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Abbotsford Abbotsford

www.reincanada.com $9.99

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Released: November 2014

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Favourable housing prices along with an appealing rural lifestyle have led Abbotsford to experience rapid population growth in the last decade, with no signs of stop-ping any time soon. The city has witnessed an increase in local jobs, with fewer people having to commute out of the city for work. Additionally, the city has seen a rise in commercial, retail, and industrial development. The major expansion of commercial and industrial lands along the Mt. Lehman Corridor, including a new high tech park and mega shopping mall (and US retail giants Wal-Mart and Marshalls) will cement in the minds of prospective businesses that Abbotsford is the goods and services hub of the Fraser Valley. The City of Abbotsford straddles the Trans-Canada Highway, functioning as a gateway community between the rest of the Fraser Valley and Metro Vancouver, with its southern border being Washington State. This means that Abbotsford’s businesses benefit from a constant flow of traffic from the United States as well as from the Metro Vancouver region. The city’s location provides a great spot to situate and grow businesses designed to service the whole province. Abbotsford is no longer just a stretch stop on the way to Vancouver from the interior of the province. Surrounded by fertile agricultural land, Abbotsford is home to some of the most productive farms in the country. The city is the largest farm gate in BC, producing over $453 million each year in revenue

1. In fact, Abbotsford’s

agriculture sector generates $20,400 in total revenues per hectare – the highest in all of Canada. The agriculture industry generates about 35% of the city’s GDP and provides more than 11,300 jobs for Abbotsford residents

2.

Thus, it comes as little surprise that many businesses including government agricultural agencies have chosen to locate their regional headquarters within the city - bringing scientists and other professionals to the area seeking homes close to their places of employment. While farming will continue to play a significant role in Abbotsford’s economy, the city has diversified its economic base in recent years to include industrial

manufacturing, aerospace, and healthcare. As a manufacturing base, Abbotsford is home to Cascade Aerospace. Next to Abbotsford International Airport, Cascade operates a 250,000-square-foot MRO facility where it maintains, repairs and overhauls aircraft from all over world employing over 500 in people. Abbotsford is home to the University of the Fraser Valley which hosts approximately 13,000 students. It has drawn approximately 900 international students from 40 different countries, giving it international recognition

3. The rapid

expansion of the university has left it popping up satellite classrooms around the city, the most recent one being in the Abbotsford Library. The university supplies Abbotsford with a large pool of student renters and contributes to the cultural diversity of the city. Post-secondary institutions also act as economic stabilizers for communities as in both good and bad economic times people continue to strive for higher education. The university’s enrollment continues to grow annually. Due to the projected numbers of students over the next 15 years, UFV will need to take massive strides to expand its capacity.

The biggest development the City of Abbotsford has ever seen was completed at the end of 2013. As the largest retail development in B.C. in the past 30 years, High Street Mall is a 600,000 square foot shopping centre. Located just off Highway 1 at the Mt. Lehman interchange, High Street features approximately 60 retail outlets

4. While the

majority of construction has been completed, the complex still has empty buildings available for new tenants. Once fully occupied, High Street is expected to provide Abbotsford residents with 1,000 new job opportunities

5.

Abbotsford’s close proximity to key transportation infrastructure including the Trans-Canada Highway, U.S. border crossings, and the Abbotsford International Airport, make the city a prime location for industrial businesses. We will see new industrial developments spring up in the city’s newer industrial areas: Mt. Lehman Industrial Area, Peardonville Industrial Area, and Clearbrook Industrial Area 2, south of King and Marshall Roads. The city is also looking to remove approximately 224 acres from the

Economy

Outlook

Source: Purple Puppy

©The Real Estate Investment Network Ltd. 4

Agricultural Land Reserve (ALR) around Bradner Road in West Abbotsford, in order to build the West Abbotsford Business Park. If approved, the project could create as many as 5,000 permanent full-time jobs and provide Abbotsford with an additional $11 million in property taxes each year

6. The Park would back onto Langley’s

Gloucester Industrial Estates, creating a massive industrial region sure to attract major businesses. The Agricultural Land Commission has the final say on whether properties are removed from the ALR. As of September 2014, no decision had been made. Keep an eye on this project as it has the potential to significantly impact the landscape and the economy of Abbotsford. The proposed development of the U District (around the university), 165 acres of mixed use residential, commercial, and institutional property, has a 30 year outlook and seeks to develop and improve the area. The developed space will lead to more jobs being offered, leaving a large opportunity for positive cash flowing properties within the district.

