Deal Tracker p. 4 ... Coquitlam industrial sales activity jumps as Burnaby market slows. $. Million. 0. $20 .... industr
Burnaby/Coquitlam
Industrial Report Fall 2014
Coquitlam industrial sales activity jumps as Burnaby market slows
T
iming has played a key role in terms of industrial deal and dollar volume in the Burnaby and Coquitlam, British Columbia industrial markets to date in 2014. Industrial sales activity in Coquitlam had already exceeded 2013’s totals by September 30, 2014 (with 14 deals totalling almost $37 million in dollar volume compared with 12 transactions valued at $13 million for all of 2013), as many of the deals that closed in the first nine months of 2014 originated in 2013. Meanwhile, deal velocity in Burnaby slowed during the same nine-month period despite achieving more than $94 million in dollar volume.
industrial buildings and strata units. Some businesses decamped to other markets due to the lack of suitable product in Coquitlam. But those companies that remained subsequently paid a premium to acquire the assets that became available. While industrial sales activity has resurged in 2014, leasing activity recently subsided after picking up following the completion of infrastructure upgrades that had impeded access to the community. Industrial vacancy in Coquitlam climbed to 3.6% in the third quarter of 2014 from 2.8% six months earlier, but remained lower than the 4.4% recorded a year ago. The addition of more than 120,000 square feet (sf) of vacant space at 65 North Bend Street and slowing absorption were the primary culprits of the increase in vacancy. However, much of the leasing activity that has taken place since the first quarter of 2014 represents a wide range of unit sizes and types – a reflection of many owner/users’ desire to expand within the market as was noted on the sales side.
Sales activity in the small 8-million-squarefoot Coquitlam industrial market has surged in 2014, with the normally tight market buoyed by the growing confidence of the market’s owner/users. Many had been seeking additional space starting in 2013 and subsequently generated sales opportunities in the market’s limited inventory of stand-alone
continued on page 3
Burnaby/Coquitlam Industrial Real Estate Sales Transactions 2008 - 2013
$160
Inside Transaction Summary p. 2 Lease & Vacancy Rates p. 3 Deal Tracker p. 4
Market Outlook Burnaby Coquitlam
Cap Rates
Industrial Vacancy
Sales Volume
40
$140
56
$120 #
#
Number of Transactions
Burnaby Coquitlam
$100
38
$60 $40
17 16
17
$20 0
Partnership.Performance.
Absorption
64
42
46
$80 $ Million
#
2008
2009
2010
19 17
2011
12 2012
Lease Rates
2013 I 1
Lack of product hinders Burnaby sales; leasing powers Coquitlam market
Kyle Blyth, Vice-President, Industrial 604.647.5088
[email protected] With eight years of commercial real estate experience, Kyle has closed more than $250 million worth of industrial transactions. He specializes in Burnaby and Coquitlam industrial property sales and leasing.
Ben Lutes, Associate 604.646.8382
[email protected] Ben Lutes specializes in Tri-Cities industrial sales and leasing. Since 2009, Ben has developed a strong reputation as a successful, clientfocused agent with excellent knowledge of the Tri-Cities’ industrial real estate market.
Matt Thomas, Vice-President, Industrial/Development 604.646.8383
[email protected] Matt Thomas specializes in North Vancouver and Burnaby industrial, sales and leasing. He has developed a large client base as well as a strong reputation as a successful, client-focused agent.
Partnership.Performance.
Source: Onni Group
Industrial leasing activity remained strong in Coquitlam in 2014 with businesses such as BC Plant Health Care and Rocky Mountain Phoenix leasing space at 81 Golden Drive (pictured above) and 91 Golden Drive.
