Richmond/Delta, BC - Avison Young

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Strong industrial sales and leasing activity in the. Richmond and Delta, BC submarkets has continued since mid-2014 even
Richmond/Delta, BC Industrial Report Summer 2015

Photo Credit: Port Metro Vancouver/William Jans Photography

Strong industrial sales and leasing activity reshaping submarkets

S

trong industrial sales and leasing activity in the Richmond and Delta, BC submarkets has continued since mid-2014 even as new development redefines Delta’s industrial landscape and the transition of many of Richmond’s former industrial properties to higher uses accelerates. While sales activity in Delta in the first half of 2015 returned to more historical levels, the municipality recorded the greatest amount of leasing activity in the region during the past 12 months. The completion of a number of large industrial deals in Richmond in the first half of 2015, including two of the largest industrial transactions in the city’s history, will likely result in a record 2015 in terms of dollar volume.

Vacancy declined in Delta to 6.8% at mid-year 2015 from 8.4% a year previous, as tenants leased up space in many of the new large-scale developments that have recently completed. These larger industrial users, typically logistics and distribution companies, were unable to locate and lease suitable space in 2014 and were awaiting the completion of projects that had kicked off in 2012/13. Average lease rates have risen due to the greater prevalence of new efficient premises. Smaller users either leased space in older, less efficient premises or purchased strata units – an important component of sales activity in a municipality where sites remain difficult (and expensive) to secure for those wishing to build their own facility.

Industrial sales dollar volume in Delta during the first half of 2015 ($49.8M/14 deals) has already surpassed the total dollar volume recorded in 2014 ($45.5M/22 deals) and is set to return to more recent historical deal and dollar volumes after a record 2013 that registered a very significant sales spike ($236.3M/46 deals). A number of large assets in Delta traded in 2013 that are unlikely to transact again for the foreseeable future. Falling debt costs compressed cap rates in 2013 and precipitated many of the deals that subsequently transacted. Owner/ users are back driving the market again in 2015.

Industrial sales activity in Richmond during the first half of 2015 ($191.7M/48 deals) is well on pace to set a new record in terms of annual dollar volume. The previous record was set in 2014 ($213.9M/100 deals) and will almost certainly be surpassed. Richmond is a market in transition as many of the sales registered in 2015 are properties that will be repurposed. As flex office/ industrial users have increasingly gravitated towards premises near public transit, rising vacancy in more traditional light industrial parks provided an avenue for investors to acquire assets for repositioning. continued on page 4

Richmond & Delta Industrial Real Estate Sales and Transactions

Inside Transaction Summary p. 2 Project Construction Map p. 3 Deal Tracker p. 4

Market Outlook Richmond

Delta

Cap Rates

Industrial Vacancy

Sales Volume

2008 - 2014

Richmond Delta

$280 46

$240

115

$200 $ Million

$160

# #

$120

#

Number of Transactions

Partnership.Performance.

80 86

122 40 73 24

$80

28

98 25

30 22

$40 0

Absorption

100

2008

2009

2010

2011

2012

2013

Lease Rates

2014 I 1

Industrial leasing and sales activity powering submarkets

Ryan Kerr, Principal 604.647.5094 [email protected]

Tilbury Distribution Centre, which is being developed by GWL Realty Advisors, is just one of a half dozen of the new logistics/distribution-focused projects currently under development in Delta.

D

elta recorded some of the strongest industrial leasing activity in Metro Vancouver during the past 12 months while sales were more muted. Richmond, on the other hand, registered significant levels of both industrial leasing and sales.

Mathew Sunderland, Vice-President 604.647.1346 [email protected]

Dominion Warehousing completed a 15-year lease transaction with Bosa Development for 250,000 sf at 1020 Derwent Way in Delta. Dominion will move into the distribution centre space on Annacis Island that was previously occupied by LG Electronics.