Population Growth According to the 2011 Federal Census, the population of Abbotsford was 133,497, a 7.4% increase from 124,258 in 2006

7. Given the rate of population increases over the past

decade, Abbotsford projects an estimated population of 150,000 by 2016, and it will break the 200,000 mark by 2036

8. Employment opportunities in Abbotsford have and

will continue to draw people to the area, people who need a place to live. In turn, housing values and rents will continue to climb. Median Age The median age of Abbotsford residents is 37.9 years, lower than the median age of the province at 41.9. Abbotsford’s stable population distribution can largely be attributed to the city’s high birth rate. Due to the affordability of housing, relative to Metro Vancouver, and its close proximity within the Lower Mainland, young families will seek Abbotsford as an affordable option for housing. A young population means that more services like education, child-care, and facilities will be geared towards younger families. This is important because it will draw more to the city. This will lead to an increase in the real estate market, especially with rentals, as many won’t be able to purchase homes yet. It is important to keep in the mind the importance of 2+ bedroom rentals as younger families will be looking for space.

Rental Market According to CMHC, vacancy rates in Abbotsford are 3.7%, which are 1.0% lower than 2013. In addition to this, the availability rate decreased by 0.6% to 4.6% for private

apartments9. The adjacent table outlines the average

rental rate by the housing type and number of bedrooms. As with other cities, different neighbourhoods command different selling prices. It’s important to note that nearly 25% of residential dwellings in Abbotsford were built between 1971 and 1980 and of those approximately 26% need repairs. This will be important when you source potential properties as you will need to do your diligence with regards to repairs

10. This also opens the potential to

create value through updated renovations.

Abbotsford provides investors with plenty of student rental opportunities. The University currently only provides students with one on-campus student housing option – the 4-storey Baker House building. Students can expect to pay roughly $671 per month for a dorm room and limited meal plan. Because of this, the majority of out-of-town students rely on rental units near the university to meet their housing needs. With enrollment expected to increase to 27,000 by 2041, the need for student housing will rise dramatically. The area around Abbotsford’s new hospital is booming with multi-families and also caters to many seniors who access the medical businesses in the area. The downtown area has a mix of tenants and it is important to do adequate screening. Like many cities, a tougher to manage tenant profile can exist in the downtown core. Sales Activity Abbotsford continues to provide an affordable housing option for those commuting to other municipalities in the Lower Mainland. Its central location within the Fraser Valley, quick access to Washington, and accessibility to

Demographics

Housing

Average Rents in Abbotsford

# of Bedrooms

Lowest Price

Highest Price

Average Price

House

2 N/A N/A N/A

3 $1,000 $2,300 $1,518

4 $1,400 $2,750 $1,815

Basement Suite

1 $650 $850 $758

2 $800 $1,200 $961

Townhouse

2 $1,450 $1,450 $1,450

3 $1,150 $1,750 $1,535

Condo/Apartment

1 $725 $1,000 $875

2 $750 $1,400 $958

Source: www.kijiji.com, www.craigslist.com (Nov. 2014).

©The Real Estate Investment Network Ltd. 5

opportunities in Vancouver keep younger families looking for a place to call home. The average cost for a single-family detached home, as of August 2014, was $459,511, an increase of 4.9% from 2013’s average of $438,112. The largest increase has been seen in apartments, a 13.7% increase from $139,083 in August of 2013 to $158,135 in August of 2014

11.

