METRO VANCOUVER INDUSTRIAL REVIEW JANUARY 19, 2017 PANELISTS: BETH BERRY, BEEDIE DEVELOPMENT GROUP LEE HESTER, JLL JEFF MILLER, OXFORD PROPERTIES MODERATORS: CHRIS MACCAULEY, CBRE JASON KISELBACH, CBRE
FORMAT
TOPICS OF DISCUSSION 1 2 THE LEASING MARKET IS STILL 3 WHERE IS ALL THE F#@%& LAND?! WHAT IS DRIVING IT AND WHERE COULD IT GO? SALES - A TALE OF TWO MARKETS TOTALS AND USER SALES VS. INVESTMENT SALES CURRENT LAND MARKET AND THE FUTURE OF INDUSTRIAL DEVELOPMENT
THE LEASING MARKET IS STILL HOT
LEASING MARKET 2016 KEY LEASING STATISTICS 2.4 % 4.0 MSF 3.6 MSF $9.00 PSF VACANCY RATE ABSORPTION NEW SUPPLY AVG ASKING RATE
LEASING MARKET MULTI-MARKET COMPARISON - HOW DO WE STACK UP? VACANCY 2.4% 7.7% 1.8% ABSORPTION (% OF MARKET) 4.0 MSF (2.15%) -1.1 MSF (-0.85%) 9.3 MSF (1.22%) NEW SUPPLY (% OF MARKET) 3.6 MSF (1.94%) 1.2 MSF (0.92%) 4.7 MSF (0.62%) UNDER CONSTRUCTION (% OF MARKET) 4.2 MSF (2.27%) 240 KSF (0.18%) 5.1 MSF (1.02%) # OF OPTIONS 100 KSF+ 8 20 70
LEASING MARKET % OF METRO VANCOUVER TOTALS SURREY DELTA TOTAL ABSORPTION 39% 25% 64% SPOTLIGHT NEW SUPPLY 29% 18% 47% ON SURREY UNDER CONSTRUCTION 19% 30% 49% & DELTA VACANCY SOUTH OF FRASER RIVER 2.6% NORTH OF FRASER RIVER 3.2%
LEASING MARKET MARKETS IN A CRITICAL STATE? % OF METRO VANCOUVER ABSORPTION VANCOUVER BURNABY RICHMOND 1% 12% -5% TOTAL 8% Q4 2016 VACANCY 1.7% 2.1% 1.6% % OF THE TOTAL MARKET UNDER CONSTRUCTION 1.55% 1.88% 0.99%
LEASING MARKET SIGNIFICANT TRANSACTIONS 2016 DEALS 2015 DEALS 1 Stemcell Technologies 236,685 Burnaby High Tech 2 Adjacent Production Services 222,879 Langley Film 3 Legion Can TV Productions 208,000 Burnaby Film 4 Skydance Media 195,000 Surrey Film 5 Urban Barn 160,000 Delta Distribution 6 CJ Express 112,066 Delta Distribution 7 Kintetsu 104,190 Delta Distribution 8 Pico Production 97,430 Surrey Film 9 The Crossing Studios 82,110 Burnaby Film 10 Leon s Furniture 79,174 Delta Distribution Amazon 548,000 New West Ecommerce TJX Canada 430,000 Delta Ecommerce Arc Teryx 243,610 New West Distribution Ironwood Studios 177,033 Vancouver Film Lululemon 155,562 Delta Distribution Fed-Ex 153,081 Delta Distribution A52 152,084 Surrey Distribution Orbit Distribution 147,378 Richmond Distribution Jysk 135,115 Pitt Meadows Distribution Kuehne & Nagel 129,782 Richmond Distribution TOTAL 1,497,534 TOTAL 2,271,645 FILM = 60% FILM = 8%
LEASING MARKET DISCUSSION
SALES: A TALE OF TWO MARKETS
SALES 1 2016 INDUSTRIAL SALES STATISTICS $1.2B TOTAL SALES 518 TOTAL # OF DEALS $195 AVG PRICE PSF
SALES 1 5 YEAR BANK OF CANADA BOND RATE VS. AVG SALE PRICE $250 3.98% Sale Price per SF 4.50% Bond Rate $195 3.50% 3.00% $150 2.50% $142 2.00% $100 1.15% 1.50% 1.00% $50 0.50% $0 0.00% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Bond Rate Sale Price $ per Sq.Ft $200 4.00%