Burnaby Industrial deal velocity within Burnaby has declined year-to-date in 2014 compared with 2013. Demand from users who wish to purchase their own real estate remains strong, but supply is limited. As a result, there have been fewer transactions in 2014. South Burnaby Corporate Centre, located in South Burnaby was sold by Westbank Projects Corp. to Investors Group for $47.6 million. At the time of the sale, the properties were fully leased at an estimated net operating income of $2.5 million, representing an approximate capitalization rate of 5.2%. The other notable transaction within the past 12 months in Burnaby was the sale of 7039 & 7069 Winston Street for $7.125 million. The property was sold by private investors to another private investor. At the time of the sale, the property was completely vacant. The purchaser intends on utilizing a portion of the building for storage and leasing out the remaining portion. In addition, a 4.04-acre vacant parcel of land at 8700 & 8790 Boundary Road sold to an owner/ user for $9.2 million, representing a sale price of $2.28-million per acre. The parcel was purchased for the purpose of building a warehouse facility for the owner/user on the southern portion of the site. The purchaser is considering developing an office building on the northern portion for it to occupy.
Coquitlam Industrial leasing activity across Coquitlam continued to rebound positively in early 2014 before levelling off by mid-year. Lease rates have remained stable (in the mid $7 range) – a reflection of the
average age of industrial product (which tends to be older with only a handful of exceptions). Landlord inducements are now on par with many of Metro Vancouver’s other industrial markets as opposed to 18 to 36 months ago when vacancy in Coquitlam was double what it was in September 2014. Small- to mid-bay leasing continues to drive Coquitlam’s industrial market and attract businesses from both sides of the Fraser River. BC Plant Health Care and Rocky Mountain Phoenix recently leased space in Coquitlam after previously operating in the Fraser Valley. Spotshub Inc. relocated to a 10,000-sf premises in Coquitlam from the firm’s previous facility in Burnaby. Soccer Express, a long-time Coquitlam industrial operator, more than tripled in size to 18,000 sf as the business expanded and was able to remain in Coquitlam. High Angle Contracting also relocated from Port Coquitlam to lease 19,058 sf at 100-2050 Hartley Avenue. Industrial sales volume in Coquitlam has increased compared with 2013 due to several large transactions (which are not common due to the relatively small size of the market). Rokstad Power Corp. purchased 80 & 84 Golden Drive for $11.3 million, a seven-acre site improved with a 37,834-sf building that the company had previously leased. The property at 115 Schoolhouse Street sold for $7.1 million and represented a rare investment deal within the market. The sale included a 10-building complex sitting on 3.5 acres. The sale to Brookmere Investments Inc. represented an initial yield of 6%. Small- to mid-bay strata sales have driven the remaining sales volume throughout 2014 with the exception of 94 Glacier Street, which sold to an owner/user for $3.925 million or $144/psf. I 2
Vacancy remains tight as lease rates stabilize in Coquitlam and rise incrementally in Burnaby North Burnaby
Coquitlam
Vacancy Rate: 2.5%
Vacancy Rate: 3.6%
Pitt Meadows
Net Lease Rate Range: $6.75 – $8.25 psf Median: $7.50
Net Lease Rate Range: $6.50 – $12.25 psf Median: $7.50
Operating Costs Range: $2.75 – $6.15 psf Average: $4.10
Operating Costs Range: $2.65 – $6.80 psf Average: $4.60
South Burnaby Vacancy Rate: 2%
Vacancy Rate: 5% Net Lease Rate: $6.50 – $7.50 psf Operating Costs: $1.49 psf
Port Coquitlam Vacancy Rate: 4.1%
Net Lease Rate Range: $6.50 – $10.00 psf Median: $8.25
Net Lease Rate Range: $5.75 – $10 psf Median: $7.85
Operating Costs Range: $1.85 – $6.40 psf Average: $3.95
Operating Costs Range: $1.32 – $4.82 psf Average: $3.46
Note: Rental rates vary depending on a wide range of factors, including location, age and construction type
A lack of available product in Burnaby (and limted new supply) has resulted in a decline in sales, while Coquitlam remains driven primarily by leasing activity.
