Vancouver’s industrial market has reached a turning point, says a new report from Avison Young.

Vacancy has likely peaked after three years of increases amid sliding leasing activity. Large-format users are driving the leasing activity as the market recovers. In the third quarter, the number of vacant availabilities spanning more than 100,000 square feet declined to 13 compared to 18 in the first quarter and 17 in the second.

Overall vacancy stood at 4% in the third quarter, with sublease spaces accounting for a fraction (0.6%) of the total. Total availability declined marginally quarter-over-quarter to 4.7%.

The total amount of vacant industrial space was approximately 1.4 million sf.

An if-you-build-it-they-will-come mindset is creating optimism after large occupiers completed multiple transactions in the 50,000-sf range. As in the office sector, the region’s industrial tenants are gravitating towards newer, higher-clearance-height facilities, leaving older B and C class buildings under pressure as the flight to quality continues.

Looking at sales, the land market is evidencing more activity as values sit 10% to 30% below peak levels. Strata-industrial sales have been slow due to higher borrowing costs, but more activity has occurred in recent months. With the slow sales still prevalent, strata-industrial prices saw a continued drop in the third quarter as demand remained low.