About 70 per cent of industrial real estate in Metro Vancouver is bought, not leased, according to a NAIOP panel of industrial experts, which estimated that at least 20 per cent of the space is bought by investors, not owner-occupiers.
The decision to buy rather than lease space is linked to the high costs for industrial land, which averages more than $1 million per acre, the panel explained.
Last year, 304 major industrial transactions in Metro Vancouver were strata sales, according to Mark Renzoni, COO and executive managing director for CBRE Canada, who chaired the February panel, with total sales of $207 million.
This year, the forecast is for $190 million in strata sales, with the decline based more on a lack of product than weaker demand.
Noting that there is a "wall of capital" looking for investment returns, the 5 per cent capitalization rate on industrial property is attracting both owner-occupiers and investors, said panelist Darren Cannon, executive vice-president of Colliers International. "I would go strata all day long," Cannon said.
The average price for new industrial strata space in Metro Vancouver is $178 per square foot, with existing space selling for an average of $169 per square foot. New smaller industrial bays, under 2,500 square feet, are demanding prices in the $194-per-square-foot range, the panel concluded.
The industrial vacancy rate in Metro Vancouver is 4.1 per cent.
from Western Investor March 2013
