- What Asking rents for industrial space in Metro Vancouver continue to fall
- Why 2.2m sf of new supply was delivered during the first three months of the year
- What’s next Marginal increases in availability forecasted through 2024 as construction slows down and the market begins to normalize
Availability in the Metro Vancouver industrial market hit 3.6% at the end of the first quarter — the highest it has been since late 2016, CBRE said in a recent report.
According to the brokerage, 2.2m sf of new supply was delivered during the first three months of the year, up 40 bp over the prior quarter and the sixth successive quarterly increase. While 72% of that space was pre-committed, the first quarter also saw the most vacant amount of new supply since the first quarter of 2017.
With demand “tempered and selective,” average asking lease rates dropped for the third quarter in a row. Notably, those follow massive average rent hikes in 2021 and 2022. That said, owners are back to offering incentives such as free rent and tenant improvement allowances, and newer, well-located properties achieve better pricing power than older ones.
“Prospective tenants and purchasers are being flooded with optionality therefor[e] the best buildings are attracting activity while older generation, inefficient product remains challenged,” the brokerage said in the quarterly report.
On the investment sales front, industrial trades in the market are down year over year. Just 10 properties worth $241m combined changed hands in the first quarter, compared with 13 deals valued at $391m a year earlier.
“A bid/ask gap remains in general as it relates to building sales, strata units and land sites; however, deals are moving forward on well-priced product, and we anticipate increased sale transaction volume over the balance of the year as new price levels settle in over the near/mid term,” CBRE said.
Notable trades completed in the first in Metro Vancouver include the sale by Grosvenor Canada of a 224,000 sq ft building at 1302 Derwent Way in Delta, B.C., for $73m, or $326/sq ft, to Vancouver-based property manager Dayhu Group of Cos. The building is occupied by a shipping supplies company and a distribution centre for retail furniture chain Urban Barn.
“Grosvenor looked at selling because they’re doing a couple of massive redevelopment projects in the market, and that was a way to raise capital outside of the debt market,” a Vancouver market watcher said.
Another notable sale was the purchase by a private investor of a 369,000 sq ft industrial site at 152 and 153 Street in Surrey’s East Newton business park for $59.7m, or $162/sq ft. The site is only the second in East Newton exceeding 5 acres to change hands in the last five years.
CBRE executive vice president Chris MacCauley expects that availability in the Metro Vancouver region will tick up marginally through the rest of 2024 as construction deliveries level off. MacCauley is optimistic about the region’s long-term appeal for investors.
“I think the takeaway is that [Metro] Vancouver is still showing its resiliency and strong fundamentals, which has made it one of the most sought-after investment markets,” MacCauley told Green Street News.
“People always say during a [downturn] that you don’t get a deal, you get an opportunity. And that’s what our market is showing right now.”