Residential Development Residential building activity in Abbotsford has trended up in recent years. In 2013, the city witnessed 627 homes begin construction, with 121 single-family homes started and 506 multi-family units started

12. As of July 2014, the city has

already witnessed 241 houses begin construction13

. New residential projects in Abbotsford include the Hudson’s Loft condominium project in the 9.6 acre Central Park Village development off of Gladwin Road. Hudson’s Loft offers small units (382 sq ft – 867 sq ft) and targets students and first time homebuyers. By offering traditionally higher priced amenities such as a location in the center of the city, green space, restaurants, and other retail, it sacrifices square footage in order to remain competitively priced.

Vicarro Ranch is a proposed 1,400-unit residential community that would sit on a 160 hectare site near Whatcom Road and Cassiar Road. The $560 million project will proceed in phases and include a combination of 264 single family homes, 38 duplexes, 229 townhomes and 348 condominium units over 5 sub-areas. Nearly 60% of the existing land will remain in its natural state or be used as green space. However, our research indicates that many renters into the 25 to 34 year age range (Millennials) are more than willing to give up square footage for premium locations. Residential housing starts are a reaction to demand in the past. What is important is to see if supply is keeping up with demand or if it is out of balance. A glut of inventory can diminish values and rents, giving renters and buyers ‘too much’ to choose from an investor’s point of view. Currently, it seems as though demand is in line with supply, and while the future remains to be seen, Abbotsford’s economy will encourage housing demand in the mid-term future.

Infrastructure As the city’s population continues to grow, Abbotsford’s leadership must ensure that the city’s infrastructure keeps up with resident demands. Infrastructure is important to meet the needs of the residents. People will leave a city that doesn’t have the capacity to educate its children, mend its ill-stricken, or arrest its bad guys. Hospitals, schools, emergency services, as well as water, sewer, and roads are of paramount importance. Here is what Ab-botsford has on its books as prioritized projects

14:

Abbotsford Collegiate Secondary School Renovation and expansion to meet its growing population’s needs – (Spring 2013)

Abbotsford 100-unit Supportive Housing - $20 million (end of 2014)

Abbotsford International Airport expansion to include a 14,000 square foot passenger terminal and runway upgrades - $100 million (ongoing to 2020)

Highway 11 widening & Vye Road Overpass to improve traffic flow at a busy vehicle/train interchange – $25 million (proposed)

Transportation The City of Abbotsford recently completed major upgrades to the interchanges at Clearbrook Road and Highway 1 and McCallum Road and Highway 1. The upgrades included more lanes over Highway 1, changes to the traffic pattern so peak traffic volume does not back up onto the highway, and improved off ramps. Both interchanges were completed in the spring of 2011. The project also included the construction of a third westbound lane from Sumas Way to just after McCallum Road. This will reduce conflicts with traffic merging onto the Highway from Sumas Way and provide a truck climbing lane. Superior transportation infrastructure lures employers to locate businesses and head offices in these areas because they can move their goods (and their people) in and out easily. The completion of the new Port Mann Bridge and the addition of more lanes east of the bridge have already had a major impact on the current and future residents of Abbotsford. People will be more willing to move east of the bridge as commutes ease to the west. Distance is measured in minutes (versus kilometres) so although the actual distance will remain the same, the widening of Highway 1 as far east as exit 216 in Langley and the 10-lane span means that residents do not spend as much time getting where they need to go, making it more enticing to move east while still working in the west. The completion of the South Fraser Perimeter Road (SFPR) means that commuting westbound just became much quicker. Access by people and the shipment of goods to and from the Vancouver International Airport is quick and easy and no longer means intricate journeys along surface streets.

Infrastructure

City of Abbotsford Sales Activity

Aug 2014 Aug 2013

Inventory 441 552

# of Sales 669 630

New Listings 126 141

Average Sale Price $459,511 $438,112

Median Sale Price $425,900 $422,500

Average DOM N/A N/A

Source: Fraser Valley Real Estate Board. (September 2014).

