Metro Vancouver industrial market report

Metro Vancouver industrial market trends

01. Average net rental rates decline, but gross rents remain steady

Net rental rates have slowly declined over the past year, with a 2.8% decrease quarter-over-quarter. In Q3 2024, average net asking rents stood at $20.74 psf, down from the peak of $21.99 in Q3 2023. Over the same 12-month period, additional rent costs have risen, keeping gross rental rates stable despite a marginal drop from $27.29 in Q3 2023 to $27.14 in Q3 2024.

Two submarkets have consistently exceeded the $30 psf mark in gross rents, with North Vancouver reaching $32.32 and Vancouver at $30.83. 

Class A properties continued to command premium rates while older product saw a more drastic rate decline. The bifurcation in rents between product classes has been steadily increasing.

02. Vacancy continued to rise for the ninth consecutive quarter

Vacancy reached 3.1% in Q3 2024, marking a 20-basis point increase from the previous quarter. The last time the vacancy rate surpassed 3% was in Q2 2015, when it stood at 3.8%. Over the past two decades, vacancy rates have fluctuated between a low of 0.3% in Q2 2022 and a high of 4.7% in Q1 2010.

Although this marks the ninth consecutive quarter of rising vacancy rates, the current rate of 3.1% remains among the lowest in major Canadian cities. 

For larger tenants seeking spaces over 100,000 sf, there were 18 available options in Q3 2024, compared to 13 options last year and just two options three years ago.

03. Minimal quarterly deliveries, but robust construction pipeline

Despite ongoing challenges with obtaining financing, 13 new projects broke ground this quarter, leading to the highest total area under construction in the past year.

Of the 61 projects currently under construction, 28% of the space is dedicated to strata developments, up from 19% in Q3 2023. There has been a noticeable increase in the percentage of pre-sold under construction strata units, rising from 20% in January 2024 to 34% in September 2024.

New supply delivered this quarter was significantly lower compared to recent quarters, with just 196,709 sf completed. By contrast, the average new completions over the previous eight quarters stood at 1.5 million square feet (msf) quarterly. Of the 61 ongoing projects, 39 are expected to be completed within the next six months.