Metro Vancouver has the highest land prices in all of Canada across the residential, commercial and industrial asset classes, according to a new report from Colliers.
The region is described as being on the “leading edge” when it comes to the price of land compared to the rest of the country, said Adam Jacobs, senior national director of research with the real estate company.
For industrial land, the price per acre in Vancouver is almost $5 million. The next most expensive city for industrial land is Toronto at roughly $2.5 million. Commercial land in Vancouver sits between $3 million and $3.5 million per acre with residential land between $4 million and $4.5 million, roughly $3 million more than Toronto, according to the May 30 national land report.
Land prices in Vancouver have increased by 155 per cent since 2018. Total land sales volume has increased by 23 per cent across Canada over the past five years.
“What happens [in Vancouver] tends to happen to the rest of the country three or four years down the road,” said Jacobs. “Vancouver is the most extreme version of a real land crunch, population growth and there's nowhere for people to go. There's just no wiggle room with any big industrial or housing projects, and we're just seeing the prices go up and up beyond what everybody thought.”
The high price per acre for land in Vancouver is contributing to low levels of affordability and adds barriers to build more housing, according to Russell Wills, Colliers’ national industrial research lead. Declining vacancy rates and federal immigration targets are adding to the unaffordability as a tight lending environment is making it more difficult to acquire residential land.
“Anything that has a longer-term time horizon is very difficult just because of what's happened with rates. There's a lot of uncertainty about whether this is temporary and they're going to start cutting rates, or maybe this is the new normal and it's going to be this way for three, four or five years and we need to plan for that,” said Jacobs.
When it comes to lending, residential and multi-family projects saddled with more complexity and time needed for zoning and approvals are not as attractive as industrial projects with clear and shorter timelines, said Wills.
The multi-family asset class has the highest construction costs across Vancouver, Calgary, Toronto and Montreal. Locally, it is approximately $450 per square foot to build a multi-family project.
“[Land prices] both cause the affordability problems and reflect the affordability problems. Something we're seeing [in Vancouver] and everywhere is people are reaching way outside what we normally would consider the Greater Vancouver area … and they're starting to go hours away in search for land that can be developed,” said Jacobs, adding that buyers are looking for available land in areas like Abbotsford.
Markets in areas with a population of less than one million people, also known as tertiary markets, have seen an increase in rental rates as a result, said Wills.
Average asking rent for industrial space in Abbotsford increased by roughly 20 per cent from $14.79 to $18.30 between the first quarter of 2022 and the first quarter of 2023.
“As much as [industrial space] is getting built, it's still probably not enough. If you're a landlord, you're thinking ‘I have tenants lining up out the door and they'll pay whatever I need them to pay to make this project work,’” said Jacobs.
One notable transaction for industrial space in the first half of 2023 is the purchase of 19469 92nd Avenue for $111 million by Conwest Group, delivering 14.21 acres of space.