However, fundamental drivers of market strength will remain in play for the foreseeable future
Amid frenzied market activity, Metro Vancouver’s red-hot industrial sector may start to normalize and return to pre-pandemic levels as the Bank of Canada introduces more interest rate hikes this year, Avison Young has predicted.
This is despite sustained demand and an industrial vacancy rate of 0.5% in Q1 2022, the lowest across North America for that period.
“Demand, sale prices, and lease rates will likely continue to escalate rapidly – but not at the warp speed prevalent in recent months and years,” Avison Young said.
Still, the report offered assurances that this deceleration is not a major cause for concern.
“Even after the market experienced more than a decade of exceptionally robust demand, the COVID-19 pandemic induced two years of accelerated growth. Normalcy, as it relates to the market’s frenetic nature, may return,” Avison Young explained.
“But there is still an extremely high need for industrial space across the region, and traditional market pressures – ongoing strong demand, lack of new and existing supply, and perpetually tight vacancy – will prevail for years to come.”
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Vendors will remain well-positioned to capitalize on their pandemic-era gains, while tenants will continue seeking space despite limited new and existing supply, Avison Young said.
“More development projects are expected to be announced in coming months as reduced supply-chain bottlenecks make some construction materials more affordable, lease rates and resale prices continue to reach record levels, and owner-occupiers continue to be challenged to find space that suits their needs,” the report added.
Ultimately, while rate hikes could become a notable obstacle in the near term, supply constraints will continue to dominate Metro Vancouver's industrial market dynamics.
“Leasing demand will continue to outpace supply by a wide margin as rent increases continue to accelerate,” Avison Young said.
“As a result of the overall prevailing pressures, some existing tenants may need to relocate, and new tenants may have to choose different areas, within the region. Tenants who have secured spaces will be well-advised to lock them up for as long as possible.”
