Metro Vancouver large mid-bay industrial development and strata-sales are slow, but the overall sector’s vacancy level is stable, says a leading Cushman & Wakefield broker.

Sean Ungemach, an industrial real estate sales and leasing specialist based in Cushman & Wakefield’s Vancouver office, made the comment following the release of the company’s latest regional industrial report.

The market’s available large-format industrial inventory has experienced a “pretty significant decline” as developers hold off on speculative projects due to uncertainty tied to global and local factors, including the Middle East conflict, increased U.S. tariffs on imports from Canada and concerns about the impact of the Cowichan Tribes decision private property ownership.

Ungemach represented U.S.-based S&S Activewear on its lease of a 162,250-square-foot lease of a Grosvenor warehouse on Annacis Island in Delta, B.C. The deal ranked as the largest single lease in Grosvenor’s 75-year Canadian history. But S&S did not have many options due to the limited supply of available industrial buildings spanning 100,000 sf or more as it sought to move out of an existing 60,000-sf location.

“Really, there [were] only a couple opportunities where S&S could actually expand into a building of that size,” he said. “And of the two options, Annacis Island was the best in considering proximity to the staff and the location of the staff where they lived and [it] would be the least displacing to their staff in the move.”

The Grosvenor deal brought the region’s large-format industrial vacancy, particularly for class A space, back under 1%.

“When it comes to the market as a whole, though, I think we are still seeing extreme softness in the sale of strata-industrial, which are small bay, call it 5,000-, 10,000-, 20,000-square-foot strata-titled units that [were] driving the industrial market, say in the peak of 2022.”

Due to the ongoing uncertainty, owner-users are in a wait-and-see mode and “afraid to make a decision” as they focus on operating their businesses efficiently and successfully “before worrying about real estate decisions.”

“Now, sales are very sluggish,” he said. “Developers aren’t building new spec product. And I think even to that extent, that mid-bay sector, call it 20,000 to 75,000 square feet, is extremely slow. And there’s well over 100 opportunities market-wide here that are vacant and available that are in that size category.”

Svetlana Lebedeva, C&W’s research manager in Vancouver, said the region’s industrial market is “very segmented” but the region’s overall 4.4% vacancy is stabilized.

Meanwhile, described the uncertain surrounding the market as “this huge headwind that just doesn’t seem to go away.”

He said the controversial Cowichan Tribes decision, which recognized that Aboriginal title prevails over fee-simple interests in a large swath of southwestern B.C. Richmond stands to be affected the most by the decision. Montrose Properties is seeking to appeal the decision in the Supreme Court of B.C. after its application to reopen the case was rejected.

But Ungemach said the ruling is affecting potential investments in other parts of the Lower Mainland, with investors holding off until questions about private ownership in relation to private ownership are clarified.

“I think it’s affecting confidence in our market,” he said. “It’s just in general because those properties, particularly in Richmond, they’re just not going to trade. They’re not. Nothing can happen on those until that whole situation is resolved.”

As a result, he said, investors are split 50-50 on whether the market has reached a pricing bottom or still needs to get there.

Pictured:

Photo: