Demand high in rental housing, industrial property sectors
CHUCK CHIANG
The Vancouver Sun
Metro Vancouver’s rental housing and industrial markets remain highly active, with demand outstripping supply on both fronts, leading to sales and price surges in some areas and low vacancy rates in others, according to recent reports.
CBRE’s Q4 market review of Metro Vancouver’s industrial real estate sector showed that the region saw industrial leasing space vacancy rates drop to 2.4 per cent at the end of last year, the lowest level since 2007. Sales, meanwhile, reached a record $1.2 billion in 2016, up nine per cent from the previous year.
The average property price was up 13 per cent, hitting $195 per square foot in Metro Vancouver, and industrial land prices saw their largest increases in a single year. All this despite “an apparent lack of properties available for sale,” the report said, with only 312 acres of industrial land trading hands in 2016.
“It’s definitely been the trend in the last three years that demand has outpaced supply almost two-to-one,” said Chris MacCauley, CBRE’s senior vice president (industrial and logistics). “It’s something that has no easy fix; it will take some long-term planning throughout Metro Vancouver to find out what are the right places for industrial land of various uses.”
The CBRE report called the depletion of Metro Vancouver’s industrial land “critical,” noting Vancouver, Burnaby and Richmond all have less than 10 years of supply left.
“About 50 per cent of the supply coming on this year (in Metro Vancouver) is already spoken for, and it’s January,” MacCauley said, adding that clients looking at Vancouver have been driven out to Surrey and Delta because of lack of availability. Surrey has 30 per cent of Metro Vancouver’s future land supply, MacCauley noted.
On the rental side, the Goodman Report on Metro Vancouver’s apartment sector showed the average price per suite in 2016 jumped 52 per cent to $377,000. Authors David and Mark Goodman of HQ Commercial added that, while 9,470 purpose-built rental units are either proposed, approved or under construction throughout the Lower Mainland, demand will continue to far outstrip supply.
“It’s anticipated that the regional population will increase by an average of 35,000 per year until 2040,” the report said. “The Goodman Report expects local landlords to remain insulated from any apparent decline in tenant demand or softening of rents.”
The short supply of rental housing and the resulting rising rents are serious concerns for David Goodman, who said Vancouver’s municipal officials have relied too heavily on federal aid, which takes time and often doesn’t fulfil the community’s needs. The result, Goodman said, is serious damage of the city’s social and economic fabric.
“You can’t just have condos and have a viable society,” he said. “You need rentals. And if you are not building enough rentals, people are going to throw their hands up in disgust … and they are going to leave our city. These are often people who are educated and have lost all hope of even renting, so they’ll go to Alberta or back east … where they won’t have such a stressful time finding a roof over their heads.”
Goodman urged city officials to reduce red tape for developers looking to build rentals in Vancouver, an application process right now that can take up to three years.
One of the only things, for both Goodman and MacCauley, that can derail demand in Metro Vancouver in the short-term may be the new Trump administration in the United States. Both analysts said people should keep a close eye on the policy changes in Washington toward tariffs and other trade mechanisms.
“The issue we are running into with our clients is that 70 per cent of all manufactured goods here are usually U.S.-bound,” MacCauley said. “So some of our clients are saying that, if there are additional tariffs coming, they may balance their expansion plans and look at south of the border.”
Goodman agreed.
“We could very well experience potential disruptions to trade and commerce, quite possibly triggering higher deficits and interest-rate increases here at home,” he said in the report. “We’re in for a bumpy ride — bet on it.”
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