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Industrial strata catching on

More businesses are looking to buy, not lease, new industrial space in Metro Vancouver and the lure is as much about potential appreciation as securing property in a tight market.

More businesses are looking to buy, not lease, new industrial space in Metro Vancouver and the lure is as much about potential appreciation as securing property in a tight market. A study from Avison Young shows that stratas accounted for 38 per cent of industrial sales last year, compared to less than 30 per cent three years ago. The trend to ownership is expected to continue this year.

"Constricted availability and high land prices are encouraging demand for strata development," said Avison Young principal John Lecky.

It is more expensive to buy than lease industrial space, but small owner-users rationalize the purchase because of potential equity returns, Avison Young suggests. Also, modern strata space offers more efficient layouts and higher floor space capacity than much of the older industrial property being leased on the market.

Prices for new industrial space are around $200 per square foot, which is down from an average of $227 at the peak in 2008. Most of the strata unit sales are in the 1,100 square feet to 3,200 square foot. range, which fits many small businesses. The industrial vacancy rate across Metro Vancouver is now 3.5 per cent, up from 2.6 per cent mid-last year, but still fairly tight. Some strata buyers may count on down-the-road leasing as a hedge against their investment. Small industrial bays, the most popular purchase, lease for from $8 to $10 per square foot, depending on location.