Experts have indicated Canada will need to build millions more homes in the next 10 years to meet our growing needs. To the casual observer the problem is easy to solve: just build more homes. For those in the real estate development field, the problem is much more complicated than this.
Amid intensified construction activity, Vancouver’s industrial real estate market is steadily magnetizing foreign investors, a trend that might pose a major challenge for the domestic buyer segment.
Numbers from Colliers International indicated that nearly 4.9 million square feet of industrial space was under development across Metro Vancouver as of the end of 2018. Almost half (45%) of this activity is in Surrey, Richmond, and Delta.
According to Avison Young, Burnaby and Coquitlam were the region’s stand-outs, with transactions involving industrial property in these locales being rapidly snapped up in a frenzy of “insatiable” demand.
“While Burnaby and Coquitlam remain highly sought after by owner-occupiers, tenants and investors, sales and leasing activity will likely slow in 2019 due to a lack of such opportunities in those markets,” Avison Young stated, as quoted by Business in Vancouver.
Read more: Canadian commercial investment to intensify this year
“With very limited new supply in the development pipeline and ongoing strong demand, vacancy in both markets – already at or near record lows – is expected to remain extraordinarily tight for the next 18 months,” the brokerage added.
This is also expected to feed into a virtuous cycle of rising rates and strong cash flow for owners, with net lease rates in Burnaby and Coquitlam hovering between $7.95 and $18 per square foot, Avison Young reported.
“We’re seeing offshore money, for the first time, coming into industrial because they understand and can see the quality of the investment,” Todd Yuen of the Beedie Development Group said. “The rents have finally caught up to the point where we can start to push the development cycle a little bit.”
While there has been a deceleration in new home sales, we must keep the pedal to the metal and continue to train skilled trades workers for the future.
Many jurisdictions in the U.S. have been thinking outside the box to boost the housing supply. Here in Ontario, we’d be wise to follow suit.
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