Metro Vancouver industrial market report
Q2 2024
Metro Vancouver industrial market trends
01. Net rental rates have continued to trend downward, additional rents on the rise
For the third consecutive quarter, net rental rates have declined, dropping to $21.34 psf in Q2 2024. The highest rate was recorded in Q3 2023, at $21.99 psf.Despite the decrease in net rents, additional rents have surged, primarily due to rising assessment values and property taxes. In Q2 2024, the average additional rent in Metro Vancouver reached $6.23 psf, marking a 21% year-over-year increase. This increase pushed gross rental rates to a record high of $27.57 psf.
Many tenants continue to experience "sticker shock" when negotiating lease renewals. For context, in 2014, the average gross rental rate in Metro Vancouver was $12.45 psf.
02. Vacancy continues to increase, market remains healthy
The vacancy rate increased by 80 basis points quarter-over-quarter, reaching 2.9% in Q2 2024. This is the highest vacancy rate seen in nearly a decade, when it hit 3.0% in Q3 2015.Despite this rise, the market remains tight, especially for quality product. While tenants may start off expecting greater leverage in lease negotiations, they have realized that lease rates remain high due to the limited supply of comparable spaces.
As a result, some tenants have adopted a "wait and see" approach, conducting thorough due diligence and avoiding rushed decisions. This lack of urgency has extended the time required to negotiate deals.
03. The second interest rate cut is bringing renewed optimism, especially for strata projects
On July 24, 2024, the Bank of Canada reduced its benchmark interest rate by 25 basis points to 4.5%. As inflation continues to cool, additional interest rate cuts are anticipated throughout the year.While the uncertain times have compelled some to sell assets unexpectedly, excellent investment opportunities have been created for those willing to commit capital.
In March 2024, 18.2% of strata projects under construction in the Metro Vancouver market were pre-sold. By June 2024, this percentage had risen to 24.5%. Although recovery remains slow, pre-sales are expected to continue increasing, especially with further expected interest rate cuts from the Bank of Canada.
Vacancy rate
0.5% sublease vacancy
Availability rate
down from 4.3% in Q1 2024
Average asking net rent per square foot (psf)
Square feet (sf) vacant
sf absorption
sf under construction
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