Frank O’Brien, (WESTERN INVESTOR) — With some of the largest residential and retail developments underway, Burnaby and Coquitlam are headlined as among the hottest housing markets in Metro Vancouver – but the record-setting industrial sector is also turning heads.
Burnaby set an industrial sales record two years ago as 73 properties traded hands for $230 million: in the first eight months of 2017, the 22 deals had already hit $107.6 million. The biggest sale to that date was a 279,900-square- foot warehouse on Spur Avenue that sold for $33.85 million.
“The Burnaby industrial vacancy rate is 2.8 per cent,” Avison Young noted in a mid-2017 report, but cautioned that lease rates are rising and the industrial land base is shrinking. This in turn has spurred more interest from investors, including heavy-hitters like Beedie Developments, Conwest Group, Kingsett Capital and Oxford Properties Group.
Virtually all of the recent new industrial space in Burnaby has been speculative, including the next phase of the Riverbend Business Park in South Burnaby, where Oxford is completing 327,317 square feet.
Beedie completed and sold out 115,842 square feet at Crescent Business Centre at the end of last year.
PC Urban is also in the mix, with an industrial strata project in the Brentwood area. Pricing starts at $380 per square foot.
In Coquitlam, investors have also plunged into a tight industrial market – the vacancy rate is 1.6 per cent, which is up from a record low of 0.5 per cent a year ago. The industrial lease rate has shot up to an average of $11.07 per square foot, third highest in Metro Vancouver.
The limited industrial space in Coquitlam has spurred strata speculation. Teck Construction LLP sold out all 27 units of its spec play at Coquitlam’s Nicola Avenue Business Park before the shovels hit the ground. The 68,700-square-foot complex opens this spring.
Beedie Development has a limited amount of industrial space unclaimed at its Fraser Mills site in Coquitlam, part of a new, massive mixed-use development. The main industrial part is 120,000 square feet in two buildings that can accommodate tenancies of 10,000 square feet to 80,000 square feet.
There has been a “ton of interest”, said leasing agent Greg Lane of Colliers International. Beedie is considering only tenant applications that match a specific profile.
“We are taking our time. We want to have job creation, such as clean manufacturing,” Lane said. Beedie also has a preference for local companies.
The first tenant, with a separate 68,595-square-foot building that opens this spring, fits the profile: AG Hair, a large, high-employee Burnaby cosmetic maker that ships product around the world.
Ironically, Fraser Mills was once a large, heavy-industrial site but residential will mostly swallow it up.
That’s worrisome, said the CEO of the Tri-Cities Chamber of Commerce, Michael Hind.
Hind said other than a 120-acre parcel of land in Port Coquitlam being developed by the Kwikwetlem First Nation there’s not much industrial land to be had anywhere in the Tri-Cities, which includes Coquitlam.
David Munro, Coquitlam’s economic development officer, agreed there’s a lack of industrial but he said it’s also creating opportunities for businesses fleeing even higher rental rates or property prices closer to Vancouver.
“Yes, we are losing businesses, but there’s other businesses that are coming in and taking up those spaces,” Munro said.
Beedie’s recently revised plans for its 89-acre Fraser Mills – formerly a sawmill that employed hundreds – will have more homes and less business space than earlier versions, however.
The company’s plans, which have yet to receive all of the required council approvals, have evolved considerably.
The developer wants to add 1,000 residential units to the 3,400 to 3,700 units currently approved, which would mean increasing the number of towers from 10 to 15. In the new proposal, the tallest building height would rise from 38 to 41 storeys.
The proposed industrial space has been nearly cut in half.
Ryan Beedie, president of Beedie Living, said the changes will make the waterfront development, which could start this summer and be built over the next decade, more “economically viable.”
That is understandable. More residential means more money.
In Burnaby, the $2 billion Amazing Brentwood project by Shape Properties and partners will include more than 6,000 strata units in 11 highrise towers when it completes near the Brentwood SkyTrain station. Shape is also developing the City of Lougheed on the Burnaby-Coquitlam border, with 23 residential towers on 40 acres around the Lougheed SkyTrain station.
In both projects, future condominiums are expected to sell well north of $800 per square foot.