Strong debt markets and constrained supply are helping Metro Vancouver’s industrial market to bounce back, according to a report by Avison Young.
The Spring 2011 Metro Vancouver Industrial Overview, released yesterday, indicates investor desire for industrial real estate remains high, and new strata and some speculative construction are helping to satisfy tenant and owner-user appetites for expansion.
According to Avison Young principal John Lecky, more industrial tenants are seeking out relocation opportunities, as the market continues to improve.
However, limited supply of available industrial real-estate might temper the enthusiasm.
“The mindset of vendors is that – by and large – they are happy with their industrial real estate holdings,” Lecky said. “In order to motivate them to transact a scarce commodity like Metro Vancouver industrial real estate, cap rate compression is necessary.”
The report states vacancy rates on industrial property in Metro Vancouver continue to decline year-over-year as the lack of land and new development increases lease rates.
Overall vacancy currently sits at 4.5% compared with 4.7% in spring 2010. The vacancy rate remains above the 2.4% recorded in fall 2008, when vacancy rose above 2% for the first time since early 2006.
Avison Young predicts demand for strata industrial space will continue to rise based on limited supply and the low cost of borrowing, and will remain strong until interest rates appreciate considerably.
Rob Gritten, principal at Avison Young said, “Owning real estate is an inflationary hedge and with such pressures building in the short to medium term, the option to purchase is appealing to many owner-users.”
Jennifer Harrison