Strata industrial attracts expanding companies as market remains tight
A lack of industrial space and high land costs continue to support projects by industrial classes, even as investors remain on the sidelines.
“We’re typically looking for Strata units now,” said Jeanette Santa Juana, CFO at Aarc-West Mechanical Insulation Inc., which has relocated its headquarters from Surrey to a unit at the recently completed Langley Gateway project at 19748 86 Avenue in Langley. “Buy land and build your own buildings, with all the development costs? This kind of unity is really good for us.”
Aarc-West acquired another unit in an adjacent development for warehousing whilst its new head office was being built, having outgrown its current premises in Surrey. It also owns Strata units in Kelowna and Kamloops.
The purchase decision in Langley was made after a two-year search for space and underlines how narrow the market for commercial owner-occupiers is. This is a change from a decade ago when more options were available and prices were lower.
“There’s nothing out there anymore. Even if there is, you’re overwhelmed by the price,” said Juana. “That was a decent price back then.”
Over the past year, prices have continued to rise, putting further pressure on the market. While Strata prices have strayed from the highs seen earlier this year, the declines have made the units little more affordable.
And yet, with so few options, builders continue to draft plans.
Denciti Development Corp., which built Langley Gateway in partnership with Nicola Wealth Real Estate, said the small-scale, 28-unit project was sold to 20 buyers before construction began. Demand was high as the project was the first of its kind in the area since 2005.
Denciti is now looking to future projects including Fraser Gateway on Lickman Road and Hwy 1 in Chilliwack. Located at the western gateway to Chilliwack, it will be one of the first new projects in town since 2018. Unit sizes will range from 3,360 to 16,843 square feet.
“Chilliwack has historically served as a peripheral industrial market for the region,” according to a recent report from Frontline Real Estate Services Ltd., which markets Langley Gateway. “Due to the recent heat of the market across the Fraser Valley, economic growth in Chilliwack and the notable lack of available strata, we are beginning to see new strata developments being planned.”
“It is urgently needed,” said Volodya Gusak, President of Denciti. “Since the vacancy rate in Vancouver is half a percentage point… I think it’s going to be very well received.”
Denciti acquired the site last year and the approval process with the city is ongoing. Gusak expects marketing to begin next year. Pricing has yet to be determined.
Frontline anticipates that the project will establish new pricing trends for Fraser Valley Strata units and help create valuable industrial space in the region generally.
A key variable in pricing new projects will be construction costs. While the increase slowly slows down, developers still face challenges in calculating pro formas.
During construction at Langley, supply chain disruptions and rising costs meant that general contractor Ventana Construction pre-ordered materials and adjusted workflow to keep costs under control.
“On the Langley project, we had to work a small miracle to get it on budget, in large part and thanks to our general contractor,” said Gusak. “Will there be any impact on Chilliwack? Yes. We will work very hard to mitigate that.”