continued from page 1
From cover: new industrial product in Burnaby limited in the near term as sales stagnate New industrial development remains exceptionally limited – only Beedie Development Group is considering some flex industrial space as part of its Fraser Mills project – and bare land is virtually non-existent. Rental rates, which were continuing to recover following a period of softening due to restricted access, have now stabilized. The age and physical limitations of much of Coquitlam’s industrial stock will ultimately cap rental rate growth. Owner/users were also the significant driving force behind deal velocity in Burnaby in the first nine months of 2014, but it was two investment sales since September 2013 – 3100 Production Way ($48.5 million) and the South Burnaby Corporate Centre ($47.6 million) – that have contributed the most to the strong dollar volumes posted in 2013 and 2014. With 40 industrial transactions valued at more than $150 million in Burnaby recorded in 2013, sales activity year-to-date 2014 has remained healthy with $94 million in sales, albeit with just 22 transactions. A lack of supply remains a constraint on deal velocity with both owner/users and investors seeking to secure industrial properties. While owner/ users comprised the majority of Burnaby industrial transactions, overall demand for investment product remained strong.
New available industrial product remains scarce. Adera and Sun Life Financial joint ventured to build out Eastlake Campus, an office and flex industrial development in the Lake City business area of North Burnaby. However, new development remains absent along Winston Street. In South Burnaby, Beedie Development Group’s acquisition of the 69-acre phase 2 of Glenlyon Business Park, formerly owned by Canada Lands Company, will be a likely source of new industrial product as will Oxford Properties’ 64.4-acre former Norampac mill site. Development on both sites will have a significant impact on Burnaby’s industrial market with the ultimate size and scale of the projects marking a departure from the size of recent industrial construction projects. Despite the addition of new industrial product at Kask Corporate Centre, Spire Corporate Centre, Ingentis on North Fraser Way, and phase two of New Haven Business Park, industrial vacancy has remained stable at 4% since mid-year 2014 due in large part to these projects being substantially leased up in fairly short order. Burnaby industrial vacancy, which registered 4.3% in the third quarter of 2013, tightened to 3.4% in the first quarter of 2014 continued on page 4
Partnership.Performance.
I 3
Burnaby & COQUITLAM industrial sales transactions (>$1 million) August 1, 2013 to September 30, 2014 MUNICIPALITY
TRANSACTION VALUE
SQUARE FEET (SF)
PER SQUARE FOOT (PSF)
DATE
7039-7069 Winston Street
Burnaby
$7,125,000
56,400
$126
August 2014
6850-6854 Merritt Avenue
Burnaby
$1,620,000
5,050
$321
July 2014
Northgate Business Centre
Burnaby
$1,125,000
3,210
$350
July 2014
3935 2nd Avenue
Burnaby
$3,040,000
12,000
$253
July 2014
ADDRESS
6996 Merritt Avenue
Burnaby
$1,285,000
5,700
$225
April 2014
North Fraser Pointe
Burnaby
$3,938,000
24,890
$158
April 2014
3149 Norland Avenue
Burnaby
$2,600,000
3,900
$667
March 2014
3910 & 3916 Grant Street
Burnaby
$2,175,000
6,440
$338
February 2014
South Burnaby Corporate Centre
Burnaby
$47,600,000
223,103
$213
February 2014
8168 Glenwood Drive
Burnaby
$14,600,000
90,400
$162
January 2014
7547 Hedley Avenue
Burnaby
$2,150,000
16,801
$128
January 2014
7020 Curragh Avenue
Burnaby
$1,400,000
5,800
$241
January 2014
4077 & 4079 McConnell Drive
Burnaby
$1,950,000
10,130
$192
December 2013
Bridge Business Centre
Burnaby
$1,150,000
3,619
$318
September 2013
3100 Production Way
Burnaby
$48,500,000
