The market for industrial space is so hot in Vancouver, British Columbia, 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 always have led to elevated real estate prices, but the e-commerce revolution has turbo-charged demand for warehouse space. Industrial rents spiked 16% to a record C$11.86 ($8.99) per square foot last year, the highest in Canada, according to a report Feb. 26 by the Toronto-based brokerage.
Vancouver industrial vacancy hit a record-low 1.4% in Q4, North America's second-lowest rate, CBRE reports. Toronto is first, but Vancouver is the largest Canadian distribution hub tied to the growing Asian market, Chris MacCauley tells @YahooFinanceCA https://t.co/xQ5z7zdWCQ— CBRE Canada (@cbreCanada) February 1, 2019
“There is a critical shortage of industrial land in Vancouver,” CBRE Canada Vice Chairman Paul Morassutti said. “It was our estimation that they could potentially, literally run out of industrial land by the early 2020s.”
Toronto’s industrial market also was 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.
Downtown Toronto had the lowest office vacancy rate in North America in 2018 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% above the 10-year average. Apartment vacancy rates in Vancouver, Toronto, Ottawa, Montreal and Halifax, Nova Scotia, were below 2% last year.