Jami Makan, (BIV) — The Metro Vancouver industrial real estate market is becoming healthier after a period of uncertainty, with tenants upgrading into higher-quality spaces and custom facilities in Surrey and other regional hotspots.
“We are seeing businesses that are regaining confidence, leasing activity is improving and there’s just much more market stability,” said Shawna Rogowski, senior manager of market intelligence with Avison Young Canada.
This is reflected in the second quarter’s 4.1-per-cent vacancy rate, which has improved from the 4.5-per-cent peak seen in late 2025, she said. It’s still elevated from what the Vancouver market is used to, but it isn’t high compared to other North American markets, she said.
It’s not necessarily a tenant’s market but there’s real tenant opportunity, she said. Softer rents and greater availability are allowing tenants to upgrade into better-quality space, with momentum concentrated in the 20,000 to 80,000 square foot range.
“When we just looked at our deal flow, that was where we saw the sweet spot,” Rogowski said.
But challenges remain, including high construction costs. Instead of building first and finding tenants later, developers are increasingly building only after securing occupiers, a practice known as build-to-suit.
With very little speculative construction underway, accelerating demand could cause a shortage of modern industrial product, so it’s currently a good window for tenants to be looking at future moves and expansions, she said.
“It’s a little bit of a softer market, but that won’t last forever,” Rogowski said.
Surrey is seeing a lot of construction, she said.
Surrey’s Campbell Heights and South Campbell Heights industrial zones are hotspots for uses such as cold storage for food and grocery, distribution of consumer products and manufacturing of data centre equipment.
Since Surrey city council approved the Stage 2 South Campbell Heights Local Area Plan in December 2024, several major development projects representing more than 140,000 square metres of industrial space have moved forward, the city said in a statement.
Some developments are under construction and anticipated to be completed by September, while others continue through the city’s development approval process and are expected to come before council later this year, it said.
These developments will help meet growing demand for industrial land while supporting Surrey’s long-term economic development, said the statement.
One developer that is especially active is Beedie, whose South Campbell Heights Business Park currently has 10 acres of available build-ready land in a strategic location. Beedie is currently permitting for a 180,000-square-foot build-to-suit parts distribution centre for a prominent automotive manufacturer, said Jason Tonin, executive vice-president of land development with Beedie Industrial.
The entire business park, when complete, will be a 60-acre industrial hub with over one million square feet of modern industrial space, according to the company.
“We’re seeing a bit more resilience in the market now,” he said.
Cost escalation and the timing of approvals are concerns in the development community, Tonin said. Tariffs are another worry in terms of both their impact on construction costs and their impact on tenants who export goods.
“Their ability to grow and to expand is truncated a bit,” he said.
Build-to-suit projects are helping the sector move forward, particularly those that meet tenant needs such as large-bay distribution facilities and warehouses with racks of shelving, hydraulic lifts and robotics.
“They know how their business operates, and they want the building to be as efficient as possible to operate that business as efficiently as possible,” Tonin said.
Beedie’s other major industrial projects in the region include the 150-acre Parkwood Industrial Estates and the 110-acre MKB Delta Lands partnership, he said.
Beedie is an industry leader because of the historical land bank it has created, said Ryan Kerr, principal with Avison Young. Other players with significant land positions include Conwest Developments and Cedar Coast, he said.
Demand is high for new-generation distribution facilities that are 150,000 to 250,000 square feet and have 40 foot-clear ceilings, good dock counts and trailer storage, he said.
“We just don’t have that many nice, shiny new distribution centres,” he said.
Strength in the large-bay market—properties over 80,000 square feet—is trickling down to the mid-bay market, Kerr said.
Volatility is a challenge due to its impact on decision-making, but corporate leaders are adjusting to the new normal.
“People … are seeing a way through this latest recessionary period, they’re getting conviction in decision-making and we are seeing deals get done because of that,” he said.
Kerr said he expects vacancy to dip below four per cent and rents to rise in the next 18 months. This is partly due to regional land constraints and a thin pipeline of new supply.
“It’s your last opportunity to get in and do something big without having complaining and kicking and screaming in the deal terms,” he said.
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