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Metro Vancouver is gaining momentum in the retail, industrial, and office sectors as its economic recovery continues as planned. The region is primed for commercial real estate (CRE) success and is expected to pick up speed in the second half of 2021.
Experts are saying that Metro Vancouver was made for commercial real estate, and for a good reason.
Retail CRE Is Thriving
Metro Vancouver’s retail CRE sector is thriving, with more and more retail CRE investors flocking to the region to meet the rising consumer demand.
In May 2021, retail sales in Metro Vancouver reached $3.7 billion, which is a 34.5% increase compared to May 2020. No other city in Canada has ever witnessed such a significant year-to-year increase.
Even the infamous Downtown Eastside sees a rise in retail sales. The neighborhood’s retail sites have reached a whopping $10 million per acre, while retail strata properties cost up to $800 per square foot.
Vancouver, Coquitlam, Surrey, and Delta had some of the biggest retail CRE sales in Metro in the first half of 2021. They include three 45,257-ft2 retail properties on Victoria Drive ($42.5 million), the 81,000-ft2 Lougheed Super Centre ($42 million), the 34,781-ft2 Rodeo Square ($23.3 million), and the 42,000-ft2 Nordel Centre ($21.3 million), respectively.
Industrial Land Continues to Shrink
With the lowest industrial vacancy rate (0.9%) in North America, and the second-lowest industrial availability rate (1.1%), Metro Vancouver has the tightest industrial real estate market on the continent. Its industrial land continues to shrink, with the most significant industrial vacancy being 47,495 ft2.
With industrial land shrinking, CRE developers face rising strata and leasing costs, the highest in Canada.
Industrial real estate properties’ leasing costs are $14.88 per square foot, on average, a 13.7% increase compared to 2020.
Industrial strata properties in the suburbs cost an average of $488 per square foot. In Vancouver and the North Shore, they are selling at more than double that price.
The most notable industrial sales in Metro Vancouver include a 2.5-acre site in North Vancouver ($44 million, Veramax Holdings) and a two-acre land in East Vancouver ($38 million, AbCellera).
Office Vacancy Rate in 2021 Keeps Rising
With CRE developers building more and more office towers, the office vacancy rate keeps rising.
In Downtown Vancouver, three new 3.3 million-ft2 office towers are under construction, with no tenants signed on at the moment.
Even so, 61% of new office space currently under construction is already pre-leased, according to Avison Young, a Toronto-based global CRE company.
As for strata offices, the largest yet sold out two years ago, with tenants paying over $2,000 per square foot.
Metro Vancouver is truly primed for commercial real estate success. Its retail, industrial, and office sectors are booming, providing CRE investors and developers profitable opportunities. The region’s economic upswing is bound to accelerate in the second half of 2021, playing a big part in the overall Canadian CRE’s path to recovery.