Despite a period of economic uncertainty, the industrial market in Metro Vancouver appears to be holding steady, and even growing.
A new report published this month by Coldwell Banker Richard Ellis (CBRE), the world's largest commercial real estate services and investment firm, shows multiple indications of growth from Q1 to Q2, whether it's the average price psf, square feet under construction, or availability rates.
Industrial lease rates continued on their upward trajectory, reaching $18.93 psf. In Q1, the rate was $17.40. After a brief dip in Q3 2020, industrial lease rates psf have been quickly increasing, boosted in part by newer deals that saw record year-one rates above $20.00.
Significant lease deals signed in Q2 include TransLink signing on as the new tenant of 14260 Knox Way in Richmond. The agreement for the 113,688-sq. ft distribution facility was reached in July, and was the biggest new lease of the quarter, by square-footage.
The Golden Ears Business Park in Pitt Meadows, on 192652 Airport Way, signed two new tenants to fill out the Phase 3 area of their site. The first tenant was UniVar, a warehousing and distribution company, for 78,270 sq. ft. The second tenant was VK Logistics, a third-party logistics company, for an even 60,000 sq. ft.
Out in Delta, another third-party logistics company, Containerworld Forwarding Services, signed on as a tenant for a 48,000-sq. ft space on 480 Audley Boulevard.
City-by-city, Burnaby had the highest net asking lease rate, at $21.02 per square-feet. It also had the second-lowest availability rate, at 0.6%, and the second-lowest vacancy rate, at 0.2%.
Vancouver, Richmond, New Westminster and the Tri-Cities, were all also above $20.00. The city with the lowest rate? Chilliwack, at $14.82.
Vancouver had the highest availability rate, at 1.7% and the second-highest vacancy rate, at 1.1%, both of which are perhaps a reflection of the city having the highest average additional rent psf, which was at $8.47, about a full dollar more than North Vancouver and nearly double that of several other cities in Metro Vancouver. Vancouver also had the highest gross rental rate psf, at $29.04, $2.52 more than the next highest, which was Burnaby.
According to CBRE, "rising labour, land, and raw material costs are causing developers to favour speculative projects over costly build-to-suit options." They also point out that energy costs rose sharply in Q2 due to the ongoing conflict in Ukraine, and that "a variety of factors of production have undergone tremendous price fluctuations since Q1 2020."
On labour, CBRE sees "minimal improvements in the labour participation rate", which will affect hiring costs. They see that the "tightening of the labour market" will generate pressure to raise wages, increasing budgets "on top of already globally leading rental rates."
Concluding their report on the market in Vancouver, CBRE said that "although signs point to a market inefficiency, strong fundamentals coupled with deep embedded spending will continue to drive growth among industrial development."