following that would be multi-family. As more and more people immigrate into this country, as more and more retirees want to downsize, the education over there with UVic growing and expanding, this is all putting a crunch on housing. So industrial would probably be your leader, followed by multi-family. Beds and sheds, they call it.
How is the supply looking, on the industrial side? Is there a lot of development happening? How has the market responded to all that demand?
Right now the absorption has been really, really good. What time will tell is, fast forward five to seven years from now, as more product becomes available, whether that absorption was so high because of pent-up demand or ongoing demand. Right now, indicators probably lead to ongoing demand.
So many zonings are so much more flexible in industrial now than they were 10 years ago, and then also the cost to produce the product is cheaper. The investor market has grown dramatically, but it's also the asset class that has the largest percentage of owner-occupiers, so it's still been a really, really strong-performing asset class and I don't anticipate it will pull off quite a bit. It will probably plateau at some point, but so far the absorption remains high, vacancy rates remain very, very low, so we can arrive at the conclusion that it's ongoing demand.
Let's say I'm looking for industrial space and I'm set on choosing between Metro Vancouver and Vancouver Island. What would the benefits be of choosing the Island?
If I look at lease rates, let's just say for industrial space in the Greater Vancouver area, they'd probably blend out at between $18 and $20, yet [as an investor] I'm probably paying $600 or $700 a foot for the product. I can go over to the Greater Victoria area, Langford being one of them, where I'm going to get lease rates in that $16 to $20 per foot area, but I'm probably paying around $375 a foot for the same product.
That's been one reason why demand has grown so much in secondary and tertiary markets like Kelowna, Kamloops, Victoria, Nanaimo. The lease rates that you get in a lot of Lower Mainland cities are on par -- in some cases better -- in some of these secondary markets, but you're paying a lot less per foot to acquire the asset, which will give you a greater cap rate when it's all said and done.
Can you give me the lay of the land a bit? In Vancouver, a lot of industrial is clustered in Mount Pleasant and the False Creek Flats. Where is industrial space concentrated in on the Island?
Esquimalt was primarily a big industrial area, but that's all be converted into condos. If you go out to the Harris Green district -- that was another very heavily industrial area -- that is also being converted into condos now. So you're definitely seeing it sprawl a lot more than what it's like here and there aren't industrial hubs as big as we'd find here.
Langford has probably been one of the areas that has seen the greatest amount of industrial growth, and that was probably driven a lot because of the land that was available there, but also -- from a positioning standpoint -- Langford's a great position if you service Victoria and Nanaimo. That's probably been the one area that's seen a tremendous amount of growth. At one point in time, I think there was approximately 600,000 and 800,000 sq. ft that were being built or proposed to be built.
Has there also been a lot of strata commercial space on the Island, either office or industrial?
I'll be completely honest with you, the strata market boom over there didn't really hit even close to how it hit over here. We are actually launching a project in Langford, it will be a strata office building, and it'll be the first full strata Class A office building built in the Greater Victoria area to date. There's been offices available in mixed-use developments, but no one has come out with this kind of offering, so we're very excited to launch that project, because it's a product that hasn't been made available.
Even when you look at the retail side of things, in the Downtown Victoria and Harris Green area, there wasn't a lot of strata retail ever built into that because developers never had the mindset that people would buy it. Over here, we buy stuff off of the floor plans.
Onto the Lower Mainland, is there anything happening in the secondary markets that your team has noticed? Anything you guys are monitoring or concerned about?
I would say everyone's quite concerned about interest rates. That definitely has impact. I think another thing we have to continue to remember is that we have record immigration numbers year over year. Just based on how many people want to be here, and how little product we can get to market to support them, whether it be commercial, residential, or strata, I think one of the things we have to be weary of is that prices are going to continue to go up. They are not going to get cheaper than what they are.
Like what we discussed with the Central Island, is there a particular asset class that's in demand right now in Kelowna and Kamloops?
Industrial is the leader in both Kamloops and Kelowna, and we've seen tremendous increases in the price-per-foot metrics, but demand is so high, vacancy rates are so low, so that continues to be the asset class, followed by multi-family. And again, because so many people are moving there and there are land constraints -- no different than everywhere else -- lease rates from the condo side of things continue to go up.
I know we had one of our staff members moving to the Kamloops area, we were helping to facilitate a one-bedroom for this individual, and we were finding one-bedroom condos between $2,000 and $2,200 a month in Kamloops, which was eye-opening. But again, that's just because demand is there and there's not enough supply.
I'm aware this year is also William Wright Commercial's 10th anniversary. How do you picture the company 10 years from now?Any plans to move into more secondary markets?
When we started this thing, we had the seven markets in BC that kind of hit our criteria to open in, and we've sort of accomplished that now. I think we want to continue to fill out that for the balance of 2023.
I don't really feel that, based on our criteria to operate, that there'd be any markets that would work well. Prince George has the population base, but there's not enough of a commercial aspect to a market like that to facilitate a pure commercial office. You see a lot more residential-commercial brokers that do that up there.
We're happy to be the big fish in a small pond. If you look at Kamloops, for example, one of our competitors closed their Kamloops office altogether, so we are the only commercial real estate office currently in Kamloops and we're proud of that.
Any plans to expand outside of BC?
We have been in some pretty serious negotiations with groups in Alberta. It's all going to come down to market timing. We had an excellent opportunity last year to acquire a brokerage in the Greater Edmonton area, but when all things were considered -- their market is obviously just a lot slower than ours -- we thought the timing just wasn't right, so that acquisition we did not move forward with. But we definitely have plans to enter the Alberta market and eventually the Ontario market as well. We're looking at a lot of things in both areas right now.
Responses have been edited for length and clarity.