The Dayhu Group of Companies successfully leased up phase one of its Boundary Bay Industrial Park development. Four tenants each took approximately 110,000 sf in the 440,000-sf project. The tenants included Apps Cargo Terminals, Speciality Distributors, Farrow Logistics and Pet Valu. Due to the success of the first phase, construction is currently underway on phase two, which includes a 428,000-sf distribution/logistics centre. Direct LP will occupy the majority of Grosvenor Americas’ new Millennium VI development at

Jeron Dillon, Associate 604.647.1330 [email protected]

1005 Derwent Way on Annacis Island after it leased 103,000 sf of the 162,000-sf development. Direct LP is relocating from East Richmond after signing a 10year deal in the recently completed next-generation distribution centre. Rodair International will expand its presence in Metro Vancouver with the recent lease of 1488 Derwent Way from Mason Investments. The freight forwarder’s 25,000-sf lease runs until 2020. Fountain Tire renewed the lease for its BC distribution centre, which is located in Morguard’s South Fraser Distribution Centre at 7510 Hopcott Road. The renewal term was for three years.

Sean Keenan, Associate 604.757.5267 [email protected]

Partnership.Performance.

In one of the more recent significant sale transactions, Bentall Kennedy acquired the 77,101-sf Ocean Ridge Business Park on Annacis Island in Delta for

$11M. The building sits on a 3.61-acre lot. Crestpoint Real Estate Investments made a dramatic entrance into Richmond’s industrial market by acquiring both Knightsbridge Business Park ($40.25M) and, more recently, Key West Business Centre in 2015. Crestpoint has indicated it plans to renovate and reposition both assets. Meanwhile, PCI Developments acquired 1148011500 River Road ($17.5M) in Richmond and is currently retrofitting the building. The developer has implemented a leasing program for the remaining vacancy in the 222,755-sf asset. Orbit Distribution Systems is relocating from South Burnaby to the old Honda distribution facility located at 13240 Worster Court in Richmond. Orbit’s lease for 147,000 sf in Sun Life Financial’s recently retrofitted building will run for a nine-year term. Bunzl Canada also recently renewed its 116,292-sf lease in Kingswood Business Park at 7433 Nelson Road in East Richmond for eight more years.

An Asian investor acquired the mixed-use flex office/industrial complex at 7911-7991 Alderbridge Way/4935-4991 No. 3 Road for $63M in February 2015 in the largest industrial deal in Richmond’s history. The property, which consists of four buildings and is located on a 7.89-acre lot, has a total gross leasable area of 169,070 sf along with 6,130 sf of second floor retail and office space. Two well-known developers in Metro Vancouver acquired 5520, 5560 and 5660 Minoru Boulevard for $35.45M in December 2014. The properties, which are currently home to two multi-tenant industrial buildings and an auto dealership, were acquired with an eye to redevelopment. In a similar scenario, a developer acquired the Keybridge Centre at 6851 and 6871 Elmbridge Way for $31.3M based on an opportunity to redevelop the site.  I 2

W KING EDWARD AVE R

W 41 AVE

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HW

NA

WA Y

MARINE WAY

AS

RO AD

G

RIM PE ER AS FR H UT SO

DE

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YP

RD

FR

144 ST

140 ST

64 AVE

ER

88 HI

GH

WA Y

152 ST

KING GEORGE BLVD

72 AVE

AS

156 ST

SURREY

1

72 AVE

64 AVE

64 AVE

144 ST

132 ST

128 ST

120 ST

104 ST

DELTA

96 AVE

88 AVE

132 ST

NO 6 RD

NO 4 RD

NO 3 RD

NO 2 RD

NO 1 RD

R

104 AVE

88 AVE

SCOTT ROAD

3 4IVER RD

13

STEVESTON HWY

NO

156 ST

R NO

128 ST

5

VE

152 ST

96 AVE

WESTMINSTER HWY

RICHMOND BLUNDELL RD

S RO

KING GEORGE BLVD

104 AVE 120 ST

WESTMINSTER HWY

MAR

B ILL YH

ER

D

NO 6 RD

11

ALDERBRIDGE WAY

ER

ET

RN BY

BRIDGEPORT RD

10 8 7

VD BL

R

152 ST

LADNER TRUNK RD

152 ST

ARTHUR DR

2

DELTAPORT WAY

32 AVE 140 ST

24 AVE

144 ST

6

152 ST

128 ST

Approximately 3.5-million-square-feet of new logistics space proposed or under construction in Delta 16 AVE

Address

Project Name Tilbury West Corporate Centre II, Phase 2 Boundary Bay Industrial Park, Phase 2

Developer

16 AVE

Size

Construction type

Estimated Completion

Beedie Group

98,512 sf

Development

Q2 2015

Dayhu Group Companies

427,400 sf

Development

Q4 2015

289,000 sf

Development

Q3 2016

Up to 1.5 msf

Development

Q4 2016

336,000 sf

Development

Q4 2016

Up to 1.2 msf

Development

Q1 2017

1

6901 72nd Street, Delta

2

8181 Churchill Street, Delta

3

9450 River Road, Delta

Tilbury Distribution Centre

GWL Realty Advisors

4

7927 Huston Road & 7927 River Road, Delta

Delta Link Business Park

Beedie Group

5

16111 Blundell Road, Richmond

6

41B & 27B Avenue, Delta

7

13240 Worster Court, Richmond

Gateway Pacific Business Centre

Sun Life Financial

8

13200-13260 Delf Road, Richmond

Knightsbridge Business Park

Crestpoint Real Estate

9

11480-11500 River Road, Richmond

11480-11500 River Road

PCI Developments

10

3810 & 3960 Jacombs Road, Richmond

Key West Business Centre

Crestpoint Real Estate

11

4671 & 4740 Vanguard Road, Richmond

Vanguard Industrial Estates

South Street Development

12

11111 Twigg Place, Richmond

11111 Twigg Place

English Bay Contracting

13

10651 No. 6 Road, Richmond

10651 No. 6 Road

Ledcor

Hopewell Distribution Centre, Phase 4 Tsawwassen Gateway Logistics Centre

Hopewell Development GWL Realty Advisors

147,378 sf 259,440 sf (14.7 acres) 222,755 sf (9.5 acres) 271,388 sf (13 acres) 193,734 sf (7.66 acres)

Renovation/ Reposition Renovation/ Reposition Renovation/ Reposition Renovation/ Reposition

NA NA NA NA

Redevelopment

TBD

13.64 acres

Development Site

TBD

14.3 acres

Development Site

TBD Source: Avison Young

Partnership.Performance.

DH

DE

9

ED

RI

KNIGHT ST

12

RIN

E AV E V H NT H A TE HT G EI

CB

IMPERIAL ST

M

Y WA DA

GS

CA

KIN

W 49 AVE

MA

EE

Y

Proposed industrial development plans in Richmond/Delta remain active SE

GH

AUSTIN AVE EE

E COLUMBIA ST

W 41 AVE

LO U

COMO LAKE AVE

S

ED

A GL GA

Y WA

I RD

LO U BOUNDARY RD

RIN

KNIGHT ST

MA

SW AY

E BROADWAY

ST JOHNS ST

RUPERT ST

W 16 AVE

NG

NANAIMO ST

KI

WILLINGDON AVE

W BROADWAY

SW

RENFREW ST

CLARK DR

W 4 AVE

HASTINGS ST

I 3

RICHMOND & DELTA INDUSTRIAL SALES TRANSACTIONS (>$1.5 MILLION) JUNE 1, 2014 TO JUNE 30, 2015 MUNICIPALITY

TRANSACTION VALUE

SQUARE FEET (SF)

PER SQUARE FOOT (PSF)

DATE

12155 Riverside Way

Richmond

$4,750,000

24,635

$193

June 2015

11400 Twigg Place

Richmond

$2,100,000

13,751

$153

May 2015

12211 Horseshoe Way

Richmond

$13,000,000

106,380

$122

May 2015

CDF Corporate Centre

Richmond

$2,350,000

11,041

$213

May 2015

ADDRESS

11400 Twigg Place

Richmond

$1,853,250

10,591

$175

April 2015

Knightsbridge Business Park

Richmond

$40,250,000

259,440

$155

April 2015

Maycrest Business Centre

Richmond

$1,892,000

7,919

$239

March 2015

7911-7991 Alderbridge Way; 4935-4991 No. 3 Road

Richmond

$63,000,000

169,070

$373

February 2015

11480-11500 River Road

Richmond

$17,500,000

222,755

$79

February 2015

18371 McCartney Way

Richmond

$5,875,000

21,150

$278

January 2015

5520, 5560 & 5660 Minoru Boulevard

Richmond

$35,450,000

97,853

$362

December 2014

6600 Fraserwood Place

Richmond

$5,605,000

31,051

$181

December 2014

4131 Vanguard Road

Richmond

$2,431,000

9,875

$246

November 2014

Keybridge Centre

Richmond

$31,300,000

78,195

$400

October 2014

CDF Corporate Centre

Richmond

$2,100,000

11,041

$190

October 2014

5760 Cedarbridge Way

Richmond

$3,238,000

10,080

$321

October 2014

12211 Vulcan Way

Richmond

$2,665,000

25,819

$103

October 2014

4455 No. 6 Road

Richmond

$9,300,000

56,236

$165

October 2014

9291 & 9311 River Drive

Richmond

$20,400,000

200,505

$102

October 2014

4460 Jacombs Road

Richmond

$8,100,000

40,084

$202

August 2014

Industrial Team Kyle Blyth 604.647.5088 [email protected] Jeron Dillon 604.647.1330 [email protected] John Eakin 604.646.8399 [email protected] Michael Farrell 604.646.8388 [email protected] Rob Gritten 604.647.5063 [email protected] Kevin Kassautzki 604.646.8393 [email protected] Sean Keenan 604.647.1334 [email protected] Ryan Kerr* 604.647.5094 [email protected] Nabila Lalani 604.647.1342 [email protected]

2480 Viking Way

Richmond

$6,313,622

50,495

$125

August 2014

11180 River Road

Richmond

$3,030,000

27,015

$112

August 2014

John Lecky 604.647.5061 [email protected] Joe Lehman

12111 Bridgeport Road

Richmond

$8,900,000

40,700

$219

June 2014

[email protected]

11060 Horseshoe Way

604.757.4958

Mackenzie Leyland 604.647.1354 [email protected]

Bennett Lutes 604.646.8382 [email protected] Douglas McMurray 604.647.5082 [email protected] Gord Robson 604.647.1331 [email protected] Struan Saddler* 604.647.5077 [email protected] Mathew Sunderland* 604.647.1346 [email protected]

Terry Thies 604.646.8398 [email protected] Matt Thomas 604.646.8383 [email protected] Ian Whitchelo 604.647.5095 [email protected] Garth White* 604.757.4960 [email protected]

Richmond

$4,100,000

28,359

$146

June 2014

1639 Foster's Way

Delta

$4,250,000

22,548

$188

June 2015

6537 River Road

Delta

$4,750,000

9,550

$497

May 2015

For more information please contact:

Tilbury West Corporate Centre II - Phase II

Delta

$5,323,465

33,137

$161

May 2015

1659 Foster's Way

Delta

$4,700,000

17,280

$272

April 2015

Michael Keenan, Principal & Managing Director 604.647.5081 [email protected]

7046 Brown Street

Delta

$6,600,000

20,938

$315

March 2015

575 Ebury Place

Delta

$3,230,000

20,730

$156

March 2015

7464 Hume Avenue

Delta

$2,311,888

20,884

$111

January 2015

Ocean Ridge Business Centre

Delta

$11,000,000

77,101

$143

January 2015

7543 Vantage Place

Delta

$1,675,000

6,400

$262

December 2014

616-640 Chester Road

Delta

$4,800,000

46,151

$104

October 2014

7388 Hume Avenue

Delta

$2,625,000

18,190

$144

October 2014

1668 Foster's Way

Delta

$3,750,000

25,461

$147

August 2014

1500-1520 Derwent Way

Delta

$9,750,000

79,475

$123

July 2014

Tilbury West Corporate Centre II - Phase I

Delta

$1,602,029

11,203

$143

July 2014

7504 Vantage Place

Delta

$2,400,000

22,135

$108

June 2014

*Personal Real Estate Corporation

Andrew Petrozzi, Vice-President, Research (BC) 604.646.8392 [email protected] Khushboo Wanchoo, Industrial Research Manager 604.647.1345 [email protected]

Avison Young #2900-1055 W. Georgia Street Box 11109 Royal Centre Vancouver, BC V6E 3P3, Canada

continued from page 1

Vacancy remained stable in Richmond at 3.3% as of June 30, 2015, virtually unchanged from 3.1% at the same point in 2014. With no new supply recently added to Richmond’s industrial inventory and the municipality seeking to consolidate industrial operators in East and South Richmond, owner/users have had an increasingly difficult time locating suitable premises. Another factor complicating industrial development is the high cost of Richmond’s development cost charges to build new flex office/industrial space in comparison with other Metro Vancouver municipalities. This has encouraged the widespread retrofitting of older less efficient industrial premises. Lease rates have remained stable, but upward pressure could manifest if vacancy remains tight and retrofitted space starts to come available in the popular submarket. 

avisonyoung.com © 2015 Avison Young. 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.; DBA, Avison Young.