Vancouver May ‘Literally Run Out of Industrial Space’ by 2020s
Vancouver May ‘Literally Run Out of Industrial Space’ by 2020s
(Bloomberg) -- The market for industrial space is so hot in Vancouver the city may run out of land for the sector, according to brokerage CBRE Ltd.
The city’s location between the mountains and the Pacific Ocean have always led to elevated real estate prices but the e-commerce revolution has turbo-charged demand for warehouse space. Industrial rents spiked 16 percent to a record C$11.86 ($8.99) per square foot last year, the highest in Canada, according to a report Tuesday by the Toronto-based brokerage.
“There is a critical shortage of industrial land in Vancouver,” Paul Morassutti, vice chairman at CBRE Canada, said by phone. “It was our estimation that they could potentially, literally run out of industrial land by the early 2020s.”
Toronto’s industrial market was also strong in 2018, with rents surpassing C$7 per square foot for the first time and new supply continuing to lag demand, according to CBRE’s outlook for Canada in 2019.
Highlights for 2018:
- Downtown Toronto had the lowest office vacancy rate in North America at 2.7% at the end of the year with the average asking price for rent in top towers jumping 14% to C$35.37 per square foot.
- Morassutti is concerned however, that a surge of new supply could hit the market over the next few years, which could coincide with the next recession.
- Commercial real estate investment hit a third consecutive annual record in 2018 at C$49.3 billion, 68 percent above the 10-year average.
- Apartment vacancy rates in Vancouver, Toronto, Ottawa, Montreal and Halifax were below 2% last year.
Look Ahead to 2019:
- Canada’s rental apartment sector could see the intro of co-living concepts, similar to student dormitories, as rents continue to rise in the biggest.
- Canada could see the first two-story industrial distribution facility as demand for last-mile deliveries and product returns accelerate.
To contact the reporter on this story: Natalie Wong in Toronto at nwong133@bloomberg.net
To contact the editors responsible for this story: Debarati Roy at droy5@bloomberg.net, Jacqueline Thorpe
©2019 Bloomberg L.P.