Six new projects planned for West Abbotsford will boost the amount of strata industrial space in the local market by nearly 80%, according to Frontline Real Estate Services Ltd.
The largest of the lot is Beedie’s Mason Corporate Centre at just shy of 168,000 square feet. Smaller projects include Martini Construction Ltd.’s Foy Business Centre and Bartek Construction Ltd.’s Mt. Lehman Business Centre.
All told, the projects total nearly 650,000 square feet and represent the first addition of strata space to the West Abbotsford market since 2009. (West Abbotsford is the area between Mount Lehman and Clearbrook Road.) This will increase the strata industrial space in the area to 1.45 million square feet by 2021, up from 810,000 square feet today.
“There was so much pent-up demand in that area and a lack of new product that had come on since 2009,” said Kyle Dodman, a broker specializing in industrial sales and leasing with Frontline.
The new space is primarily large and small units, with mid-sized units accounting for just 117,000 square feet.
Many of the units have dock loading, unusual in older construction because it was considered a waste of leasable space. However, it also meant that older space wasn’t always as functional as it could be.
An influx of more sophisticated builders such as Beedie, QuadReal Property Group and Hungerford Properties as well as Rockwell Pacific Properties Inc. signals a shift. The new generation of industrial space is more focused on meeting users’ needs rather than simply maximizing floor space, and this is particularly true of strata units.
Demand is coming both from within the market as well as from occupiers in markets farther west that have been priced out. This has put upward pressure on prices in Abbotsford, which have increased in some instances to more than $250 a square foot. This is 40% higher than last year.
This compares with rent increases of 8.7% in Metro Vancouver over the past year, according to the latest industrial market report from tenant representation firm Cresa Global Inc. It added that rents in the past five years have increased more than 55%.
Combined with a drop in interest rates, Cresa’s report says the strata industrial market is again on fire, with record prices being recorded across the region.
Fraser Valley crunch
Metro Vancouver’s tightest industrial market in more than a decade is being felt most in the Fraser Valley, according to Cushman & Wakefield Ltd.’s mid-year industrial market report.
“The Fraser Valley region has been a significant driver of these conditions with overall vacancy declining to 1.5% in the second quarter of 2019 from 3.1% in the third quarter of 2018,” it said.
Vacancies in Metro Vancouver as a whole stood at 1.7% at the end of the second quarter.
The result is that tenants are looking east, and this – as Cresa and Frontline both note – has put prices across the Lower Mainland in the same ballpark. The shift is supported by proximity to workers, drawn east by more affordable housing, and to distribution routes, including Highway 1, the Sumas border crossing and Abbotsford International Airport.
The blurring of lines between markets is clearly seen in the latest Colliers International report, which lumps Abbotsford and Chilliwack in with other submarkets in Metro Vancouver. Colliers pegs vacancies in the region at 1.5%, with Abbotsford sitting at the same rate. Chilliwack is exceptionally tight at 0.4%.
With the exception of Vancouver and North Vancouver, where net lease rates average above $17 a square foot, net lease rates across the region typically average between $9 and $12 a square foot. Metro Vancouver industrial space as a whole averages $11.76 a square foot. The average in Abbotsford is $10.79.
However, the submarket with the most new industrial space under construction continues to be Surrey, at 2.4 million square feet. •