Inexpensive debt was the primary factor, according to the commercial real estate company.
“As the cost of debt declines, it puts more downward pressure on capitalization rates/yields,” said Struan Saddler, a Vancouver industrial sales and leasing specialist for Avison Young. “This should entice prospective vendors to offer to the market because they are looking at historically low cap rates and, accordingly, higher proceeds.”
There were 27 industrial real estate transactions valued at $36.8 million during the first half of 2011, the highest dollar amount since 2007. It was also the greatest number of first-half transactions since 2008.
The Vancouver industrial market hit a bottom in 2009 in when there were just 36 transactions. But the market has since been recovering strongly.
“While there is a lack of large dollar volume product available, we are witnessing an increasing number of smaller investment transactions, which is enhancing the stability in the industrial investment market,” said Avison Young Principal John Lecky, who specializes in Vancouver industrial property sales and leasing. “The only thing limiting strata development is identifying a site large enough to render the economics attractive.”
Industrial vacancy has started to rise slightly, up to 3.9% in the spring of 2011 from 2.5% in the fall of 2010. But Avison Young’s report predicted it would again tighten by the end of this year as new development has remained limited and land supply will continued to constrain availability.
The most notable lease projects this year included Acme Analytical Laboratories Ltd., leasing about 82,000 square feet at Shaughnessy Street, and Vancouver Opera Association leasing about 30,000 square feet on East 3rd Avenue.