Nov 19, 2014 - companies along with modest demand from manufacturing firms. ... Avison Young was a winner of Canada's Be
For Immediate Release (3 pages) Wednesday, November 19, 2014
Contact: Andrew Petrozzi (604) 646-8392 email:
[email protected]
Editors/Real Estate Reporters • Please click on link to view Avison Young’s Fall 2014 Metro Vancouver Industrial Overview: http://www.avisonyoung.com/fileDownloader.php?file=files/contentfiles/Offices/Vancouver/Research/2014/Vancouver_IndustrialOverview_Fall2014.pdf
Strengthening demand driving speculative industrial construction to new highs in Metro Vancouver Avison Young releases its Fall 2014 Metro Vancouver, BC Industrial Overview Vancouver, BC ─ Significant speculative construction in multiple Metro Vancouver industrial markets has served notice to tenants, owners and investors that leasing activity, demand for industrial product and regional economic conditions have produced expansion and acquisition opportunities after years of indecision and measured growth expectations. This shift in outlook has come as the result of rising absorption rates triggered by the activation of oft-delayed expansion plans and an increase in Metro Vancouver’s typically limited supply of sale and lease options for industrial users seeking to expand or enter the market. Overall Metro Vancouver industrial vacancy tightened to 3.6% at fall 2014, down slightly from 3.9% 12 months earlier. This decline in vacancy occurred even as the total industrial inventory rose more than 3 million square feet (msf) to 189.4 msf from 186.3 msf in fall 2013 – one of many recent examples of the strong demand for industrial space in the region. In the five largest industrial submarkets, vacancy tightened or remained unchanged compared with a year ago. These are some of the key trends noted in Avison Young’s Fall 2014 Metro Vancouver Industrial Overview, released today. Vacancy in Richmond, which declined to 2.5% from 4.4% a year earlier, recorded the largest drop in Metro Vancouver, which was primarily due to an active leasing market and a lack of substantial new product. Vacancy in Surrey rose slightly to 2.6% from 2.3% year-over-year as market activity included the delivery of more than 240,000 sf of new inventory and significant positive absorption. Burnaby, which recorded a slight decline in vacancy to 4% from 4.3%, remained very active with the addition of several new projects that did little to alleviate tightening vacancy. Page 1 of 3
Vancouver proper, which recorded an increase in vacancy to 3.2% from 2.5%, remained constrained due to a lack of new product and continued demand for the existing, inefficient industrial properties that make up a significant proportion of the submarket’s supply. And despite the addition of more than 1 msf of new inventory, vacancy in Delta remained virtually unchanged at 7% compared with 7.1% a year ago. “This wave of absorption of leased industrial space in the past 12 to 18 months has in large part been driven by the difficulty many owner/users have had acquiring suitable industrial premises to purchase,” comments Avison Young Principal Rob Gritten. “While developing strata projects continues to be a winning formula for many of the region’s industrial developers, low interest rates, constrained land supply and a lack of alternative ownership options continues to fuel strata sales.” Gritten adds: “Owner/users also choose to lease in order to meet immediate expansion needs and to await an opportunity to acquire larger, more efficient premises or to remain flexible for high-growth needs.” Increased leasing activity, delivery of new product and positive absorption of space has not translated into upward pressure on rental rates and is unlikely to do so in the near to mid-term. The average asking rate on a PSF basis in Metro Vancouver is $8.59 as of fall 2014, a decline from $8.74 a year earlier. Additional rents average $3.81 psf, which remain virtually unchanged from last year’s $3.86. Competitive pressure for BC to remain a cost-effective jurisdiction vis-à-vis Alberta has played a role in keeping rates stable, which eliminates volatility and provides cost certainty, but curtails rent increases despite expensive land costs. Industrial land prices, while high in comparison with other jurisdictions due to the geographical and political constraints placed on much of the region, have remained stable since approximately 2009. As a result, rents have remained static and have yet to surpass the peak reached in 2007/2008. Industrial users active in the market have represented a combination of logistics and distribution companies along with modest demand from manufacturing firms. The ongoing expansion of port facilities combined with rising container volumes and the decision by the Tsawwassen First Nation to proceed with a 1.2-msf warehouse as part of the native-owned Tsawwassen Gateway Logistics Centre (along with large-bay projects from Dayhu Group, Onni Group and Hopewell Development) are fuelling the bullish outlook for the continued demand for bulk space. “Construction activity in Campbell Heights in Surrey, an increasingly popular industrial node in Metro Vancouver, serves as a snapshot of the wide range of tenant and user demand currently in the regional market,” notes Michael Farrell, a Vice-President in Avison Young’s Vancouver office. “All the different sectors of demand are represented in Campbell Heights, including small, medium and large-bay lease options, build-to-suit developments and strata units.” “While industrial leasing activity in Metro Vancouver is expected to remain active in all segments of the market into 2015, these recent developments should increase product choice to tenants of all sizes who are seeking to expand throughout the market. This activity will direct new demand to those projects currently under construction or consideration,” he says. Avison Young’s Fall 2014 Metro Vancouver Industrial Overview includes a Q&A panel discussion with Dayhu Group’s Paul Tilbury, Onni Group’s Greg Wilks, Oxford Properties’ Page 2 of 3
Jeff Miller, Grosvenor Americas’ Michael Beattie and Murray DeGirolamo of Hopewell Development on the return of speculative industrial construction projects to the Metro Vancouver market. All five discuss the challenges and opportunities they identified in the market and the factors that led them to believe their respective projects would be successful. Avison Young is the world’s fastest-growing commercial real estate services firm. Headquartered in Toronto, Canada, Avison Young is a collaborative, global firm owned and operated by its principals. Founded in 1978, the company comprises 1,600 real estate professionals in 61 offices, providing value-added, client-centric investment sales, leasing, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial and multi-family properties. -end-
For further info/comment/photos: • Andrew Petrozzi, Vice-President, Research (BC), Avison Young: 604.646.8392 • Rob Gritten, Principal, Avison Young: 604.647.5063 • Michael Farrell, Vice-President, Vancouver, Avison Young: 604.646.8388 • Sherry Quan, Principal & National Director of Communications & Media Relations, Avison Young: 604.647.5098; mobile: 604.726.0959 www.avisonyoung.com Avison Young was a winner of Canada’s Best Managed Companies program in 2011 and 2012 and requalified in 2013 to maintain its status as a Best Managed company. Follow Avison Young on Twitter: For industry news, press releases and market reports: www.twitter.com/avisonyoung For Avison Young listings and deals: www.twitter.com/AYListingsDeals Follow Avison Young Bloggers: http://blog.avisonyoung.com Follow Avison Young on LinkedIn: http://www.linkedin.com/company/avison-young-commercial-real-estate Follow Avison Young on YouTube: www.youtube.com/user/AvisonYoungRE
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