If you want to find a gym or a bank in North Vancouver, you鈥檒l have no trouble finding one by walking down the street.
But a quirky independent dress shop, a print store or artisan bakery?
You鈥檒l likely have to look a little harder.
That鈥檚 because commercial assessments that keep rising even as residential values are falling mean many smaller local businesses are facing pressures to stay afloat on the North Shore.
The types of leases most businesses have to sign 鈥搑equiring them to pay any increase in property tax tied to those assessments 鈥揳re proving too much for some, causing independent shops to close and be replaced with financial institutions, chain stores and medical offices 鈥揳mong the few who can afford the rent.
鈥淓dgemont has five banks,鈥漵aid District of North 麻豆传媒映画Coun. Lisa Muri, who has voiced concern for the past several years about costs driving out local businesses. 鈥淚t鈥檚 three blocks long.鈥�
鈥淚n the past, [commercial areas] were such an eclectic mix,鈥漵he said.
But that colourful mix of mom-and-pop style of business is buckling under pressure.
Patrick Stafford-Smith, CEO of the North 麻豆传媒映画Chamber, shares those concerns.
鈥淚鈥檓 really concerned about losing businesses that have been valuable to the community,鈥漢e said. 鈥淭hey are pushed out because of factors out of their control. We are seeing businesses leave.鈥�
As a commercial real estate agent who specializes on the North Shore, Ross Forman has a front-row seat on many of those changes.
鈥淚 think retailers in general are struggling,鈥漢e said.
鈥淛ust before Christmas I think we had six retail vacancies come up in the Lower Lonsdale area. We usually have maybe one or two at a time.鈥�
Overall in North Vancouver, commercial assessments this year are up between two and seven per cent while light industrial properties are up between nine and 18 per cent.
But that鈥檚 on top of
And some increases in assessment have been far higher. Forman said one property owner of a two-storey industrial building on East Esplanade has seen his assessment jump 34 per cent this year. Another owner of buildings in the Pemberton and Welch light industrial area has seen her commercial assessment jump over 40 per cent.
With relatively few sales of commercial and industrial land, it only takes a couple of high-priced transactions to set the market ticking upwards.
One of the biggest transactions last year in North 麻豆传媒映画was the sale of the longstanding Windsor Plywood property at 309 Kennard Ave., along Cotton Road.
Four years ago, that property with a single-storey 1960s warehouse was assessed at $3.66 million. It sold in February for $12 million.
Another 15,000-square-foot property in the commercial and light industrial area near Pemberton sold for $6.55 million last year 鈥搊ver twice its assessed value just four years ago.
Forman points to another commercial property at 266 East First St. with just over 3,600 square feet that sold for $3.3 million at the end of 2018.
鈥淎 brewery bought it,鈥漵aid Forman. 鈥淭hat鈥檚 $911 a square foot. That is probably $200 a square foot higher than what it should have sold for.鈥�
鈥淲hen you get two or three sales like that in that price range, that鈥檚 where it starts to affect where the market sits.鈥�
In the world of residential real estate, when an assessment rises much faster than the average, it鈥檚 the property owner who ends up footing the bill for increased taxes.
But in commercial real estate, it鈥檚 different.
Not so long ago, 鈥渢here were lots of gross leases,鈥漵aid Forman 鈥� in which costs like property tax were included in the price.
But in the past decade especially, that鈥檚 changed to something called a 鈥� in which additional costs like property tax are paid by the tenant.
鈥淣inety-five per cent of the leases are all triple net leases,鈥漵aid Forman.
鈥淲hich means that if the property taxes go up, it just automatically falls on the tenant. The tenant has to pay the bill.鈥�
If assessed value suddenly skyrockets, that could see a small business forking out an extra $1,500 a month, just in tax increases.
鈥淚鈥檝e had merchants tell me the taxes are substantial for them,鈥� said City of North 麻豆传媒映画Coun. Don Bell, who has raised concerns about the issue.
鈥淭hey鈥檙e struggling. They鈥檙e competing with big box stores and the internet. This is the straw that is breaking the camel鈥檚 back.鈥�
Exacerbating the problem is the way properties are valued by BC Assessment on their 鈥渉ighest and best use.鈥�
Under that system, properties aren鈥檛 assessed on their current use but on the potential value of what the property would be worth if it was redeveloped to the maximum density allowed.
