Industrial vacancy in Richmond dropped to 2 per cent by the end of 2015, due to strong leasing activity and a lack of new inventory delivered to the market, according to Avison Young’s Spring 2016 Richmond/Delta Industrial Report. Meanwhile, Delta’s industrial vacancy rate dipped to 4 per cent — the first time since 2009 that it has dropped below 5 per cent.
The tight leasing market has sparked action from investors and owners. Industrial sales in Delta last year totalled $133 million over 39 deals — the second strongest year during the past decade, trailing only 2013 ($236 million and 46 deals).
In Richmond, there were 105 deals totalling $268 million last year, surpassing the previous 2014 record by $48 million.
Developers are now hustling to create more space. There is more than 5.2 million square feet of new industrial space proposed or under construction in Richmond and Delta, the report said
Both municipalities, considered regional submarkets to their larger neighbours, logged “lock in step vitals” seeing vacancy drop, while sales volume and rents climbed.
The report shows that Richmond and Delta have become prized industrial areas within the region, said Ryan Kerr, a principal with Avison Young in Vancouver.
“Richmond has always been a top submarket, boasting the greatest amount of industrial square footage and traditionally being one of the least vacant submarkets,” he said. “Delta on the other hand has seen a renaissance in terms of popularity in areas south of the river like Tilbury, Nordel and Boundary Bay.”
He said interest in these areas is growing among small-to-large tenants, owner-occupiers and investors due to the benefits of the South Fraser Perimeter Road (SFPR), which completed in December 2013.
“We are seeing all types of projects like strata, institutional rental properties and build-to-suits come out of the ground in both Richmond and Delta,” he said, adding that distribution businesses and e-commerce lease deals have been highlighting the recent demand for space.
Kerr said a lot of the new space is “gaining great traction in the early stages of development prior to completion.”
Even with a lot of new industrial space coming on the market, Kerr said the vacancy rate in both cities will likely stay low. “We do not expect to see a significant uptick in vacancy as new space comes online,” he said. “Pre-leasing will be common and the pipeline for development will hardly satiate the current and future demand.”
Of the 18 industrial projects being developed or renovated in Richmond and Delta, four involve Beedie Development Group.
Among those is the new Delta Link Business Park, which takes up a large portion of the eastern half of Tilbury Island on the south arm of the Fraser River in Delta. The business park is expected by Beedie Group to eventually entail 1.5 million sq. ft. of industrial space.
The expansion into Delta by Beedie Industrial and others has been driven by demand for space by distribution and transport tenants, spurred by the effectiveness of the SFPR, said Todd Yuen, president of Beedie Industrial.