Industrial real estate sales in 2013 were dampened because of vendor misconceptions relating to potential land-use options, according to a January 20 Avison Young market report.
Many industrial property owners believe that at some point in the future, they will be able to have residential or mixed-use development on their properties, despite "strong indications to the contrary," according to Struan Saddler, a senior associate in Avison Young's Vancouver office.
"Vendors are astutely aware there is a finite amount of land and want to ensure they receive maximum value," Saddler said.
"This mindset has proven frustrating for purchasers who have sought to take advantage of low-cost debt to step up to meet already elevated vendor expectations and close a deal."
Sixty transactions worth around $83.6 million were recorded in Vancouver in 2013. This is the lowest dollar volume since 2010. By comparison, 2012 saw 74 transactions worth $119.1 million, due in large part to sales of units in new developments including the Rivershore Business Park and the Shoreline Business Centre.
The vacancy rate in Vancouver increased to 2.5% in the fall of 2013 from 2% one year prior. Avison Young said the increase is due to turnover in existing unoccupied buildings that are "physically obsolete." The only areas in Metro Vancouver that had lower vacancy rates were Surrey and North Vancouver, both at 2.3%.
In 2014, Avison Young expects deal volumes consistent with 2013 levels with prices remaining elevated as vendors continue to hold expectations of future land-use changes.
