Standing inventory in Kelowna’s industrial market is on track for absorption this year as buyers return to the market and leasing demand remains steady.
“There’s definitely momentum and we’re optimistic about this year, especially over last year,” said Travis Blanleil, an associate vice-president with CBRE Ltd. “We’ve seen demand start to return to the market, on both a sale and lease basis.”
Blanleil is part of the team marketing Stratosphere, a Beedie development at 2050 Pier Mac Way in Kelowna’s Airport Business Park that’s by far the largest project underway in the market.
Offering 144,914 square feet of space across 13 units, Stratosphere’s large-bay format is unique in the market and has attracted interest from multi-national groups.
“We’re seeing demand from local, national and multinational groups. They’re looking at getting into the Kelowna market if they’re not already established there,” Blanleil said. “Groups are no longer looking at it as a stop between Calgary and Vancouver; they’re looking at it as a strategic location to service that population.”
Yet the market has cooled since the heady days of 2022, when Beedie bought the 14.7- acre site. Hailed as the “largest single property industrial land transaction by dollar value in the city’s history,” Beedie paid $25 million, or an estimated $1.7 million an acre, for the property.
It’s now offering 8.5 acres of land back to the market, either for lease or purchase. The timing is right, given the renewed demand in the market and the looming lack of supply in what remains a land-constrained region.
“There’s not a lot of land, especially at scale, in the core of Kelowna, so we’re getting groups that are certainly interested in the land component that we have,” Blanleil said.
There’s also not a lot of space under construction, which means renewed demand this year will tighten availability next year.
“We forecast working through the existing inventory in the next 12 months and then be right back in a position where it’s a supply-constrained market,” Blanleil said.
A mid-year report from Colliers pegged Kelowna’s industrial vacancy rate at 4.1 per cent, up from 3.2 per cent a year earlier and one per cent in 2020. With 456,000 square feet of industrial space under construction, Colliers saw little chance of vacancies declining in the near future.
“Guys have had to pivot, and provide some inducements … but they’re still absorbing, and they’re still moving forward,” said Jeff Hancock, a Kelowna-based commercial broker with William Wright Commercial.
Hancock represents Lorval Developments Ltd., developer of Kyle Road Business Park, billed as West Kelowna’s “only large industrial purchase opportunity” with 115,000 square feet of space.
But like Blanleil, Hancock anticipates constraints down the road.
“We’re constrained up here when it comes to industrial land,” he said. “Some of these big pieces that are getting bought up that are in the path of growth, that you can tell will eventually be rezoned into some other use, that’s just going to continue to erode the overall industrial supply.”
He points to Mark Anthony Group’s purchase of the former BC Tree Fruits Co-op warehouse at 880 Vaughan Ave., Kelowna, a 5.2-acre property with 195,159 square foot of warehouse space. It's being offered to the market for $13 per square foot, or $15 per square foot for demised portions.
“I don’t think they’re approaching that as a long-term industrial play. That site certainly has some pretty significant redevelopment and repositioning potential,” Hancock said. “Down the road, you’re going to see that turn into something significant.”
