With mounting rental rates and plummeting vacancy levels as of the end of the third quarter, Metro Vancouver’s industrial property market appears to have remained largely pandemic-proof more than half a year after the imposition of mobility restrictions due to the coronavirus pandemic.
In its recently released Industrial Overview Report / Fall 2020: Metro Vancouver report, Avison Young said that industrial vacancy in the area dropped from 1.7% during the second quarter to 1.2% by the end of Q3 2020. Vacancy was 1.5% during the same period last year.
The 1.2% vacancy reading is considered a record low for Metro Vancouver. Similar levels were last seen during the first and second quarters of 2019.
“While COVID-19 has adversely impacted select industrial operators, a significant proportion of industrial activity in Metro Vancouver has not only endured the imposition of containment protocols, but has prospered as a result,” Avison Young reported. “The pandemic has also highlighted the region’s ongoing inability to build meaningful amounts of new supply at a rate rapid enough to meet the persistent demand from tenants and owner/occupiers.”
The trend is expected to push the region’s rental rates even higher, with investment sales going as high as $1,284 per square foot this year.
“This lack of leasable space translates into fewer options for tenants and continued rental rate appreciation as ongoing supply constraints limits availability,” Avison Young said. “This rental rate assumption is further supported by the annual escalations currently being negotiated and approved in a majority of industrial leases signed since April 2020.”
The sustained demand stemmed from sectors that rapidly occupied the space left behind by businesses which were hit the hardest by COVID-19.
“Those businesses benefiting from the pandemic have included virtually all e-commerce and related logistics/distribution operations along with food production, building material and home improvement suppliers/manufacturers, traditional and refrigerated warehousing as well as the resumption of film and television production,” Avison Young said.