That鈥檚 how aging one- and two-storey retail buildings get assessed as though a mixed-use highrise is already standing on the site.
Buildings in Lower Lonsdale, lower Capilano and lower Mountain Highway are among those recently impacted.
That鈥檚 also what happened at Westview Shopping Centre last year, said Forman, when the property assessment jumped 43 per cent in value 鈥� from about $40 million to roughly $57.5 million.
鈥淭he assessment authority went in and said, 鈥榊ou know what? It鈥檚 time that this is a redevelopment property. We鈥檙e going to base it on highest and best use that says you can put towers on it,鈥欌�漵aid Forman. But in the meantime, 鈥淲e have leases that go till 2032. So they鈥檙e paying higher taxes for the next 12 years.鈥�
Alarmed by the number of local businesses who can no longer make it in an environment of skyrocketing assessments,
In the last week, the province has indicated it鈥檚 working on a fix, although the details of that are still scant and it鈥檚 possible it may create as many problems as it solves.
According to the Ministry of Municipal Affairs and Housing, legislation will be introduced this spring that would give municipalities the ability to provide a tax break to small businesses they identify as paying high property taxes.
The interim legislation would allow municipalities to exempt a portion of the value of some commercial properties from taxation, according to the ministry.
But exactly how that would work is raising another set of questions.
鈥淭he devil is really in the details,鈥漵aid City of North 麻豆传媒映画Mayor Linda Buchanan when city council discussed the issue Monday night. 鈥淭here鈥檚 a lot of unanswered questions. Some people think it鈥檚 easy to do tax policy. It鈥檚 not.鈥�
Making municipalities choose which properties qualify for a tax break and which don鈥檛 could easily lead to friction as businesses lobby town hall for exemptions, said Stafford-Smith.
鈥淚 think it鈥檚 going to be a nightmare,鈥漵aid Derek Holloway, a recently retired BC Assessment assessor. 鈥淚 think what will happen is it鈥檒l put the municipalities in the position of playing favourites 鈥� the pie shop versus the car dealership.鈥�
It also isn鈥檛 clear yet whether the tax break would apply just to rented properties or also to those which are owner occupied.
鈥淭o fix it, it may create even more problems,鈥� he said.
Chief among those is that municipalities still need to collect the same amount of tax revenue, regardless of who鈥檚 paying.
And if some businesses are paying less, inevitably someone else is paying more. 鈥淪omebody pays eventually,鈥� said Holloway.
Pete Turcotte, owner of Big Pete鈥檚 Collectibles, has experienced first hand the stresses that rising assessments and taxes can bring during his 29 years in business in Lower Lonsdale.
In his last location in the 100 block of Lonsdale, Turcotte had what he felt was a 鈥渧ery fair鈥� gross lease for his shop. 鈥淲e were paying $5,300 a month,鈥漵aid Turcotte. But when it was time to renew, his landlord wanted to increase that to more than $8,000 a month, he said. His counter-offer 鈥� of more than $7,000 鈥� was rejected.
Turcotte had no choice but to move to a smaller nearby location at 121 East First St.
He considers himself lucky to have found a landlord who wanted a stable tenant.
This time, though, the lease is triple net.
Turcotte said he questions whether anyone should be asked to pay the taxes for their landlord.
鈥淭here just comes a point when landlords shouldn鈥檛 expect tenants to cover everything,鈥漢e said. 鈥淚f you鈥檙e going to own a building, maybe you should be on the hook for that increase in value yourself. It鈥檚 win-win for them and lose-lose for us.鈥�
But most businesses don鈥檛 have a choice. Whether it鈥檚 space in an old building with a rising assessment or space in a newer and more expensive building 鈥渢here isn鈥檛 a better option,鈥漵aid Turcotte. 鈥淚t just gets more expensive.鈥�
Meanwhile his old space on Lonsdale is still sitting empty 鈥� something that鈥檚 happening more frequently as local businesses are forced out.
Turcotte questions whether government could help with rules that ground floor properties must be retail 鈥� not occupied by services. He also wonders why there鈥檚 no provincial vacancy tax on commercial units 鈥� something he suggests might prompt landlords to set more reasonable rents.
Empty retail space left by vacating local business don鈥檛 help anyone, he said. 鈥淭here鈥檚 no businesses in it. There鈥檚 no employees in it. They鈥檙e not doing anyone any good.鈥�
