A Practical Guide for Tenants, Landlords, and Investors

Commercial real estate leasing in British Columbia operates under a commission structure that is often misunderstood — particularly by tenants entering the market for the first time.

Unlike residential transactions, where commissions are more standardized, commercial lease commissions vary based on:

• Deal structure

• Lease term

• Rent profile

• Brokerage agreements

Understanding how commissions are structured helps all parties navigate leasing transactions with clarity and confidence.

1. Who Pays the Commission?

In most commercial lease transactions in BC:

👉 The landlord pays the commission

This commission is:

• Paid to the listing brokerage

• Then shared with the cooperating brokerage (if applicable)

Tenants typically:

• Do not pay commissions directly

• Benefit from broker representation at no out-of-pocket cost

2. How Commissions Are Calculated

Commercial leasing commissions are generally based on:

👉 Total lease value over the term

This includes:

• Base rent

• Sometimes additional rent (depending on the agreement)

Typical Structure (Simplified Example)

A common structure may look like:

• Year 1–5: ~4%–6% of gross rent

• Years 6–10: Lower percentage (e.g., 2%–3%)

👉 The longer the lease term, the larger the total commission — but at declining rates

3. What Is “Gross Lease Value”?

Gross lease value refers to:

👉 Total rent payable over the lease term

Example:

• 2,000 sq. ft.

• $20/sq.ft. base rent

• 5-year lease

Annual rent = $40,000
Total lease value = $200,000

Commission is calculated on this amount.

4. How Commissions Are Split Between Brokers

When two brokerages are involved:

• Listing agent (landlord rep)

• Cooperating agent (tenant rep)

👉 The commission is typically split:

• 50/50 or 60/40 (common, but not fixed)

This split is agreed upon in advance and disclosed.

5. What Happens in Renewal or Extension?

If a tenant renews:

• The original agreement may include a renewal commission clause

• Generally, no commissions are paid upon renewal or in some cases, a smaller commission may be payable on the extended term

👉 This depends on the original listing agreement

6. What About Off-Market or Direct Deals?

In off-market scenarios:

• Commission terms are negotiated directly

• May involve:

  • Lower total commission

  • Referral fees

  • Exclusive representation agreements

👉 These deals are more flexible but require clarity upfront

7. Why This Matters for Tenants

Even though tenants don’t pay commissions directly:

👉 Commissions are effectively built into the economics of the lease

Understanding this helps tenants:

• Negotiate more effectively

• Understand broker incentives

• Structure stronger offers

8. Why This Matters for Landlords

For landlords:

• Commission is a transaction cost

• Influences:

  • Net effective rent

  • Deal structure

  • Lease term preferences

Landlords often:

• Prefer longer lease terms

• Structure deals to justify commission outlay

9. Transparency and Disclosure

In British Columbia, licensed real estate professionals are required to:

• Disclose how they are compensated

• Provide clarity on representation

• Act in accordance with regulatory standards

👉 This ensures transparency for all parties involved

Licensed real estate professionals in British Columbia are regulated by the BC Financial Services Authority

✅ 1. BC Financial Services Authority (BCFSA)

👉 https://www.bcfsa.ca

Commission structures and disclosure obligations are governed by professional standards set by the Real Estate Council of BC

✅ 2. Real Estate Council of BC (Professional Standards)

👉 https://www.bcfsa.ca/industry-resources/real-estate

Industry practices are also shaped by broader guidelines from organizations such as the British Columbia Real Estate Association

✅ 3. BCREA

👉 https://www.bcrea.bc.ca

Conclusion

Commercial lease commissions in British Columbia are flexible, deal-driven, and based on the total value of the lease over time.

While landlords typically pay the commission, it remains an important factor influencing:

• Deal structure

• Lease terms

• Negotiation dynamics

For tenants, landlords, and investors alike, understanding how commissions work leads to more informed decisions and smoother transactions.

Helpful Resources

👉 BC Financial Services Authority (BCFSA)

👉Real Estate Council of British Columbia – Professional Standards

👉British Columbia Real Estate Association (BCREA)

Frequently Asked Questions

Do tenants pay commission in commercial leases in BC?
No, in most cases the landlord pays the commission, which is shared between the listing and cooperating brokerages.

