Three years ago, the industrial market was riding a post-pandemic high. Driven by the surge in online commerce the pandemic ushered in and supply chain disruptions, demand for large-format warehouse space and smaller units for last-mile distribution and owner-occupiers priced out of larger space kept landlords hopping.
With an eye to the shortage of industrial land closer to the core, Denciti Development Corp. closed on two parcels totalling 12.6 acres north of Highway 1 at Lickman Road in Chilliwack in August 2021, its fourth major deal of the year.
Bought in partnership with Kadestone Capital Corp., 7985 Lickman Rd. and 43971 Industrial Way were a gateway opportunity – the eastern margin of Metro Vancouver and Abbotsford, and the entrance to the region’s industrial heartland for those heading west.
“From industrial to commercial to retail, we could even see a last-mile distribution facility or a national retail anchor tenant,” Denciti CEO Garry Fawley told Western Investor at the time.
In the years since, Denciti has developed Fraser Gateway Centre, a 4.5-acre mixed-use complex supporting local business growth, tourism, and employment needs with a 150-room dual-branded hotel by Marriott, Tim Hortons, and 15,000 square feet of retail space. The complex is set to complete this summer.
But a proposed light industrial development with 24 strata industrial units on the site’s northern parcel has yet to take shape.
While the site is a trophy location, Denciti listed the 8.15-acre property with CBRE Ltd. last year in response to the evolving industrial dynamic in the region.
“A firm our size has to react to the market,” Fawley said. “We always look at it in a very proactive way, in terms of what the best options are.”
With interest rates returning to palatable levels, owner-occupiers are once again looking at investing in space, but Denciti’s investment committee wanted to keep its options open.
“If we get the right deal, we’ll move on because we can redeploy,” Fawley said.
“All developers are looking at what their options are,” said Chris MacCauley, executive vice-president with CBRE Ltd. in Vancouver, who holds the listing for the property with Travis Blanleil. “When you have some economic uncertainty, everybody wants to keep things open and assess their options.”
Beedie, for example, is seeking buyers for 8.5 acres at 2050 Pier Mac Way in Kelowna, part of a 14.7-acre site it bought in 2022 for an estimated $1.7 million per acre. The $25 million deal was hailed at the time as the “largest single property industrial land transaction by dollar value in the city’s history.”
Conwest Developments Ltd. is also considering options on 50 acres it holds in Surrey.
The long-term strength of the industrial market means most owners can afford to be patient, a fact underscored by pricing.
While demand is weaker, potentially affecting short-term pricing, well-located properties such as Denciti’s site on Lickman Road have continued to appreciate in value.
Four years ago, the parcel sold for nearly $1.8 million per acre. Today, the sale price could be in the range of $4 million per acre, consistent with other recent transactions along Industrial Way in Chilliwack.
“The value of this site is only going to go up and up because it’s irreplaceable,” Fawley said.
The appreciation comes even as space has returned to the Metro Vancouver market and vacancies have risen, hitting 5.3 per cent at the end of 2024, up from 3.2 per cent a year earlier. While lease rates have fallen, they remain above $20 per square foot, and space under construction has been resilient even as completions have slowed.
“There’s still a lot of optimism in the industrial market; it’s going to be resilient, our fundamentals are too strong,” MacCauley said.
Vancouver receives 90 per cent of Canada’s imports from Asia, which in turn make up 80 per cent of port volumes. Moreover, close to 60 per cent of those goods move through local industrial space, MacCauley added, insulating the region’s industrial sector from tariff threats from the U.S.
The attitude is similar in Calgary, which has positioned itself as a regional distribution hub for Western Canada. Tariffs may have chilled investment decisions, but vacancies are trending down.
“Domestic distribution and supply chain networks, things for the most part are going to continue going on the way they have,” said Paul Marsden, executive vice-president and a partner in the Calgary office of Colliers Canada. “We’re in a 3.3 per cent vacant market and declining. We have 1.3 million [square feet] under construction, and over half of that is preleased.”
The conditions reflect a tighter market in the first quarter than at the end of 2024, heralding a more competitive market for tenants.
Marsden believes most landowners would entertain offers on a portion of their industrial holdings, but few developers are willing to write offers until the market outlook stabilizes.
Alberta’s industrial sector also shows signs of diversifying beyond the logistics sector.
“We’ve been trying, for a lot of years, to make ourselves a regional distribution hub for Western Canada, veering away from some of the commodity cycles that we’ve had,” Marsden said.
Diversification ensures a more consistent flow of property taxes to municipal governments than boom-bust sectors while creating a greater range of jobs.
Suppliers to the renewable energy sector are seeking research, development and manufacturing space, while the province is seeking to attract $100 billion worth of data centre investment by 2030.
O’Leary Ventures announced plans Dec. 9 for a $70 billion industrial park in the Municipal District of Greenview near Grande Prairie dubbed “Wonder Valley,” which promises to be the world’s largest data centre.
It followed eStruxture Data Centres’ announcement six weeks earlier for CAL-3, a 90 MW computing centre with 300,000 square feet of space in Rocky View County north of Calgary that’s set to come onstream next year.
“Alberta, you’ve got land available for days,” Marsden said, noting that a stable electrical grid and business-friendly municipalities make for an attractive environment.
Data centres and suppliers like Calgary-based CoolIT Systems, which recently secured a 149,000-square-foot space for a research and manufacturing facility with Colliers’ help, are a small part of Calgary’s industrial mix but point to how uses are evolving.
Back in B.C., the shortage of outdoor storage space has put a renewed focus on what owners are charging for land.
“For the longest time in Vancouver, your highest return was to maximize site cover on land,” MacCauley said. “Now what’s happening is there’s a lot of demand for industrial land, but not necessarily to have a building on it.”
But with land rents in the range of $4.50 a square foot, the returns are little more than holding income.
“You cannot buy land and get a return,” said MacCauley, who was part of the CBRE team involved in the sale of 1371 McKeen Avenue in North Vancouver.
Dream Industrial REIT acquired the 27.5-acre property from Wesbild Holdings Ltd. on Jan. 31 for $143 million, an average of $5.2 million an acre.
With values like that, land rents would need to be twice as high in order to justify holding the land long-term. With demand on the rise, vacant land will continue to be in the path of development, pushing outdoor storage, truck parking and other uses further out from the core.
“You can have great economic throughput without having to have a building on it. There’s still a need for industrial land without buildings,” MacCauley said. “But we don’t have any vacant land, so it’s never going to be a huge driver in our market.”
