Demand is expected to remain strong in the Lower Mainland’s retail and industrial property markets despite vacancy rates edging up so far this year.
According to CBRE’s second-quarter retail market report, the overall retail vacancy rate increased to 3.3% by mid-2013 from 2.9% at the end of 2012. Much of the increase was concentrated in the suburban markets like Surrey, Burnaby and Richmond in part because of the continued closure of Zellers stores in the Lower Mainland.
The reopening of stores as Target outlets over the next few quarters is expected to reduce the suburban vacancy rate.
However, the Zellers effect on vacancy rates has been offset by increased demand in other retail segments. Colliers’ second-quarter retail market report noted that vacancy rates in open food-anchored shopping centres have declined over the first half of the year. The greatest absorption levels in this segment were in Richmond, Delta, Maple Ridge, Pitt Meadows and Mission.
Overall, the report suggested that strong population growth forecasts in many of the region’s suburban centres will continue to attract more national and international anchor tenants at regional retail hubs, potentially boosting local foot traffic to support a more diverse mix of local retailers.
For industrial property, the region’s market remains tight despite a vacancy rate of 4.9% that, according to CBRE, is 20 basis points higher from a year ago. The unchanged rate results primarily from older large-format facilities that have yet to find tenants given the demand for newer facilities with higher ceilings located near major transportation routes. CBRE noted that most of the leasing activity thus far this year has been in new facilities with ceiling heights greater than 28 feet. Because there is limited availability of such property in the region, the market is expected to stay tight with far less supply of industrial land demanded for regional and national-scale users.Colliers noted that the lack of new land available for industrial use has already caused large distribution companies to forgo the Lower Mainland and locate in competing cities like Calgary.