©The Real Estate Investment Network Ltd. 6

The presence of the Abbotsford International Airport is a boon for people and businesses. Creating jobs, attracting businesses and impacting the decision of where residents locate, the presence of this airport has been a game changer for the city. More can be done to increase its impact and attract even more jobs to the area. Presently, a hotel is being erected at the Mt. Lehman/Hwy 1 on-ramp to service the flyers. Public Transit Like Chilliwack, Abbotsford is quite restricted when it comes to transit. Abbotsford is currently serviced by Central Fraser Valley (CFV) Transit which provides service within Abbotsford and to Mission. There is also a shuttle that runs from the UFV Chilliwack to Abbotsford campuses to service those who do not want to make the daily drive to the university. There is a current initiative underway with BC Transit to expand public transit to include Rapid Transit, Frequent Transit, Local Transit, Targeted Transit, Inter-regional, and Regional Transit. In order for the city to attract investors and younger families it must develop a comprehensive transit plan to suit their needs. Rental Rules According to the BC Residential Tenancy’s website, the maximum allowable rental increase for 2014 is 2.2%. This is set to increase to 2.5 in 2015

15. Abbotsford permits

secondary suites if they meet certain requirements16

. One such requirement is zoning (zones RR1, RR2, RR3, RR4, RS1, RS2, RS3, A1, A2, A3, A5 and N11 may permit secondary suites). Development Planning and Building Permits & Licenses staff has been reviewing and updates the information presented on their website. The updated secondary suite guide is set to be published in late 2014

17.

Business Incentives The City of Abbotsford undergoing a total rewrite of its Zoning Bylaw with completion anticipated at the end of 2014. An update of the Official Community Plan is scheduled for December 2015. Stay tuned for the

outcome of these policies and legislation as surely, the will impact investors. Abbotsford currently offers two active tax exemption programs to entice new businesses. The Abbotsford International Airport Revitalization Tax Exemption Bylaw supports those looking to economically expand the area around the airport

18. The Consolidated Abbotsford

Downtown Revitalization Tax Exemption Bylaw supports those looking to improve the downtown core with new or renovated construction. One important requirement within this tax exemption is that the property that is undergoing improvement must be at least 50% commercial space

19.

Abbotsford has the fourth lowest mill rate in the city in Metro Vancouver with a commercial to residential tax ration of 2.45

20. Its commercial mill rate was 12.69 and its

residential rate was 5.15 in 2014. The residential rate impact investors directly in the pocket book in the form of property taxes – the higher the rate, the lower the cash-flow. Commercial rates impact businesses and their deci-sion to set up shop in particular communities, affecting subsequent employment opportunities for residents. Mu-nicipal development fees are relatively high compared to surrounding areas (3

rd highest out of 20 cities).

Economic Development Investors seeking opportunity in Abbotsford should check their website for present and future development plans. They have useful information regarding bylaws, zoning, and tax incentives. One thing they lack, however, is up-to-date information, as seen by their 2006 immigration stats. The City of Abbotsford has recently been known by inves-tors and business owners as a tough place in which to do business. It is important for investors to realize that if the politics, civic policies or city employees are difficult to work with, this is likely true for other businesses who determine that it is not worthwhile to set up shop here, thereby stifling economic growth and expansion. It is well known that some businesses have decided to locate elsewhere due to crippling zoning by-laws and unyielding planning policies.

Political Climate

Source: Aaron Bastin

©The Real Estate Investment Network Ltd. 7

Economic Risk 10/12

Yield Growth Potential 7/12

Local Politics Conducive to Business 4/8

Access to Transportation 6/8

Investors’ Insights 8/10

Total 35/50

Investment Rating Abbotsford is an interesting place for real estate investors. Purchase price points are much lower than anywhere west and rents are higher than anywhere east…it is just difficult to find a happy balance in order to cash flow. Abbotsford’s location, infrastructure and its international airport have it poised for investment excellence in the future. The new Port Mann Bridge, the creation of the SFPR, and the extra lanes on Highway 1 have had a very positive impact on Abbotsford, and it’s an impact that will continue to grow as

housing prices continue to increase in Metro Vancouver. When residents of the west decide it is time to buy and see how quickly they can commute, watch this market take-off. (Now if only secondary suites become legal…). Due to its size and location, property management is not a problem and finding trades for repairs and maintenance is relatively easy. This City is not at the effect of extreme market fluctuations and investors see steady, albeit BC rent controlled, increases. For the long term real estate investors, particularly those interested in self-managing, Abbotsford is a good bet.