Is commission included in the rent?
Indirectly, yes. While tenants do not pay commissions upfront, it is typically factored into the overall lease economics.

Are commercial real estate commissions fixed in BC?
No, commissions are fully negotiable and vary based on lease term, deal structure, and market conditions.

How are commissions paid on long-term leases?
They are typically calculated on the total lease value, with higher percentages in earlier years and lower percentages on extended terms.

Do brokers get paid on lease renewals?
Sometimes. Renewal commissions depend on the original listing agreement and whether a renewal clause is included.

Can commission be negotiated in off-market deals?
Yes. Off-market transactions often involve more flexible and customized commission arrangements.

Why do landlords prefer longer lease terms?
Longer leases justify higher total commissions and provide more predictable income, making the asset more valuable and financeable.

Strong Demand, But Limited Landlord Acceptance

Despite strong demand from vape and smoke shop operators in Nanaimo, securing suitable commercial space has become increasingly difficult.

In many cases, tenants are:

• Offering above-market rents

• Ready to sign quickly

• Seeking long-term leases

Yet, landlords remain hesitant — and often decline these tenants altogether.

This disconnect highlights a broader reality in the commercial leasing market:

Not all demand is equal from a landlord’s perspective.

1. Tenant Demand Is Real — and Growing

Vape and smoke shop operators are actively seeking space across:

• Corridor commercial locations

• Downtown retail units

• High-visibility storefronts

From a purely financial standpoint:

• Many are well-capitalized

• Willing to pay premium rents

• Looking for immediate occupancy

👉 On paper, they appear to be ideal tenants.

2. Landlord Concerns Go Beyond Rent

However, landlords are not evaluating tenants based on rent alone.

Key concerns include:

Reputation & Tenant Mix

Many landlords are focused on maintaining:

• A family-friendly image

• A curated tenant mix

• Compatibility with neighbouring businesses

Vape and smoke-related uses are sometimes viewed as:

• Misaligned with the property’s positioning

• Undesirable for adjacent tenants (e.g., medical, professional, or family-oriented uses)

Regulatory Uncertainty

Municipal regulations around vape and smoke shops continue to evolve.

Landlords may be concerned about:

• Zoning restrictions

• Future regulatory tightening

• Licensing complexities

👉 This creates perceived long-term risk

Financing & Insurance Considerations

Some lenders and insurers may:

• View these uses as higher risk

• Impose additional conditions

This can influence landlord decision-making, especially for:

• Leveraged properties

• Institutional ownership

Resale & Exit Strategy

Landlords also think about:

• Future buyers

• Marketability of the asset

A lease to a vape or smoke operator may:

• Narrow the future buyer pool

• Impact perceived property value

3. Limited Supply Amplifies the Challenge

Nanaimo already faces:

• Limited retail inventory

• Strong demand from multiple tenant categories

This means landlords often have multiple tenant options, including:

• Service-based businesses

• Medical or professional users

• Food and beverage operators

👉 When given a choice, many landlords prioritize:
stability + compatibility over rent maximization

4. Zoning and Use Restrictions Play a Role

In certain zones:

• Vape and smoke-related uses may be restricted or conditional

• Additional approvals may be required

This introduces:

• Delays

• Uncertainty

• Additional work for landlords

👉 Many prefer to avoid this altogether.

5. What This Means for Operators

For vape and smoke shop tenants, this market dynamic means:

Longer Search Timelines

Securing space may take significantly longer than other retail uses.

Need for Targeted Strategy

Success often depends on:

• Identifying landlord profiles more open to the use

• Focusing on specific zones or properties

• Working with brokers familiar with local dynamics

Flexibility Is Key

Operators may need to:

• Consider secondary locations

• Explore less competitive submarkets

• Be flexible on size and layout

Conclusion

The difficulty faced by vape and smoke shop operators in Nanaimo is not due to lack of demand — but rather a mismatch between tenant demand and landlord preferences.

While these tenants may offer strong financial terms, landlords continue to prioritize:

• Tenant mix

• Long-term asset value

• Regulatory clarity

• Compatibility with surrounding uses

Understanding these dynamics is essential for navigating the leasing market effectively.

