Speculators are going all-in on Metro Vancouver industrial real estate, gambling to sell space into a market that is starting to rival the residential sector with multiple bids and soaring prices.
In East Vancouver, industrial strata space is selling for up to $550 per square feet, up at least 10 per cent from a year ago. An aging industrial site on Clarke Drive and East 7th Avenue was recently snapped up for the equivalent of $18 million an acre, noted Boe Iravani, vice-president of Cushman & Wakefield.
“The industrial market [in East Vancouver] has changed,” Iravani said, explaining that demand has shifted from renovating and leasing older buildings to demolition and redevelopment into strata space.
An example is Conwest Development, which outbid competitors this month for an industrial-zoned city block near East Hastings and Victoria Drive. Conwest plans to develop and sell 200,000 square feet of multi-level light industrial space on the land.
Vancouver’s industrial vacancy rate has plunged to 2.1% – the lowest of any major Canadian city – according to Colliers International.
Speculation has also taken hold in Burnaby, where “overwhelming demand “ has driven industrial vacancies to record lows of around 1 per cent, reports Avison Young.
Right now, 1.3 million square feet of industrial is underway in Burnaby and New Westminster, all of it being built on speculation.
So far, gamble is paying off for big developers.
Beedie Development Grouppre-sold more than 120,000 square feet of its latest industrial strata project in Burnaby, while Conwest sold out 121,700 square feet in a Burnaby complex that doesn’t complete this fall.
When a Burnaby window-manufacturing site came to the market this spring on North Fraser Way, the half-acre parcel drew multiple bids and sold for more than $6 million.
“These stand alone industrial buildings are attracting multiple offers and are generally under contract within weeks,” said Avison Young principal Ross Bougie. He forecast more business owners will consider selling their property “to capture the premium pricing available.”