Fraser Valley industrial real estate developers are rolling the dice with a record amount of speculative construction that is causing a white-knuckle reaction in some quarters.
“Local landlords in the area have expressed concern about the amount of large-block space coming to the overall Metro Vancouver market in the next six to 18 months and the space’s potential impact on vacancy and rental rates,” said Avison Young’s John Eakin, a vice-president in the Vancouver office specializing in industrial sales and leasing.
The concern may be understandable. According to Avison Young, 1.4 million square feet of new industrial space will hit the Fraser Valley market by this time next year, “with still more to come.”
So far, the heady construction pace has not driven vacancy rates much higher. Vacancy rates in Surrey (2.9%), Maple Meadows (3%) and Abbotsford (4.6%) have risen slightly compared with a year ago, while vacancy in Langley (2.8%) tightened, Avison Young reports.
At least 120,000 square feet of the new speculative space is Surrey strata projects, where the industrial units are sold, rather than leased.
Bramwell & Associates Realty Advisors Inc., an appraisal firm, estimates that existing Surrey industrial space sells for $178 per square foot, but new space can sell for more. Small and mid-bay space also appears to capture higher prices. For example, in March, a buyer paid $326 per square foot for a 4,300-square-foot industrial unit on the Langley Bypass in Surrey.
Speculators are betting big, based on the rising prices of Fraser Valley industrial land. In the past year, there have been six industrial land sales in Surrey that exceeded $1.2 million per acre, with half of these for more than $1.5 million per acre, according to Avison Young. Campbell Heights in Surrey represents one of the last few sources of large-format freehold industrial land in Metro Vancouver.
