Metro Vancouver’s suburban office market continues to exhibit “resilience” when compared to downtown, but it is industrial demand that will define real estate action in the ‘burbs over the next 12 months, analysts suggest.
While the office market calms, the industrial sector continued to roar, accounting for 72 per cent of the total commercial real estate transactions in Metro Vancouver during the first half of this year, according to Avison Young.
Avison Young agents were involved in what is being hailed one of the largest industrial sales in the Fraser Valley this year, with the September 24 share sale to Bosa Properties Inc. of a 37-acre package with 460,000 square feet of buildings and additional density available.
The property, at 44500 and 44688 South Sumas Road and 6333 Unsworth Road, Chilliwack, was purchased from Legacy Pacific Land Corp.
Even with a mere 2.2 per cent vacancy rate, Chilliwack is tied with Surrey with the highest industrial vacancy in the Fraser Valley, where the overall average was 1.4 per cent at the end of Q3, according to Cushman & Wakefield data.
So far this year, more than 758,000 square feet of industrial space has been leased or sold in the Fraser Valley, another 1.33 million square feet was absorbed in Burnaby and more than one million square feet was taken in Pitt Meadows. Still, the overall industrial vacancy in the suburbs surrounding Vancouver is a tight 1.2 per cent, among the lowest in North America.
Relief is coming, however. There is approximately eight million square feet of new industrial space under construction in the suburbs, including nearly 300,000 square feet in Coquitlam, where the Q3 industrial vacancy was zero per cent.
Office sector
The suburban office vacancy rate increased slightly in the third quarter (Q3) from the second quarter, to 7.8 per cent, and total absorption of space went negative by 59,200 square feet. But not all markets saw a downturn, according to NAI Commercial, Vancouver, which described the sector as “resilient.”
Surrey, which makes up 18 per cent of the suburban market, witnessed a decrease in its office vacancy rate to 7.2 per cent, from 8.3 per cent in Q2. A major lease deal in the quarter was the BC Cancer Society taking 11,600 square feet of sublease space at the King George Hub on King George Boulevard.
Burnaby, constituting 40.6 per cent of the suburban market with a total of 25.3 million square feet of office inventory, saw its vacancy rate rise to 9.3 per cent from 8.8 per cent in the second quarter, despite leases of from 10,000 square feet to 15,000 square feet at, respectively, Brentwood Office Centre and Kings Crossing.
Richmond, the second-largest market with nearly 5 million square feet, also experienced an increase in its vacancy rate, to 9.3 per cent, from 7.9 per cent, quarter-to-quarter.
Across the suburban markets, total new construction added 414,000 square feet, while 243,173 square feet was leased in the three month period.
The office sublease space expanded, growing to 516,958 square feet, up 27 per cent from the second quarter. This constitutes more than a quarter of all the available office space in the suburban markets, NAI reported.
