Abbotsford apartment buildings and rental developments have entered a heyday of high demand and low supply. Rising population, high income levels, a diverse employment market, low vacancy, and low rental housing supply contribute to a thriving multifamily investment and development market in Abbotsford.
Location, population, income levels, and housing prices have all lead to the lowest vacancy rate in decades. New rental supply is lagging far behind demand. As a result, thousands of rental units are needed. And, opportunities abound for apartment building owners, lenders, and developers.
Abbotsford is located 70km east of Vancouver in the heart of the Fraser Valley. The city is the largest municipality in the Fraser Valley Regional District and the fifth largest city in British Columbia.
The City of Abbotsford is part of the Central Fraser Valley Transit System. Express buses provide connections between Chilliwack and Langley. The West Coast Express train line provides services from downtown Mission to downtown Vancouver in just 1 hour and 15 minutes.
The Abbotsford International Airport is the second largest airport in the Lower Mainland after YVR, Vancouver International Airport. The airport is conveniently located near Highway 1 and is just 40km to Surrey’s Central City. Regular passenger flights are available with WestJet, Swoop, Flair Airlines and Island Express Air. The sole cargo airline is UPS Airlines.
Strategically located on Highway 1, Abbotsford is a hub for transportation and logistics companies. The highway provides quick access to Delta Port and Port of Metro Vancouver. In addition, Abbotsford is just 6km to the USA border. As a result, the city is a significant import-export location for cross-border trade.
As a result of its excellent geographical location and desirable Fraser Valley lifestyle, Abbotsford supports a strong middle class population and strong tenant demographic.
Above average population growth, a high proportion of renters, and a young tenant demographic make Abbotsford an exceptional market for rental apartment building development.
The Abbotsford population was 190,748 people in 2018. This number is projected to reach 204,254 by 2023, an annual growth rate of 1.38%. Annual population growth rate is nearly 20% higher than the provincial average, making Abbotsford one of the fastest growing markets in British Columbia.
Historically, Abbotsford population grew by 1.44% every year between 2013 and 2018. That growth rate is 26% higher than the provincial average during the same period. Abbotsford has proven that it can maintain consistent growth.
The number of household are increasing at a similar rate. As of 2018, there were 66,096 households in Abbotsford. This is expected to grow to 70,991 by 2023. This increase represents 4,895 new households which will be created in the next four year.
In Abbotsford, the proportion of renters is increasing. In 2018, 28.8% of households rented their primary dwelling. By 2023, that number will increase to 29.3%.
When combined with the projected population growth, this increase represents the need for an addition 1,731 new rental dwellings in the Abbotsford market by 2023. The current rate of purpose-built rental development is far behind this trend.
Further improving rental condition, Abbotsford has a young population. The median age is just 38.8 years old, lower than the provincial average of 42.2. A younger population tends to rent for longer as young people strive for financial independence.
As a result of a growing population, young demographics, and the rising proportion of renters, Abbotsford apartment buildings are a safe and profitable investment.
Abbotsford Income & Employment
Abbotsford boasts fast-growing incomes and a diverse job market. As a result, Abbotsford landlords have a wide selection of financially qualified tenants to keep their buildings full.
Average household income rose to $96,058 in 2018, up 16.5% from 2013. More than 30% of Abbotsford households earn between $40,000 and 80,000 per year. And, nearly 32% Abbotsford households earn more than $100,000 per year.
In order to attract the most suitable tenants, Abbotsford apartment building developers should perform careful research during project feasibility phase. Income demographics in particular locations can have a significant impact on project viability. Neighbourhood demographics within 500-800 metres of the site should be given serious consideration.
Abbotsford has a diverse and strong job market. Unemployment was just 4.5% for 2018, lower than the provincial average. In addition, an abundance of economic sectors are represented in the job market. Retail, construction, health care, manufacturing, and transportation/warehousing are the top five employment sectors, collectively making up almost 50% of local jobs.
Due to its position as a transportation and logistics hub, Abbotsford has one of the strongest industrial sectors in the province. Industrial space, warehousing and manufacturing are much more balanced than the tight, high-priced property in Metro Vancouver.
Income growth, an abundance of jobs, and a strong middle-class give Abbotsford apartment buildings stable and consistent financial performance.
Abbotsford Vacancy Rate
Abbotsford apartment buildings vacancy rates are extremely low. In 2017, the Abbotsford vacancy rate sank to 0.2%, the lowest in British Columbia.
