Investors are circling an East Vancouver development, the first in North America to mix condominium towers with industrial strata space.
“I thought the industrial buyers would all be owner-occupiers, but we are getting a lot of calls from investors,” said Dan Jordan, a Colliers International vice-president who began marketing the non-residential space at Wall Financial’s Strathcona Village this month.
In 2014, the City of Vancouver rezoned a two-block strip of East Hastings to allow both residential and “light industrial,” defined as production, design and repair uses.
Strathcona Village, being built on the north side of the 900-block of East Hastings Street, is the first development under the zoning change. It is a three-tower condominium complex skirted by two floors of industrial, commercial and retail strata. All 280 condos in the development sold out last year at prices ranging from $199,000 to $439,000. As a condition of the rezoning, Wall Financial is including 70 apartments that will be turned over to the city for social housing. Those will be rented at rates ranging from $375 per month to market levels.
Now 54,000 square feet of industrial and commercial space has been divided and is being sold at $450 per square foot and up – way up. Two of the 18 units have already sold, Jordan said, including a 1,000-square-foot ground-floor industrial space with Hastings Street frontage that was bought for $700,000.
The city’s “light industrial” definition captures nearly any kind of production, from making video games or films, a bakery or even roasting coffee, Jordan explained.
Investors appear interested because they can buy non-residential space close to the downtown core and then lease it to a variety of commercial tenants, he said.
“There are a lot of eyeballs on this project,” said Russ Bougie, an industrial real estate specialist and principal with Avison Young, Vancouver.
Bougie said annual lease rates for Vancouver industrial space have doubled in the past 18 months to $20 per square foot and up, partly because soaring demand from the film and tech sectors has driven Vancouver industrial vacancy down to 1.4%, the lowest in Canada.
Jordan estimates that Strathcona Village’s light industrial space could lease for $30 per square foot, net. This would pencil out to a capitalization rate of 3.5%, Bougie estimates, noting, “A 4% return would attract multiple offers.”
If Strathcona Village proves successful in attracting new residents and employment to East Vancouver, the city should look at extending the mixed-use zoning in the area, Bougie said, perhaps farther along Hastings and Clark Drive.
“We do have a number of enquiries for sites in the area,” confirmed a spokesman for Vancouver’s planning department.
Bruno Wall, president of Wall Financial, said the biggest surprise with Strathcona Village was the acceptance by condo owners of living above industrial space.
“There was no resistance,” he said. “It has all been very positive.”
Wall Financial is scouting similar sites in the East Hastings corridor, but does not have any land under contract, said Wall.
While mixing industrial with residential works best in urban cores, the concept is also being considered in the suburbs. The biggest example is Fraser Mills on the Fraser River in Coquitlam, where Beedie Development Group plans to combine industrial, retail and offices with hundreds of condominium units on a 90-acre former pulp mill site.
The City of Coquitlam has designated the area as Waterfront Village Centre and has rezoned it to include commercial, industrial and residential use. Final development plans for the site are to be released December 1. •