Frequently Asked Questions

Why are vape and smoke shops struggling to find space in Nanaimo?
Landlords often prioritize tenant mix, building reputation, and long-term asset value over higher rental offers.

Are vape shops allowed in all commercial zones?
No, zoning restrictions and conditional use requirements may limit where these businesses can operate.

Do landlords reject vape tenants even if they offer higher rent?
Yes, many landlords consider factors beyond rent, including neighbouring tenants and property positioning.

What can vape operators do to improve their chances of leasing space?
Working with a broker, targeting suitable zones, and being flexible with location and layout can improve success.

Helpful Resources

Navigating zoning and licensing requirements is a critical step for vape and smoke shop operators. Reviewing municipal regulations and confirming permitted uses early in the process can help avoid delays and uncertainty.

• City of Nanaimo Business Licence Requirements

• City of Nanaimo Zoning Bylaw (No. 4500)

• Health Canada – Vaping Regulations

Avoid Costly Mistakes by Understanding the Approval Process

One of the most common misunderstandings in commercial leasing is the difference between a business licence and approval for a specific use of a property.

Many tenants assume that once they secure a lease, they can simply apply for a business licence and begin operations. In reality, municipalities like Nanaimo require that your intended use is permitted under zoning and approved from a planning perspective before a business licence is issued.

Failing to understand this distinction can lead to:

• Delays in opening

• Unexpected costs

• Lease commitments without approval

• In some cases, being unable to operate at all

This guide explains the difference and outlines how to approach the process correctly.

1. What Is a Business Licence?

A business licence is a municipal authorization that allows you to legally operate a business within the city.

It confirms:

• Your business is registered with the municipality

• You meet basic operational and safety requirements

• You are authorized to conduct business at a specific location

However, a business licence does not determine whether your use is allowed at that location.

👉 It is the final step, not the first.

2. What Is “Approval for Intended Use”?

Before applying for a business licence, the City must confirm that your intended use complies with zoning and building regulations.

This includes:

• Whether your business type is permitted in that zone

• Whether it is a permitted use or conditional use

• Whether the building meets requirements for that use

This process may involve:

• Planning department review

• Zoning confirmation

• Change of use or occupancy classification

• Building permit requirements

👉 This is often referred to informally as:

• “Zoning approval”

• “Use approval”

• “Occupancy compliance”

3. The Correct Order of Steps

Understanding the sequence is critical:

Step 1 — Confirm Zoning & Permitted Use

• Is your business allowed in that zone?

• Is it permitted or conditional?

Step 2 — Planning / Use Approval

• City confirms your use is acceptable

• May require additional review or conditions

Step 3 — Building & Code Compliance

• Fire safety

• Washrooms and accessibility

• Ventilation (for restaurants, etc.)

• Electrical or mechanical upgrades

Step 4 — Apply for Business Licence

• Only after the above are satisfied

4. Real-World Examples (Nanaimo Context)

Example 1 — Daycare

• Zoning may allow daycare conditionally

• Requires:

  • Outdoor fenced space

  • Occupancy classification change

  • Safety approvals

👉 Business licence will not be issued until these are completed.

Example 2 — Restaurant

• Zoning may permit restaurant use

• But requires:

  • Commercial kitchen

  • Ventilation (hood system)

  • Fire suppression

  • Accessible washrooms

👉 Lease signed without checking = major risk

Example 3 — Automotive / Industrial Use

• May only be permitted in specific zones (e.g., industrial)

• Some commercial zones restrict or prohibit these uses

5. Why This Matters for Tenants

If you skip the approval process:

❌ You may lease a space you cannot use
❌ You may face unexpected renovation costs
❌ You may experience delays of weeks or months
❌ You may breach lease timelines

👉 This is one of the most common and costly mistakes in commercial leasing.

6. Why This Matters for Landlords

Landlords also need to be cautious:

• Not all tenants are suitable for every unit

• Incorrect use can create:

  • Compliance issues

  • Insurance risks

  • Neighbouring tenant conflicts

A well-informed leasing process:

• Reduces vacancy risk

• Improves tenant quality

• Avoids future disputes

7. How to Protect Yourself (Practical Advice)

Before signing a lease:

✔ Confirm zoning designation
✔ Verify your use is permitted (or conditional)
✔ Speak with the City of Nanaimo planning department
✔ Understand required upgrades or improvements
✔ Include a subject clause for municipal approvals

👉 Example condition:

“Subject to the tenant obtaining all necessary municipal approvals, including zoning, use, and business licence.”

