The Line Between Industrial & Office Space Becomes Blurred
Over the past few months I’ve had more inquiries regarding industrial listings and/or properties than all other sectors combined. Not to mention my last few completed deals (a mix of sales and leasing) were all industrial type properties. Why? What is the big attraction these days to this asset class? Well, if you’re looking in and around the Greater Vancouver area, the lease rates for industrial product have been skyrocketing. I recently leased a light industrial space of over 4,000 square feet in the Grandview-Woodland area of Vancouver averaging $29.00 per square foot on a gross lease basis. These rates for industrial premises were previously unheard of… anywhere.
Where office and retail properties have been the preferred asset, more and more investors are now focusing on industrial opportunities. Whether it be small bay strata or larger multi-tenant facilities. Even reputable developers are paying big per square foot values unlike anything we’ve ever seen for decent sites with solid redevelopment potential. Average purchase prices per square foot has seen a jump from $250 per square foot in Q1 of 2016 to $290 per square foot as of March 31st, 2017 and values are still climbing. IntraUrban, Ironworks, and WorkSpaces at Strathcona Village totaling 382,340 square feet of building area are three major projects under construction that are paving the way for efficient and well thought-out spaces that are extremely attractive to investors and owner/occupiers alike. Prices for strata units in these developments are ranging between $360 and $667 per square foot for shell spaces.
Current Cap Rates in the 3-4% range and relatively uncomplicated ownership are just some of the other highlights of why one might consider the purchase of industrial property. The Vancouver area alone had $37.3M in industrial sales during Q1 of 2017.
I also have experienced clients who purchase vacant industrial land or buildings as a long-term holding vehicle. Some of these properties are not at all pretty but it doesn’t matter to them. They are of the mindset that we are literally running out of land and larger sites will be that much more attractive, or dare I say imperative, in the near future for proper infrastructure.
Clients are also stocking their portfolios with slightly smaller scale light industrial properties. Where a simple and cost-effective renovation on a ‘run-down’ building can achieve great gains in lease rates with cleaner users.
If you’re curious about industrial opportunities, or would like additional information, I am always happy to chat.
By Jesse Godin, Commercial Sales & Leasing