431,050
$113
September 2013
8125 North Fraser Way
Burnaby
$6,800,000
42,463
$160
September 2013
6879-6885 Russell Avenue
Burnaby
$1,750,000
17,570
$100
August 2013
1480 Boundary Road
Burnaby
$1,620,000
7,200
$225
August 2013
3455 Gardner Court
Burnaby
$6,968,000
46,874
$149
August 2013
4155-4165 McConnell Drive
Burnaby
$4,485,000
33,618
$133
August 2013
Clipper Court
Coquitlam
$1,625,000
9,835
$165
July 2014
115 Schoolhouse Street
Coquitlam
$7,100,000
56,134
$126
June 2014
250 Schoolhouse Street
Coquitlam
$1,180,000
8,518
$139
June 2014
25 Leeder Street
Coquitlam
$3,575,000
NA
NA
May 2014
1312 - 1316 Ketch Court
Coquitlam
$2,582,000
18,316
$141
May 2014
903 Sherwood Avenue
Coquitlam
$1,100,000
7,100
$155
May 2014
80 & 84 Golden Drive
Coquitlam
$11,300,000
37,834
$299
April 2014
901 Tupper Avenue
Coquitlam
$1,753,000
8,520
$206
March 2014
Cayer Industrial Park
Coquitlam
$1,650,000
9,860
$167
January 2014
910 Tupper Avenue
Coquitlam
$2,980,000
18,860
$158
January 2014
94 Glacier Street
Coquitlam
$3,925,000
27,185
$144
December 2013
51 Glacier Street
Coquitlam
$4,287,500
10,800
$397
September 2013
Industrial Team Kyle Blyth 604.647.5088
[email protected]
Bennett Lutes 604.646.8382
[email protected]
Jeron Dillon 604.647.1330
[email protected]
Douglas McMurray 604.647.5082
[email protected]
John Eakin 604.646.8399
[email protected]
Gord Robson 604.647.1331
[email protected]
Michael Farrell 604.646.8388
[email protected]
Struan Saddler 604.64.5077
[email protected]
Rob Gritten 604.647.5063
[email protected]
Dan Smith 604.646.8397
[email protected]
Kevin Kassautzki 604.646.8393
[email protected]
Mathew Sunderland 604.647.1346
[email protected]
Sean Keenan 604.647.1334
[email protected]
Terry Thies 604.646.8398
[email protected]
Ryan Kerr 604.647.5094
[email protected]
Matt Thomas 604.646.8383
[email protected]
Nabila Lalani 604.647.1342
[email protected]
Khushboo Wanchoo 604.646.1345
[email protected]
John Lecky 604.647.5061
[email protected]
Ian Whitchelo 604.647.5095
[email protected]
For more information please contact: Michael Keenan, Principal & Managing Director Direct Line: 604.647.5081
[email protected] Andrew Petrozzi, Vice-President, Research (BC) Direct Line: 604.646.8392
[email protected]
continued from page 3
before delivery of these new projects bumped the vacancy rate back up to 4% at mid-year 2014 where it remained into the third quarter of 2014. Rental rates are trending upward as demand continues to drive absorption of new product and older, less-efficient space becomes harder to locate. Burnaby land sales remained few and far between in the past 12 months due to a lack of available sites, but the recent sale of a 4.04-acre parcel at 8700/8900 Boundary Road for $9.2 million represented a price per acre of more than $2.27 milllion. Investment sales were similarly scarce and, resultantly, capitalization rates have been hard to identify but are anticipated to generally remain compressed in line with other comparable industrial product in high-demand industrial nodes throughout Metro Vancouver. For example, the $48.5-million acquisition of 3100 Production Way in September 2013 represented a capitalization rate of 5%. While a range of industrial opportunities, including strata, small to large-bay lease product and build-to-suit options, are on the horizon in South Burnaby, Coquitlam’s industrial market is likely to remain constrained due to the nature of the mature market and lack of industrial land.
Avison Young Commercial Real Estate (B.C.) Inc. #2100-1055 W. Georgia Street Box 11109 Royal Centre Vancouver, BC V6E 3P3, Canada
avisonyoung.com © 2014 Avison Young Commercial Real Estate (B.C.) Inc. All rights reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young Commercial Real Estate (B.C.) Inc.
