One of the hottest segments of the industrial real estate market in recent quarters has been strata-titled space, and Surrey is no exception.
Burnaby’s Beedie Group has the final bay of its 135,000 Campbell Heights I development under contract, while the initial phases of Martini Construction Ltd.’s Rymar Business Centre in Cloverdale have sold out, prompting applications on the next two buildings.
“Demand has been extremely high since the second week of December,” said Jordan MacDonald, principal of Frontline Real Estate Services. “We went from having six deals to 22 deals within a week – it just absolutely blew up.”
Moreover, pricing has been strong. Units in Rymar are fetching $165 a square foot, while strata sale prices for the past six months have averaged $171 a square foot – up $10 a square foot from the previous six months.
On the heels of one of the strongest starts to any year for local industrial sales, developers are not only planning more product but even a small amount of speculative construction.
In addition to 47,000 square feet at Rymar, there are 70,000 square feet of small-bay strata space planned at Kuusamo Business Park while Beedie is planning an additional 100,000 square feet.
“Guys wouldn’t dream of building out spec lease space, or even a lot of the spec strata space 12, 18 months ago, but now we’ve got guys calling us up looking for projects,” MacDonald said.
Vacancies in Surrey’s office market hit a record low at the end of 2010, but the outlook for 2011 points to a sharp rise.
Brokerage firm Avison Young is forecasting vacancies across Surrey to reach 7.1% in 2011, up from 2.5% at the end of 2010 given the volume of new construction planned for the city. But Avison Young principal Darrell Hurst believes the actual scenario may not be so dire.
“It’s just to give us some sense of what may happen,” Hurst said, noting that the forecast doesn’t account for preleasing in the 198,000 square feet set to complete in three projects this year nor additional deal activity.
But with demand in Surrey’s downtown core alone trending in excess of 300,000 square feet a year, Hurst is optimistic.
“We fully anticipate that we will exceed the historical average [absorption], and we won’t get as high as 7%,” he said.
Hurst said interest in Surrey from large-scale tenants is beginning to increase, driven in part by transit connections to Surrey’s city centre and the prospect of major new development that will transform the centre into what’s long been touted as Metro Vancouver’s second downtown.
Concord Pacific Group’s completion late this year of the first two Jung Ventures Inc. towers acquired in the wake of the Lehman Bros. collapse in 2008 will boost retail activity in the King George SkyTrain area.
The towers, the first phase of the Park Place and Park Avenue developments that will be home to more than 5,000 people when fully built out, will add 12,500 square feet of retail space to the market. In addition, Concord Pacific is building 15,000 square feet on two levels adjacent to King George station, with a view to providing amenities for commuters and an anchor for the nascent neighbourhood it’s developing.
Concord Pacific vice-president of sales Grant Murray said the aim is to provide shops and services catering to commuters while the lower level will face the courtyard surrounding the towers. Potential tenants include coffee shops, medical and dental offices, a child-care facility and other services.
“What’s exciting for us is the dynamics of that whole area becoming a Surrey civic centre area, and also the emergence of a lot of people moving into that area,” Murray said. “We’re excited about the professional clientele that’s going to be moving into the building.”
Murray said lease rates will be consistent with the North Surrey average, which Colliers International pegs at $20 to $30 a square foot.