Speculative industrial developers are confident B.C.'s Fraser Valley market will remain hot this year after posting $194 million in sales last year, up from $191 million in 2009, according to Avison Young’s Spring 2011 Fraser Valley, BC Industrial Report, released this week.
Avison Young classifies the communities of Surrey, Langley, Abbotsford and Chilliwack as the Fraser Valley.
“Rent levels throughout the Fraser Valley industrial precincts are beginning to rise as overall vacancy continues to decline,” said Avison Young broker Michael Farrell, who specializes in Fraser Valley industrial property sales and leasing. “Furthermore, investor demand is strong in the region, with a particular emphasis on well-leased, investment-grade properties.”
“We are witnessing a renewed interest in development sites as several local speculators, investors and users are re-entering the market,” said Avison Young broker John Eakin, a Fraser Valley industrial sales and leasing specialist.
Eakin adds that strata properties remain a popular option in the Fraser Valley as the low cost of debt encourages ownership when compared with leasing.
“With rental rates expected to rise further this year, demand for strata has increased dramatically in the Fraser Valley. We anticipate increased activity due to pent-up demand, which will put upward pressure on lease rates as inventory declines throughout the balance of 2011 due to requirements from expansion-minded owner/users,” Eakin said.
Capitalization rates in the Fraser Valley have declined to the 6.0 per cent to 6.5 per range from 7 per cent  in recent months as pricing strengthened. Strata industrial in the Fraser Valley ranges from less than $100 per square foot for large-bay sites to more than $200 per square foot for smaller spaces.  Beedie Group recently sold out 133,000 square feet of spec strata in Surrey’s Campell Heights industrial park; and Kuusamo Developments (BC) is building 11 units of strata industrial on spec in Surrey, totaling about 58,000 square feet.