Growing inventory and new projects shift dynamics in Metro Vancouver's industrial market
For the first time in nearly a decade, Metro Vancouver’s industrial real estate market has seen vacancy rates climb above 3%, according to the latest report from Avison Young.
The industrial vacancy rate reached 3.1% in the third quarter, a 20-basis point rise from the previous quarter. The report noted that vacancy rates have risen for over nine straight quarters, an unusual trend for an area known for its high demand and limited availability.
“The last time the vacancy rate surpassed 3% was in Q2 2015, when it stood at 3.8%,” the report read. “Over the past two decades, vacancy rates have fluctuated between a low of 0.3% in Q2 2022 and a high of 4.7% in Q1 2010.”
Despite the current increase, Vancouver’s industrial vacancy rate remained among the lowest in Canada’s major cities. The availability of large industrial spaces has grown, with 18 options over 100,000 square feet available this quarter compared to just two-three years ago.
New projects and rent adjustments
Industrial construction in Metro Vancouver is on the rise, with 13 new projects breaking ground this quarter alone, the highest total area under construction in over a year.
Out of the 61 projects underway, 28% of the total space is dedicated to strata developments, up from 19% a year ago. Pre-sold strata units under construction have also seen an increase, rising from 20% in January 2024 to 34% by September 2024.
The report also showed that average net rental rates have slightly declined, though gross rents remained stable. Average net rents fell 2.8% quarter-over-quarter, landing at $20.74 per square foot in Q3 2024, down from the peak of $21.99 in Q3 2023.
However, additional rent costs have increased, which kept gross rental rates steady, with a slight decrease from $27.29 in Q3 2023 to $27.14 this quarter.
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Notably, North Vancouver and Vancouver continue to lead in high rental costs, with gross rents exceeding $30 per square foot, at $32.32 and $30.83, respectively.
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