NAIOP Industrial Panel
January 23, 2016
Panel Members:
- Beth Berry - Beedie Development Group
- Jason Kiselbach - CBRE Limited
- Murray DeGirolamo - Hopewell Development
- Sean Ungemach - Cushman & Wakefield
- Blake Asselstine - Beedie Development Group
- Darren Cannon - Colliers International Canada
Leasing
In 2015, there was too much spec space, however, there has been high absorption. There were 19 new leases over 90,000 sf in 2015, 2.5 million sf of space leased and now the lowest vacancy since 2008. There are 17 lease options for anyone looking for a space that is over 150,000 sf in inner municipalities and available for 2016 occupancy.
Some larger users are consolidating in Calgary such as Home Depot, who is vacating their Delta Plant. 2013 and 2014 were disastrous years, whereas 2015 has improved dramatically. Now in 2016, a lot of large space renewals have been done in advance, and new buildings are seeing 75% occupancy upon completion. A reduction in absorption is anticipated in 2016.
The start of 2015 was a tenants market and landlords gave lots of free rent to get high face rates. At the end of the year, free rent was disappearing.
The higher the building, the cheaper the cubic foot rental cost would be. So, buildings with high ceilings of 30 feet, rent for more than buildings with lower ceiling height. Yet, the rent increase is disproportionate. In other words, the incremental increase per foot decreases as the building height increases. The demand for high ceiling ware houses is increasing and thus, the demand will continue to increase from large bay users.
Location will still be important. Existing tenants want to stay in their existing locations.
Older building rental rates have not raised much over the last five years; they are still hanging around the $5.50 mark. However, the buildings are not worth tearing down yet as they still have economic life and demand is steady.
Demand is stronger for the newer product, while the older product just stays stable.
Sales
In 2015:
- $1.1 billion of sales - highest annual sales volume ever
- Number of deals down 5%
- Ave price $172/sf.
There was a lack of product available for investors in 2015 and hence few transactions.
Costs to build are going up, so one might anticipate prices will continue to rise.
Cap rates will continue to go down; 4.5% cap rate could be reached if mortgage rates stay low. Large properties will also sell for lower cap rates.
The difference in the cap rate of B and C buildings vs. A cap rates is greater than it used to be.
Publications
- Reasons For Landlords To Appeal Their Property Assessments
- Developers need to Appeal the Additional School Tax (AST)
- Expected Assessed Value Changes In 2022
- 2022 Property Assessment Value Changes
- Misconceptions within the Property Assessment Process
- Additional School Tax Exemption for Developers
- Minimizing Property Tax on Development Land
- Why Such An Increase 2021 Industrial Property Taxes?
- Burnaby Industrial Properties Appear to be Over-Assessed
- Have BC Assessment Over-assessed Retail Spaces
- 2021 Property Assessment Value Changes
- Assessment Of Residential Sites Under Construction
- Should Homebuilders Be Paying Additional School Tax?
- City of Vancouver Land Averaging 2020
- Government Assistance: Property Tax
- 2020 Assessment of Apartment Properties
- Development Sites: Is The Additional School Tax Applicable?
- 2020 Property Assessment Value Changes
- BC Lower Mainland Market Update 2020
- Taxes Affecting Real Estate In 2019
- Development of Sites Under Construction - 2020
- Land Averaging For 2019 Property Tax In Vancouver
- 2019 Property Assessment Value Changes
- Understanding B.C.'s Proportional Representation Referendum (PPTX)
- Amacon Update
- Vancouver Vacancy Tax
- 2018 Property Assessment Value Changes
- Mayor's Council Proposal for Funding Transit
- Resolving Disputes - A New Approach
- Mixed Use Properties - Potential reclassification for Property Taxation
- Classification of Mixed Use Properties September 2016 Update
- Possible Effects of FIT on Assessments
- BC Foreign Investors Tax
- NAIOP Industrial Panel
- Classification of Mixed Use Sites - Part 2
- Opportunities for Brokers
- Valuation of Properties Under Construction
- Is Assessed Value Equal to Market Value?
- Civil Resolution Tribunal Update - October 2014
- Assessment Appeal Board Changes Classification for Mixed Use Development Sites
- Strata Civil Resolution Tribunal Update
- Reviewing Appraisals - Download
- Resolving a Rental Dispute
- How are School Taxes Calculated? | doc