The two latest industrial builds planned for Vancouver will tilt speculative strata industrial development to near dominance in the city.
Thanks to soaring industrial land costs in Metro Vancouver, a bias towards strata development has skewed new development being delivered to include only limited amounts of traditional lease space, according to a third-quarter report 2020 from Avison Young.
Nowhere is the trend more pronounced than in Vancouver, where, of the 328,000 square feet of new industrial under construction, 172,000 square feet is strata, where the space is sold rather than leased.
The two new projects planned for South Vancouver by PC Urban will push the new strata development up by more than 154,300 square feet.
PC Urban has submitted a development permit application to the City of Vancouver for the two new strata industrial projects. They are to be built on a former metal recycling 2.2-acre site on Ontario Street and a two-acre site on East Kent Avenue, which was used as a storage yard. Construction is projected to complete in 2022.
“Demand for strata has been very resilient through COVID-19 and we’re seeing a ton of activity, in particular with PC Urban’s IntraUrban Brentwood in Burnaby which is 100 per cent sold and is now seeing re-trades and resales at prices well over $525 per square foot,” said Ryan Kerr, principal at Avison Young. “With low financing costs for buyers, we’ve seen a lot of groups previously leasing who are now looking to purchase, especially in a market where industrial rents are rising by 15 per cent a year.”
Additionally, said Kerr, there is very limited to no supply of new industrial strata anywhere in the Vancouver market.
“With vacancy rates down from 1.7 per cent earlier this year to 1.2 per cent today, and ongoing rising rental rates, new industrial strata allow owner-occupiers to control costs and build equity.”
Vancouver’s average industrial lease rates are now around $17 per square foot. It is not uncommon for new Vancouver strata industrial space to sell for north of $1,000 per square foot.
PC Urban’s first industrial strata development, IntraUrban Laurel in the South Vancouver area, sold out before construction was complete, a record for the industry. Its new Ontario Street development will consist of three buildings totaling over 82,000 square feet close to the SkyTrain Marine Gateway station, and will target flex-commercial uses, including flex office and retail components. The two-building East Kent Avenue project, with a total of 72,296 square feet, is aimed at light industrial users, including contractors and trades, the company stated.
“South Vancouver has a history as an industrial hub and is a sensible home-base for small businesses or tradesmen,” says PC Urban CEO, Brent Sawchyn. “Those companies need and want to stay in Vancouver but have very limited options.”