8. The Key Takeaway

A business licence allows you to operate.
But zoning and use approval determine whether you can.

Understanding this distinction is critical to:

• Avoid risk

• Save time and capital

• Ensure a smooth and successful business launch

Conclusion

In Nanaimo’s competitive commercial market, the difference between a smooth opening and a costly delay often comes down to understanding the approval process.

By confirming zoning, securing use approval, and completing necessary compliance steps before applying for a business licence, tenants can move forward with confidence.

For both tenants and landlords, clarity at the outset leads to better outcomes and stronger long-term relationships.

Frequently Asked Questions

Do I need zoning approval before getting a business licence?
Yes, your intended use must comply with zoning regulations before a business licence is issued.

What happens if my business use is not permitted?
You may need to apply for a conditional use approval or find an alternative location.

How long does it take to get a business licence in Nanaimo?
Timelines vary depending on approvals required, but delays often occur if zoning or building compliance is not confirmed early.

Can I sign a lease before getting approvals?
Yes, but it is strongly recommended to include conditions subject to zoning and municipal approvals.

Helpful Resources

👉You can verify zoning designations using the City of Nanaimo Zoning Bylaw

👉You can verify zoning designations using the City’s interactive zoning map

👉Business Licence Information

👉BC Property Transfer Tax Guide

How Zoning Impacts What You Can (and Cannot) Do With a Property. 

Zoning is one of the most important — and often misunderstood — aspects of commercial real estate.

Whether you are:

• Purchasing an investment property

• Leasing space for a business

• Exploring development opportunities

Zoning determines what uses are legally permitted on a property.

In markets like Nanaimo, where industrial and commercial supply is limited, understanding zoning is critical to:

• Avoid costly mistakes

• Structure deals correctly

• Identify hidden opportunities

This guide provides a practical overview of how zoning works in Nanaimo and what investors and tenants need to consider.

1. What Is Zoning?

Zoning is a regulatory framework used by municipalities to control how land and buildings can be used.

Each property is assigned a specific zoning designation, which defines:

• Permitted uses (what you can do)

• Conditional uses (what may be allowed with approval)

• Restrictions (what you cannot do)

• Building requirements (height, setbacks, density)

Zoning ensures:

• Orderly development

• Compatibility between neighbouring uses

• Protection of infrastructure and community planning

2. Common Commercial & Industrial Zoning Categories in Nanaimo

While exact definitions vary, the most relevant zoning categories include:

Industrial (I Zones)

Examples: I1, I2, I3

Typical uses:

• Warehousing

• Light manufacturing

• Trades and contractors

• Outdoor storage (in certain zones)

• Logistics and distribution

👉 These are the most in-demand zones due to limited supply.

Commercial (COR, CC, DT Zones)

COR (Corridor Commercial)

• Retail, service businesses, restaurants

• Some automotive and service uses

• High visibility locations (e.g., Bowen Rd)

CC (Community Commercial)

• Shopping centres

• Grocery-anchored retail

• Service businesses

DT (Downtown Zones)

• Retail, office, restaurants

• Mixed-use (commercial + residential)

• Higher density and pedestrian-oriented

Mixed-Use Zones

• Combine residential and commercial uses

• Increasingly common in redevelopment areas

3. Permitted vs Conditional Uses (Critical Concept)

Every zoning category has two key classifications:

Permitted Uses

✔ Allowed “as-of-right”
✔ No additional approvals required (beyond permits)

Example:

• Warehouse in an industrial zone

Conditional Uses

⚠ Allowed only with municipal approval

May require:

• Additional review

• Public consultation

• Specific conditions

Example:

• Daycare in certain commercial zones

• Automotive use in select areas

Why This Matters

A property may technically allow your use — but only conditionally.