Sources

1. City of Abbotsford. (2010). Community Profile. http://viewer.zmags.com/publication/851986af#/851986af/5 2. City of Abbotsford. (November 2010). Abbotsford in Action. http://www.abbotsford.ca/AssetFactory.aspx?did=14622 3. http://www.ufv.ca/future-students/faq/faq-other-questions/how-many-international-students-does-ufv-have.htm Retrieved on September 24, 2014 4. Abbotsford News. (January 20, 2011). “Cineplex Joins High Street Mall”. http://www.bclocalnews.com/fraser_valley/abbynews/

news/114311189.html 5. City of Abbotsford. (June 2011). eConnections. http://www.econnectionsabbotsford.ca/?page_id=242 6. Mills, K. (10 June, 2013). City supports Bradner industrial project. Abbotsford News. Retrieved from http://www.abbynews.com/

news/210957121.html 7. http://www12.statcan.gc.ca/census-recensement/2011/dp-pd/prof/details/page.cfm?

Lang=E&Geo1=CSD&Code1=5909052&Geo2=PR&Code2=59&Data=Count&SearchText=british%20columbia&SearchType=Begins&SearchPR=01&B1=All&Custom=&TABID=1

8. http://www.abbotsford.ca/economic_development_and_planning_services/planning_services/demographics_statistics.htm Retrieved on Septem-ber 23, 2014

9. http://www.cmhc-schl.gc.ca/odpub/esub/64487/64487_2014_B01.pdf?fr=1373409200163 Retrieved September 22, 2014. 10. http://www.abbotsford.ca/Assets/Abbotsford/Dev+Services+-+Planning+and+Environment/Data+and+Statistics/Demographic+Profile+-

+Abbotsford+Summary.pdf Retrieved on September 25, 2014 11. http://www.fvreb.bc.ca/statistics/Package%20201408.pdf Retrieved on September 23, 2014 12. CMHC. (January 2014). Housing Now – Vancouver and Abbotsford CMAs. Retrieved from CMHC online https://www03.cmhc-schl.gc.ca/catalog/

productDetail.cfm?lang=en&cat=70&itm=63&fr=1411753795791 13. CMHC. (August 2014). Housing Now – Vancouver and Abbotsford CMAs. Retrieved from CMHC online https://www03.cmhc-schl.gc.ca/catalog/

productDetail.cfm?lang=en&cat=70&itm=63&fr=1411753795791 14. Government of British Columbia. (March 2014). BC Major Projects inventory. Retrieved from http://www.jtst.gov.bc.ca/ministry/

major_projects_inventory/index.htm 15. http://www2.gov.bc.ca/gov/topic.page?id=539D67CD1FE548B58B3732CFC299C406&title=Residential%20Rent%20Increases Retrieved on

September 22, 2014 16. http://www.abbotsford.ca/Assets/Abbotsford/Dev+Services+-+Planning+and+Environment/Development+Brochures/

Secondary+Suites+FAQ+Brochure.pdf Retried on September 22, 2014 17. http://www.abbotsford.ca/Assets/Abbotsford/Dev+Services+-+Planning+and+Environment/Data+and+Statistics/Quarterly+Report+2014+Q2.pdf

Retrieved on September 22, 2014 18. https://abbotsford.civicweb.net/Documents/DocumentList.aspx?ID=28191 Retrieved September 22, 2014

19. https://abbotsford.civicweb.net/Documents/DocumentList.aspx?ID=28179 Retrieved September 22, 2014 20. NAIOP. (Fall 2014) 15th Annual Regional Office Development Cost Survey. https://www.naiopvcr.com/media/18435/NAIOP_COBS_2014.pdf

©The Real Estate Investment Network Ltd. 8

Notes