Booming Industrial Markets: Metro Vancouver
We are often asked where to invest if we were investing in commercial real estate and without hesitation the answer remains the same, “within the industrial markets in a growing Metro Vancouver area.” From an investment standpoint, the industrial market currently offers it all; low vacancies, high demand on the sell side, low impact for landlord requirements, and highly desirable redevelopment opportunities under OCP’s when applicable.
In 2018 we saw Vancouver’s industrial lease rates surge by 29.1% over the last year followed by Beijing’s ranked second overall with a year-over-year increase of 19.8%. At the end of the fourth quarter last year, the Metro Vancouver area saw industrial vacancy rates dip below 1.5% and sub 1% in some markets. This equals growing annual returns for landlords and also indicates the high demand from tenants that continue to drive up lease rates year-over-year.
All of this together would be a perfect storm for investors if they could enter into the industrial landlord market, but as cities and municipalities try to scramble to create more housing opportunities, industrial land becomes a prime target for rezoning and increased density under current and future Office Community Plans also known as OCP’s. The sometimes-large land parcels combined with single or two-story buildings, create a great opportunity for developers and cities to increase the density of these areas and thus driving up land prices of industrial properties; creating an even more attractive exit for investors. If this has not peaked your interest, industrial properties are the cheapest of all commercial asset classes to acquire on a price per foot basis. Fraser Valley small bay industrial units can be found for as little as $300,000–$400,000 depending on the location and size. With most industrial and manufacturing zonings now expanding the type of tenants that can operate within, we are seeing tenants range from professional services all the way to small tech start ups take occupancy within the industrial sector. As office leasing pricing continues to increase while the vacancy rates dip to historical lows, we will see more and more office like tenants look to light industrial and industrial office spaces in the future.
Written by Cory Wright for William Wright Commercial
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