If Metro Vancouver real estate were a poker game, industrial developers would be the high-stakes, hard-eyed players at the table.
By Frank O'Brien
This year, speculators have anted up 1.5 million square feet of new industrial space and plan to shove even more onto the market in 2015, gambling that growing demand will covered their bets.
“[We] took on a build and they will come mentality,” said Greg Wilks, vice president of commercial property management and leasing with Onni Group, explaining its speculative development of the Golden Ears Business Park in Pitt Meadows, Metro Vancouver’s largest industrial project. Being built in phases, the park will eventually cover more than 1.5 million square feet. “We anticipate building another 350,000 square feet of spec product to kick off phase two in 2015,” Wilks said.
The developers may be gamblers, but they are not stupid, suggests figures released by Avison Young.
Even as three million square feet of new industrial space came onto the market in the past year – pushing the total inventory to nearly 190 million square feet – the overall industrial vacancy rate fell to 3.6 per cent, down from 3.9 per cent a year earlier. In Richmond, Surrey and Langley, less than 2.6 per cent of industrial space is vacant, Avison Young reports.
The current speculation, which often hinge on selling industrial space rather than leasing it, involves both private developers and First Nations.
Dayhu Group is building the first of two 440,000-square-foot buildings on spec at the Boundary Bay Industrial Park, aimed at warehouse and distribution clients using the new South Fraser Perimeter Road.
Also in Delta, the Tsawwassen First Nation, with partners, is developing its Tsawwassen Gateway Logistics Centre, beginning with a 1.2 million square foot warehouse.
Speculative developments are also charging ahead in Surrey’s Campbell Heights area and in New Westminster.
The developers may not be stupid, but some are gamblers. In Delta, for example, where more than two million square feet of speculative space is planned or underway and 265,000 square feet will hit the market this year, the vacancy rate has spiked to 8.6 per cent the highest in the Lower Mainland, according to a survey by Colliers. In Pitt Meadows/Maple Ridge, also active with speculative building, the vacancy rate is at 5 per cent, up from 3.3 per cent in the fall of 2013.
Also, Avison Young notes that industrial lease rates are edging lower.
“Delivery of new product and positive absorption of space has not translated into upward pressure on rental rates and is unlikely to do so in the near to mid-term,” the commercial real estate agency noted.
The average lease rates for industrial space is now $8.59 per square foot, down from $8.74 per square foot a year ago.
