Vancouver’s Industrial Availability Rate to Hit Historic Record Low in 2018

Lack of space will challenge the city’s industrial users in 2018

Vancouver, BC – February 14, 2018 – Vancouver’s industrial availability rate continues to plummet, according to a new report by CBRE Vancouver, and industrial users across Metro Vancouver and the Fraser Valley are feeling the impact. Metro Vancouver’s industrial availability rate dropped 160 basis points (‘bps’) from 3.9% in 2016 to 2.3% by the end of 2017, the lowest on record in the region and the second lowest in North America. In a market that was already low in available space, Metro Vancouver saw over 4.7 million square feet of positive absorption, the commercial real estate industry’s measure of tenant demand. This was met with only 3.1 million square feet of new industrial product being delivered to the market.

According to the report, average net asking rents for Metro Vancouver as of Q4 2017 were $10.23 per square foot, up 13.6% year-over-year, and the first time rates have broken the $10 barrier in the region. Record low availability has created a challenging situation for industrial users in the Vancouver market. New entrants to the market will find it more difficult than ever to find space and existing companies are already finding it more difficult to expand or relocate.

“We are at a critical stage and we need to find industrial areas for these companies. It used to be that when companies couldn’t find space in Vancouver, they moved to the Valley. But now the Valley doesn’t have much inventory left either. We’ve already used up our safety net. So there’s a threat we’re going to see companies relocating out of province or it will limit their growth potential,” commented Chris MacCauley, Senior VP of Industrial at CBRE in Vancouver.

Year-over-year, the most significant increases in lease rates were recorded in Tri Cities/New West (35%), North Vancouver (29%) and Vancouver (20%). Tenants looking to new industrial development for relief will be disappointed with 2018’s pipeline as new buildings are already more than 47% pre-leased. The two municipalities with the largest industrial inventories currently have two of the lowest availability rates – Richmond at 2.0%, down 240 basis points year-over-year and Surrey at 1.3%, down 180 basis points.

“Demand has continued to outstrip supply in Vancouver by more than a million square feet a year. Yet there is currently no plan in place to find solutions to what will soon become a deterrent for businesses in a wide diversity of industries like film, food processing, retail and e-commerce. We need to find an outlet for this demand or it could hamper our ability to sustain our positive GDP growth in the province. We have to make sure we have the space to accommodate this growth,” added MacCauley.

On the investment front, 23 transactions involving land sites of 5 acres or larger took place in 2017. These transactions totaled $345 million, an increase of 134% from 2016, at an average price per acre of $1.24 million, an increase of 45% year-over-year. CBRE’s top 10 lease deals for 2017 were all situated in the Valley, with an expected shift even further east for industrial land sales this year. The two most significant industry types to be involved in the largest leasing deals were Food and Beverage (31.3%) and Furniture/Building Supplies (26.1%).

For more information on the CBRE Report, please click HERE to download the full version.

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