👉 This can impact:

• Timelines

• Risk

• Financing

• Lease negotiations

4. Zoning Is Only One Piece — You Still Need Approvals

Even if zoning permits your use, you may still need:

• Business licence approval

• Building permits

• Fire and safety compliance

• Health authority approvals (for food, daycare, etc.)

Example:
A restaurant may be allowed under zoning, but still requires:

• Commercial kitchen ventilation

• Washroom compliance

• Fire suppression systems

👉 Zoning ≠ automatic approval

5. Why Zoning Matters for Investors

For investors, zoning directly impacts:

1. Income Potential

• Broader permitted uses = larger tenant pool

• More demand = stronger rents

2. Liquidity

• Flexible zoning = easier resale

3. Risk

• Restrictive zoning = longer vacancy periods

4. Future Upside

• Rezoning potential = redevelopment value

6. Zoning as a Strategy (Where the Real Opportunity Lies)

Sophisticated investors don’t just accept zoning — they use it strategically.

Examples:

✔ Buying underutilized land with rezoning potential
✔ Identifying properties with rare permitted uses
✔ Securing industrial-zoned land in supply-constrained areas
✔ Leasing to tenants whose use fits perfectly within zoning (low risk)

In markets like Nanaimo:

Zoning constraints = opportunity for those who understand them

7. Common Mistakes to Avoid

❌ Assuming a use is allowed without verification
❌ Not checking conditional use requirements
❌ Ignoring parking or servicing requirements
❌ Overlooking environmental or drainage constraints
❌ Signing leases before confirming approvals

👉 These mistakes can delay projects or kill deals entirely.

8. How to Verify Zoning (Practical Steps)

Before committing to a property:

1. Confirm zoning designation

2. Review permitted and conditional uses

3. Speak with City of Nanaimo planning department

4. Verify any site-specific restrictions

5. Confirm required approvals for your use

Conclusion

Zoning is a foundational element of commercial real estate — it determines what is possible, what is profitable, and what is risky.

In a supply-constrained market like Nanaimo:

• The right zoning can unlock long-term value

• The wrong zoning can limit flexibility and income

For investors and business owners alike, understanding zoning is not optional — it is a critical part of making informed, disciplined real estate decisions.

Frequently Asked Questions

How do I check zoning for a property in Nanaimo?
Zoning can be verified through the City of Nanaimo’s zoning bylaw and interactive mapping tools.

What is the difference between permitted and conditional use?
Permitted uses are allowed as-of-right, while conditional uses require additional municipal approval.

Can zoning be changed or rezoned?
Yes, but rezoning requires a formal application process and approval from the municipality.

Why is zoning important for commercial real estate?
Zoning determines what type of business or development is allowed on a property, directly impacting its value and usability.

Helpful Resources

👉You can verify zoning designations using the City of Nanaimo Zoning Bylaw

👉You can verify zoning designations using the City’s interactive zoning map

👉Business Licence Information

👉BC Property Transfer Tax Guide

A Strategic Perspective on Supply Constraints, Demand Drivers, and Long-Term Value

Industrial real estate across Canada has emerged as one of the most resilient asset classes over the past decade. While major markets such as Vancouver and Toronto have seen significant price appreciation and yield compression, smaller regional markets are increasingly drawing investor attention.

Nanaimo, located on Vancouver Island, is one such market. With strong population growth, constrained industrial land supply, and increasing demand from essential service industries, Nanaimo is beginning to exhibit characteristics typically associated with early-stage, high-growth industrial markets.

This article outlines the structural factors driving interest in Nanaimo’s industrial sector and why investors are increasingly allocating capital to the region.

1. Structural Supply Constraints Limit New Industrial Development

One of the defining characteristics of Nanaimo’s industrial market is limited land availability.

Several structural factors restrict new supply:

• Island geography limits expansion

• Agricultural Land Reserve (ALR) protections reduce developable land

• Limited serviced industrial inventory

• Lengthy zoning and approval processes

• Competing demand from residential and mixed-use development

Unlike larger mainland markets, supply cannot easily respond to increased demand. This creates a structural imbalance that supports:

• Long-term land value appreciation

• Downside protection during economic cycles

• Strong pricing power for landlords

For investors, constrained supply is one of the most important drivers of durable value.

