Industrial squeeze
Surveying the latest industrial market reports, it seems that there’s no time like the present to jump into the market.
According to Avison Young, the current wave of industrial construction, set to complete this year, is occurring on land that cost little relative to where values have soared in recent years.
“As developers replenish their land banks, that historical cost advantage, which helped offset rising land prices, will be exhausted and costs will inevitably rise,” the brokerage reports.
Greenfield sites are rare while brownfield sites require expensive remediation on top of the land value.
This means owner-occupiers who want to acquire premises and control occupancy costs had best do so now, by buying either existing freehold buildings or strata-titled properties that suit their needs.
Yet strata transactions were down in the first quarter of 2015, and while seasonal factors were partly to blame, Kyle Dodman, an industrial broker with Frontline Real Estate Services Ltd., said it’s a sign of things to come.
“There’s lots of new construction becoming available throughout 2015, but after that it’s a little bit up in the air,” Dodman said. “There’s not a whole lot of strata planned beyond 2015, and there’s a large market for it, so you’re going to have to see an increase in pricing.”
Investment steady
CBRE Ltd. reports that Vancouver bucked the national trend of lower investment volumes in the first quarter of the year, with an 80% increase in aggregate values, adding up to more than $1.25 billion worth of investment sales.
Activity was led by private Canadian investors, who continued to drive market activity countrywide with “an unusually high” 52.5% of acquisitions, CBRE’s report said. While land sales dominated, accounting for more than a quarter of the investment, industrial investment was the runner-up, at $236.1 million.
While industrial investments were down slightly from the last quarter of 2014, overall volumes “continue to be at near peak levels,” according to RealNet Canada Inc.
The lack of available assets is driving prices, and CBRE research director Ross Moore said some good-sized deals are coming together for later this year.
“The market is good, upward price pressure is pervasive, and demand is well in excess of supply,” he said. “[It’s] not a whole lot different from a year ago.”
Townhome sales strong
Three weeks ago, this column noted that townhomes were among the housing types helping to boost density in White Rock.
Now, Fifth Avenue Real Estate Marketing Ltd. reports that townhomes account for upwards of 70% of new home sales in the Fraser Valley as a whole.
“As the cost of single-family housing has greatly increased and supply has become more limited, the townhome has become more acceptable,” the report states. “Based on a recent survey of 40-plus industry leaders, 96% of those surveyed believe the townhouse sector will continue to advance to meet the growing consumer demand.”
Research by Vancouver-based market research firm Urban Analytics Inc. indicates that the first three months of 2015 saw more townhomes sold than in any quarter in the past five years.
On the resale side, Real Estate Board of Greater Vancouver statistics indicate that townhome sales rose to 3,084 units in the first five months of 2015 from 2,253 in the same period of 2014. The benchmark price in the board’s area rose 6.4% from a year ago and now sits at $501,000.
Similarly, townhome sales in the Fraser Valley Real Estate Board’s jurisdiction topped 2,305 during the period, up from 1,273 during the first five months of 2014. The benchmark price was $303,100, up 2% from a year ago.
For the Lower Mainland as a whole, the benchmark price is now $415,500. •
