Surging prices for Burnaby light industrial strata space reflects plunging suburban office vacancies that have fallen to a 17-year low as lease rates continue to climb.
“We expect the rising investor demand trend in the suburbs to continue as falling vacancy rates will result in lease rate growth,” said Tony Quattrin, vice-chairman of the national investment team at CBRE Vancouver. “Interest from domestic and foreign investors remains strong for the suburban office market, particularly along suburban transit stations. In fact, investors in the suburban office market are seeing returns up to 40 per cent higher than downtown Vancouver.”
Much of the action is in Burnaby. Among the top suburban office deals transacted in Q1 2018 were the remaining five of nine office buildings at Willingdon Park, totaling 488,811 square feet on 2.3 acres, as well as the Investors Group Metro Vancouver Portfolio, a collection of nine office buildings combined with industrial, totaling more than one million square feet across 31 acres.
Willingdon Park sold to an U.S. investor. A Canadian investor bought the Investors Group Portfolio.
The shortage of suburban office space and potential appreciation has helped attract smaller investors to light industrial projects in Burnaby, which often merge office and industrial use.
The latest example is the conversion of a 50,000-square-foot industrial/office complex in the Brentwood area, where PC Urban will offer the space as commercial strata, the first in the area in 20 years.
Commercial strata prices in Burnaby have increased 88 per cent in the past 10 years to more than $400 per square feet today, according to Avison Young. The price increases, Avison Young said, are a result of supply constraints exacerbated by the rezoning of the area’s industrial land into multi-family developments. There are currently zero vacant industrial strata units available for sale in the area, an Avison Young survey found.
Prices at PC’s InterUrban Brentwood start at $425 per square foot for units ranging from 2,700 square foot, which pencils to a starting price north of $1.1 million. All units have grade loading, 24’ ceiling heights, high efficiency lighting and sprinklers.