2. Strong and Diverse Tenant Demand

Nanaimo’s industrial demand is driven by essential, non-discretionary sectors, including:

• Construction and trades

• Marine services

• Equipment and logistics operators

• Light manufacturing

• Automotive and service-commercial users

These businesses are:

• Locally embedded

• Operationally necessary

• Less sensitive to economic volatility

This results in:

• High occupancy levels

• Strong tenant retention

• Lower default risk compared to office or discretionary retail

From an investment perspective, this tenant profile supports stable and predictable income streams.

3. Small-Bay Industrial Is in Particularly High Demand

A notable feature of Nanaimo’s market is the scarcity of small-bay industrial units.

These spaces are highly sought after by:

• Local trades businesses

• Contractors

• Service operators

• Owner-users

Key characteristics:

• Units typically range from 1,000–5,000 sq. ft.

• Limited new supply entering the market

• High competition among tenants and buyers

As a result:

• Vacancy rates remain extremely low

• Lease rates have shown consistent upward pressure

• Owner-user demand often competes directly with investors

This segment represents one of the most active and competitive areas within the local industrial market.

4. Attractive Risk-Adjusted Yields Compared to Major Markets

While yields in core markets have compressed significantly, Nanaimo continues to offer:

• Industrial cap rates in the range of 4.75%–6.25%

• Lower entry pricing compared to Greater Vancouver

• Less institutional competition

Importantly, these returns are supported by:

• Stable tenant demand

• Long-term lease structures

• Inflation-linked rent adjustments

For investors seeking a balance of income, stability, and growth, Nanaimo provides a compelling alternative to more saturated markets.

5. Population Growth Is Driving Long-Term Commercial Demand

Nanaimo is one of the fastest-growing mid-sized cities in British Columbia.

Key drivers include:

• Migration from Greater Vancouver

• Interprovincial migration

• Growth in remote work

• Lifestyle-driven relocation

Population growth directly impacts industrial demand through:

• Increased need for local services

• Expansion of trades and construction activity

• Growth in logistics and distribution

Over time, these trends support:

• Higher absorption of industrial space

• Increased rental demand

• Sustained pressure on limited supply

6. Infrastructure Investment Is Strengthening the Market

Infrastructure expansion plays a critical role in long-term real estate performance.

Nanaimo is currently benefiting from:

• Airport expansion (YCD)

• Highway and corridor upgrades

• Growth in port and marine activity

• Expansion of commercial nodes in North and South Nanaimo

Improved infrastructure enhances:

• Connectivity

• Business activity

• Regional economic integration

Historically, these investments tend to precede sustained commercial growth cycles.

7. A Market in the Early Stages of Institutional Recognition

Markets such as Kelowna and Victoria have already undergone significant institutional investment cycles.

Nanaimo, by contrast, is:

• Earlier in its growth trajectory

• Less saturated by institutional capital

• Still accessible to private and international investors

This creates an opportunity to:

• Acquire assets at relatively favourable pricing

• Benefit from future yield compression

• Participate in long-term market maturation

In many ways, Nanaimo today resembles where other successful regional markets were 10–15 years ago.

Conclusion

Nanaimo’s industrial real estate market is supported by a combination of:

• Structural supply constraints

• Strong and diversified tenant demand

• Attractive risk-adjusted yields

• Sustained population growth

• Ongoing infrastructure investment

Together, these factors create a stable and forward-looking investment environment.

For investors seeking long-term income, capital preservation, and exposure to a growing regional market, Nanaimo represents a compelling opportunity within Canada’s commercial real estate landscape.

Frequently Asked Questions

What types of industrial properties are available in Nanaimo?
Nanaimo offers a mix of small-bay industrial units, warehouse space, service-commercial buildings, and limited industrial land opportunities.

What are typical industrial cap rates in Nanaimo?
Industrial cap rates generally range between 4.75% and 6.25%, depending on tenant quality, lease terms, and location.

Why is industrial land scarce in Nanaimo?
Supply is constrained due to island geography, Agricultural Land Reserve (ALR) restrictions, and limited serviced industrial zoning.

Is Nanaimo a good market for industrial investment?
Yes, strong population growth, low vacancy, and limited supply make Nanaimo an attractive long-term industrial market.