During the Great Recession of 2008-2010, Abbotsford vacancy rates climbed dramatically. Vacancy rose from 2.4% in 2007 to a 20-year high of 6.7% in 2010. Just as quickly, vacancy returned to the 10-year average of 3% by 2013. That downward trend continued, reaching a record low of 0.2% in 2017.
According to CMHC, the Abbotsford vacancy rate was just 0.9% in 2018. As a result, new rental buildings quickly get leased up and available units are at a minimum.
Looking ahead, vacancy rates will remain below the 10-year average for the foreseeable future. The strong job market and population growth projections require thousands of new rental homes be built. The current pace of rental housing development is lagging far behind demand.
A vacancy rate of less than 2.0% is expected through 2020 and, unless rental housing starts rapidly accelerate, low vacancy will continue through to 2022.
Abbotsford Housing Prices
Condominium prices in Abbotsford have more than doubled since 2016. As prices skyrocketed, the number of unit sales followed suit. Sales peaked at nearly 1,200 units each month from October 2017 to April 2018. In 2019, the pace of sales has moderated to an average of 775 units per month reflecting a general cooling in the residential housing market.
Two effects of the rapid housing price increases have been lower rates of housing affordability and increased condo instead of rental development.
As housing prices rose, the average earner can afford to purchase an ever smaller home. This leads younger people to rent instead of buy.
At the same time, as prices rose the development market favours condominium units, not rental. Rental housing has been left behind. Several years of latent demand have been built up.
Today, as housing prices moderate and stabilize, rental housing development will again become a more attractive option. Young people will continue to rent instead of own. As a result, an increase of capital will move into rental development.
Abbotsford Rental Housing Supply
A clear indication of the lack of rental development in Abbotsford can be found here. During the past few years the total number of rental units in Abbotsford was flat. All the while, housing prices doubled and population growth accelerated. This has led vacancy rates to plummet and rental rates to shoot up.
In addition, nearly 36% of Abbotsford rental housing was built prior to 1979. Many of these buildings require substantial capital improvements and/or redevelopment.
Approximately 1,200 rental units will be in need of upgrade or replacement by 2030. An additional 1,486 units were built during the infamous “rainscreen” era of 1990-1995. A significant portion of these buildings have water ingress issues and subsequent capital costs.
The number of rental units in Abbotsford is flat. Thousands of units are in need of capital investment and/or redevelopment. So, where’s the new supply?
Abbotsford Rental Housing Starts & Completions
Rental housing construction in Abbotsford is playing a game of catch up. Through the entire decade of 2000-2010, just 445 rental units were built. Compare that to 436 units just in 2018!
The pace of rental housing has accelerated in recent years. Large rental housing developments were completed in 2014, 2017 and 2018. Total rental housing completions since 2010 has reached 1,284 units.
However, this pace of construction remains far less than market demand. New households alone could gobble up nearly 1,800 units by 2023. Add another 400 units nearing the end of their life and at least 200 units in need of significant capital improvements, and the City of Abbotsford needs as many as 2,400 rental units in the next 5 years.
As residential condo market softens, developers should consider rental options for existing and future projects. Any drop in land prices will contribute to feasibility of multifamily rental development as highest-and-best use.
Abbotsford Apartment Buildings Cap Rates
Abbotsford apartment building cap rates average 4.55% over the past three years.
Average price per unit for Abbotsford apartment buildings is $122,578 for older, re-sale buildings.
A Gross Rent Multiplier of 13.5 is average for Abbotsford buildings.
Abbotsford cap rates depend heavily on location, suite mix, rental rates, building age, and capital improvements.
If you’d like an opinion about Abbotsford apartment buildings or your purpose-built rental project please call (778) 235-9293.
Abbotsford Apartment Buildings Market Highlights
- Strategic location with (relative) abundance of industrial space and easy access to ports/US border.
- Population growth has proven consistent and will continue for the foreseeable future.
- Incomes are rising rapidly. There’s a strong working middle class in Abbotsford.
- Unemployment is low. Job market is diverse and (mostly) blue-collar.
- Vacancy rate have plummeted and will stay below 2% until at least 2022.
- Rental housing supply is flat, creating high demand for more units.
- Condo prices doubled in three years, meaning more people choose to rent instead of own.
- Up to 2,400 rental units are needed in Abbotsford in the next 5 years.
- Average Abbotsford cap rate is 4.55%. This number can be lower for new apartment buildings.