SALES 1 USER PURCHASE CASE STUDY, THEN & NOW ASSUMPTIONS 20,000 SF 5 YEAR 30% 25 YEAR BUILDING MORTGAGE DOWN PAYMENT AMORTIZATION 2007 2016 AVG $ PSF $142 $195 Purchase Price $2,840,000 $3,900,000 5 Year Bond Rate 3.98% 1.16% Spread 150 bps 200 bps Interest Rate 5.48% 3.16%
SALES 1 USER PURCHASE CASE STUDY, THEN & NOW 2007 2016 % CHANGE Purchase Price $2,840,000 $3,900,000 37 Interest Rate 5.48% 3.16% -42 Monthly Payment $12,184 $13,184
SALES 1 STRATA CONTINUES TO OUTPERFORM SOUTH VANCOUVER SOUTH BURNABY DELTA CAMPBELL HEIGHTS
SALES 2 ANOTHER BANNER YEAR FOR INDUSTRIAL INVESTMENT YEAR # OF DEALS TOTAL PRICE 2013 2014 2015 10 8 13 $388M $231M $381M INDUSTRIAL TRANSACTIONS $15M+ 2016 9 $456M BUT...
SALES 2...NOT REALLY 1. 1550 Burrard Street Vancouver $185,000,000 Molson Brewery 2. 6849 72nd Street Delta $60,216,945 3. 8400 & 8500 River Road Delta $49,500,000 4. 18800 Lougheed Highway Pitt Meadows $45,750,000 Loblaws to Choice REIT 5. 901 Great Northern Way Vancouver $34,600,000 6. 10239 Grace Road Surrey $26,455,000 7. 11411 Bridgeview Drive Surrey $21,500,000 City of Surrey to CCB 8. 8900 Glenlyon Parkway Burnaby $17,700,000 9. 120 West 3rd Avenue Vancouver $16,400,000 NOT A TRUE INVESTMENT DEAL "FIRM DEAL PRIOR TO 2016" WE ARE LEFT WITH 4 DEALS TOTALING $95M
SALE MARKET DISCUSSION
WHERE IS ALL THE F#@%& LAND?!
LAND/DEVELOPMENT METRO VANCOUVER INDUSTRIAL LAND SALES - 10 ACRES+ 12 400 10 350 8 7 250 Total Acres 8 6 6 200 150 3 100 4 2 50 0 2012 2013 2014 Total Acres 2015 # of Deals 2016 # of Deals 300 10
REMEMBER THE MARKETS IN A CRITICAL STATE? LAND SALES 3 ACRES+ 2012 TO 2016 VANCOUVER BURNABY RICHMOND # OF DEALS 2 13 9 1 Sold Out Strata 2 Government 5 to Developers (all planned or completed Strata or BTS Sale) All Users or Government AVG # OF DEALS PER YEAR 0.4 2.5 1.8
REMEMBER THE MARKETS IN A CRITICAL STATE? REMAINING YEARS LAND SUPPLY VANCOUVER BURNABY RICHMOND SITES OVER 1 ACRE & PRIVATELY OWNED BUILDABLE SQ.FT. 45% SITE COVER REMAINING YEARS BASED ON 5 YEAR AV. ANNUAL ABSORPTION 21 acres 116 acres 276 acres 420,000 2,300,000 5,420,000 2 5 10
LAND/DEVELOPMENT THE NEW FACE OF INDUSTRIAL IN THE CITY OF VANCOUVER 2.07 FSR 0.83 FSR
LAND/DEVELOPMENT THE WALL STREET JOURNAL Prologis to build first multistory warehouse in the US SEATTLE VANCOUVER Developers are having a harder time finding space for new warehouses in increasingly crowded and expensive cities. Their answer: build upward SUB 2.5% VACANCY LAND PRICES 25% GEOGRAPHIC CONTRAINTS WHY NOT HERE?
LAND/DEVELOPMENT DISCUSSION
KEY TAKEAWAYS LEASING The market will tighten in the short term SALES LAND/DEVELOPMENT Small user sales are still the majority We have not yet hit price levels to free up trophy assets Multi-Story warehouses, we are not there yet
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