Wall Financial is mixing residential with industrial development, a first in North America, with its Strathcona Village project on East Hasting Street in Vancouver. All 280 condos in the development sold out at prices ranging up to $439,000. Now 54,000 square feet of industrial and commercial space has been divided and is being sold at $450 to $700 per square foot.
“There are a lot of eyeballs on this project,” said Russ Bougie, an industrial real estate specialist and principal with Avison Young, Vancouver.
Bougie said annual lease rates for Vancouver industrial space have doubled in the past 18 months to around $20 per square foot, even higher in some areas, partly because of soaring demand from the film and tech sector that has driven Vancouver industrial vacancy down to 1.4%, the lowest in Canada.
Meanwhile, demand from traditional industrial tenants remains rock solid in a region that is expected to post the highest gross domestic product among major Canadian cities this year and already has Canada’s lowest unemployment rate.
But the lack of industrial land – an acre can sell for $1.5 million or more – could force large distribution, warehouse and heavy industrial tenants to look elsewhere, warned Lee Hester, a senior vice-president with Jones Lang LaSalle in Vancouver.
“We will lose to Calgary, we will lose to Kelowna, we will lose to Seattle and we will lose to California,” he told a Vancouver real estate conference in November. “It’s already happening. Anyone north of 100,000 square feet [is] looking at those other regions.”
The BC Real Estate Association (BCREA), however, sees no downturn in industrial demand, noting that its commercial leading indicator (CLI) index was up 2.4% in 2016’s third quarter compared with a year earlier.
“Job growth in key commercial sectors and robust consumer demand led the CLI higher in the third quarter,” said BCREA economist Brendon Ogmundson. “A rising CLI points to continued strength in B.C. commercial real estate activity in 2017.”
Late in 2016, the federal government approved the $6.8 billion Kinder Morgan Trans Mountain pipeline expansion, which is forecast to generate more than $1 billion in construction and add to demand for industrial land and property in Metro Vancouver, starting as earlier as this year.