Steady interest
“The incredible appetite of purchasers looking to secure a facility as an owner rather than tenant has been fuelled by the historically low interest rates. ... Given the shortage of available industrial land, there are just a handful of strata projects currently underway.”
Sound familiar?
Those thoughts come from Todd Scarlett, an industrial broker with Colliers International, when asked to comment on the market for strata space among industrial users – five years ago.
But they’re also an indicator of just how consistent that market has been in the Lower Mainland and how the factors driving the market have remained largely unchanged since fall 2007.
Mark Renzoni, executive vice-president and managing director with CBRE Ltd. in Vancouver, told panellists at the January breakfast of commercial real estate association NAIOP that strata sales have consistently ranged between 60% and 70% of all industrial deals for the past decade.
While sales were down in 2012, with 304 deals totalling just $207 million, average deal size was second only to 2010.
“The deals were larger in strata as we moved a bit more into the larger bay format,” Renzoni said.
There were also fewer projects underway, a point picked up by panellists Murray DeGirolamo, executive vice-president with Hopewell Development Corp., and Jarvis Rouillard, vice-president, investments, with Triovest Realty Advisors Inc.
Smaller sites have eroded in the Lower Mainland’s industrial land crunch, DeGirolamo said, while Rouillard noted that large development sites in the region can be counted on one hand.
And land values, in turn, have increased and boosted prices for new space. Rising prices are a challenge, but abundant capital and cheap debt aren’t about to stop appreciation.
“I really do think they’ve got to max out at some point here, quick,” Rouillard said of prices. “But having said that, they may not because there’s just so much capital trying to be placed.”
Counterpoint
Strata sales led industrial activity in the Burnaby market in 2012, according to a recent Avison Young report, but contrary to CBRE’s assessment of the regional picture, smaller properties dominated deals.
Avison Young reports that of 58 industrial deals in Burnaby in 2012, just two totalled more than $3 million.
Most deals were for small-bay strata units.
“While interested parties remain actively engaged in seeking to acquire industrial real estate in Burnaby, there is very little suitable product, new or existing,” Avison Young reports.
“The lack of strata units developed in the 10,000-square-foot range highlights a very underserviced element of the market.”
Social housing
This columnist had the chance to hear venture capitalist Fred Wilson, a financial backer of social media startup Twitter (through his company Union Square Ventures), speak in New York in January 2009.
Wilson told an audience of real estate professionals how Twitter’s potential as a social medium lay in its ability to deliver short, real-time blasts of information to distributed networks of people.
The power of social media applications is familiar to Vancouver-based BuiltSpace Technologies Corp., which is using QR codes at commercial and institutional properties across B.C. to connect occupants, landlords and suppliers in a conversation about building needs.
Now, North Vancouver’s Conasys Inc. is incorporating social media into the online homeowner guides it provides to 35,000 homes across Canada on behalf of more than 300 developers and builders.
When requested by clients, the latest edition of the homeowner portals will stream a feed from Twitter, Facebook or other social media alongside information on household equipment.
“We already have this engagement platform,” explained Jerry Bauer, who was appointed Conasys CEO in November 2012, succeeding founder James Christensen.
“Builders and developers want to engage homeowners in other areas. If they can build a relationship with current homeowners, then maybe they can have referral programs.”
Six-year-old Conasys also attended the NAHB International Builders’ Show in Las Vegas last week, part of early efforts to enter the U.S. market.
