Vancouver’s natural assets, mountains and surrounding expanses of water, contribute to an exceptional setting and a high-quality of life for its residents. However, these geographic features also limit the amount of land available for development and, combined with a healthy economy, have led to very low vacancy rates in the area’s industrial and office markets. Those who wish to develop or lease office or industrial property in the Vancouver market should expect to pay significantly more than they did just a few years ago, according to three local experts who spoke to the NAIOP’s Board of Directors at the National Forums Symposium in Vancouver. They gave insights into the unique aspects of its market as well as the challenges and opportunities facing the Port of Vancouver.
Darren Cannon, executive vice president at Colliers International, stated Vancouver’s industrial vacancy rate currently stands at 1.9 percent, fueled by e-commerce, television production and demand for facilities at the port. Supply is so constrained, according to Cannon, that a tenant looking for 100,000 square feet of space right now would have only about three properties from which to choose. There is growth in multistory industrial warehouse strata space – a type of property ownership similar to that of residential condominiums wherein a property is divided into several units with individual title – with prices upwards of $700 per square foot within the city of Vancouver.
Vancouver’s office market is experiencing low vacancy rates primarily from demand by U.S. tech companies, according to Peter Muench, associate vice president at Colliers International. Tech companies are especially interested in operating within the “Cascadia Corridor”— the geographic area that extends along North America’s west coast—so they can efficiently sync and program their platforms in one time zone. The need for space in this corridor and the strength of the U.S. dollar has made Vancouver an attractive option in the tech sector. Amazon is partnering with WeWork to occupy much of the available space in central Vancouver and the combination of tech and coworking companies accounts for 73 percent of pre-leasing activity. As with the industrial market, office tenants looking for space for about 200 employees currently have only two available options in central Vancouver. This space limitation, coupled with demand, is driving the revitalization of C-class space in the market.
The Port of Vancouver is also feeling the pinch for space and the demands of the global economy. As Canada adjusts to the demands of e-commerce, the port of Vancouver is reconciling the need for cutting-edge facilities with its limited available space for growth. Marc Ballard, manager of real estate for the Port of Vancouver, estimated only 20 percent of the land surrounding the port is currently available for development; the port has one of the lowest land availability rates in North America. The availability of the port’s industrial properties is further constrained by their conversion into film and television studios and other alternative uses.
Additionally, the popularity of multi-tenant strata developments are limiting the availability of space for large, single-tenant warehouses. In order to operate most efficiently, logistics companies need expansive warehouse as close to the port as possible, but the lack of space has made it impossible to locate in Vancouver. Ballard stated, “Every 100 acres of industrial land lost results in $1.9 billion in lost economic potential.” The port is now undertaking several initiatives that will protect the remaining available industrial land.
- Vancouver’s geographic constraints limit the amount of developable land, causing upwards pressure on land values.
- Net rental rates for Class AAA office space will exceed $70 per square foot for the first time in Vancouver’s history.
- Office space in Vancouver will see continued increase in demand from technology and coworking sectors.
- Demand for sophisticated, logistic driven industrial properties at the port of Vancouver, where space is extremely limited, will drive multistory development.
NAIOP’s Vice President for Knowledge and Research Jennifer LeFurgy, Ph.D., directs knowledge and research activities and serves as the Editor in Chief of Development magazine.