The second and third quarters of 2024 saw three interest rates cut by the Bank of Canada, down 75 basis points (bps) from 5.00% to 4.25%, with the potential for more reductions before the end of the year. After several consecutive quarters of positive absorption, the third quarter of 2024 saw absorption reach negative territory at 361,635 square feet, largely in part to a continued influx of large block vacancies coming to the market. However, Surrey, Langley, and Coquitlam posted positive absorption due to its leasing momentum from previous quarters, new supply pipeline, and large lots of developable land.
Average asking rental rates continue to decline with a regional average reaching $20.38 per square foot with several active listings reducing its asking rate to compete with sublease options also hitting the market. What is seemingly regarded as a tenants’ market with the relative abundance of availabilities, it remains to be seen how landlords will react to the downward pressure on their headlease rents to address the rise in competitive product in the market.
Despite the market conditions facing the Vancouver market, there are many projects in the pipeline signaling continued confidence in the Vancouver industrial landscape. As a gateway to Asia and a port city in North America, demand for large bay space remains. This quarter, there were several lease transactions over 100,000 square feet in size, signaling to the market that despite the increasing number of availabilities there still remains tenant demand from various industrial sectors.
On the construction side, the largest developments to be built on a speculative basis are Heppell’s Latimer Lake Logistics Park (Buildings 1 and 2) totalling 644,000 square feet in Campbell Heights and Epta Development’s Eagle Meadows Business Park in Pitt Meadows — a two-building project totalling 366,000 square feet in the growing Pitt Meadows and Maple Ridge markets. In addition, Conwest Development’s Nordel Point in Delta will bring to the market 212,000 square feet of warehouse space conveniently located along major highway corridor.
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