Strong pre-construction demand is fueling hopes for PC Urban’s planned industrial strata project on the Barnet Highway in Coquitlam, though the official commercial launch remains months away.
“We received a handful of [letters of intent] before going to market,” said Brent Sawchyn, CEO of PC Urban Properties Corp. “There is apparently a pent-up demand for our offering which we are very excited about.
IntraUrban Eagle Ridge, as the project is known, will provide 149,000 square feet of small bay space in two buildings when completed in the last quarter of 2024. It will be one of the few new strata developments in an area of rental brokerage Avison Young describes as “underserved”.
PC Urban bought the property in partnership with Nicola Wealth Real Estate for $24 million in May. As interest rates began to rise, Colliers International was bullish on the project in its second-quarter market report.
“With rising rental rates and perpetually low availability, this industrial strata project could very well still see record prices, even amid rising interest rates,” he said, noting that rental rates were heading north of $20 per square foot.
But the industrial strata market has cooled since June as interest rates combined with high construction costs dampened demand. Transactions took longer to make as buyers became more cautious, and some developers suggested offering strata projects for rent rather than sale.
Sawchyn said the pricing for the space has yet to be determined, but the fundamentals of Metro Vancouver’s industrial market have not changed.
“We are still seeing activity. Is it as robust as it was eight or nine months ago? No,” he said. “The underlying requirements are still the same. Vacancy rates are effectively zero for industrial spaces, and only getting worse, if that were possible.
Similarly, strong demand is evident at its IntraUrban Cornerstone development in Langford, which recorded five sales in September. The project is now 80% sold, with three buildings totaling 165,000 square feet expected to be completed in the second half of 2023.
But uncertainties are holding back many buyers.
“In the short term, when we don’t know when the Bank of Canada is going to stop raising interest rates, for someone who’s going to close in 12 months, figuring out what your cost is going to be at that point. the weather is a bit uncertain,” said Beth Berry, vice president of Beedie Industrial, which recently launched strata projects in Langford and Kelowna.
Pacific Ridge Business Center presale prices start at $460 per square foot, while Stratosphere in Kelowna starts at $465 per square foot.
But all offers are welcome, both buyers and tenants, rental offers in mind.
“When interest rates rise, it has a big impact on [affordability], so moving to leasing allows those same businesses to grow but not lock in an interest rate at this point,” Berry said. “What we’re trying to do is meet the demand that’s out there.”
And demand remains, and is expected to intensify as some developers are delaying new strata projects after the surge in activity in recent years. Speakers at the Nov. 3 Vancouver Real Estate Strategy and Leasing Conference said a lack of building strata will increase pressure on rental space in a market where industrial space availability is averaging 0.8% and asking rents are $20.67 per square foot.
“With interest rates going up, existing condo projects not selling, upcoming condo projects getting delayed or pushed back, so I think that’s just going to put more pressure on rental inventory,” said Peter McFetridge, Vice President, Leasing with the Onni Group of Companies.
Developers need to keep their options open to keep up with demand, according to Irene Au, leasing director at QuadReal Property Group, which is partnering with Hungerford Properties to build and lease Xchange Business Park in Abbotsford.
“Converting strata into more rental products, that’s probably one of the things that would help availability,” she said.