High demand for industrial units in Metro Vancouver is outpacing new supply and driving rental rates higher.
With an ongoing record low vacancy rate of less than 2%, even a 5% growth in inventory (more than 9.2 million square feet net) over the past 36 months has not done enough to meet demand, especially from the fast-growing ecommerce sector.
Avison Young reports that the industrial vacancy rate in the fall of 2018 has hit 1.5% in Metro Vancouver with rental rates have continuing to climb rapidly. The average asking net rent in Metro Vancouver is now at $11.43 psf, up from $9.99 psf a year earlier.
New build may be best for large operators
Tenants in virtually all markets are faced with either renewing their lease at notably higher rates or relocating further away from the region’s traditional core industrial markets to markets located further south of the Fraser River and further east in the Fraser Valley.
“Companies are increasingly looking for efficiencies, including consolidating multiple locations into a larger facility,” comments Avison Young Principal Russ Bougie. “Given enough lead time, larger companies currently have more options for a new build-to-suit than if they were to lease an existing building in almost all size ranges and markets.”
Market fundamentals remain strong, and demand from owner-occupiers and investors at near record levels is expected to continue for at least the next 18 months.