In its Industrial Real Estate Market Report, Newmark Knight Frank Devencore reported that the industrial real estate market in Metro Vancouver has been somewhat slower to recover from the 2008-2009 recession than the office leasing sector. However, Newmark Knight Frank Devencore also notes that a number of signs point to an economy that is gaining strength and momentum, and expects that the market will see moderate but steady growth in the months ahead. Vacancy rates vary significantly throughout Metro Vancouver, from a high of approximately 7.5 per cent in Delta, to 5.2 per cent in Richmond, 3.5 per cent in Surrey and 3.0 per cent in Vancouver itself, so the various submarkets must be carefully researched to isolate the best leasing opportunities.
“In 2011, we anticipate a gradual increase in demand for quality industrial space, and overall vacancy rates should drop as major blocks of space have been taken up and are now in short supply,” said Jon Bishop, vice-president and general manager of Devencore Company Limited. “And because there is a minimal amount of new spec construction taking place, there will likely be upward pressure on asking rental rates in the coming months.”
Bishop also pointed out that many risk-averse institutional landlords remain willing to negotiate flexible leasing arrangements, so tenants with strong covenants may have an excellent opportunity to recast their leases. “Indeed, we have been able to secure a wide range of inducements-from office improvements and cash allowances to warehouse-component upgrades-for our clients. Similarly, users wishing to relocate also have opportunities to strike advantageous deals in competitive submarkets. Additionally, with the flow of capital restored and excellent financing options available, we are seeing an increasing number of space users evaluating their options in the build-to-suit and acquisition markets,” Bishop said.
Nationally, the industrial real estate markets in most of the country’s major cities strengthened through 2010. Certain sectors gained ground more quickly than others; the high tech and manufacturing industries were hardest hit by the global slowdown, and have also been the slowest to bounce back. In 2011, Newmark Knight Frank Devencore expects to see continuing positive space absorption and increased demand for quality industrial space throughout most of the country.