Metro Vancouver industrial market report

Metro Vancouver industrial market trends

01. Vacancy continued to rise for the tenth consecutive quarter

Vacancy increased to 3.7% this quarter, rising 60 basis points from Q3 2024 and nearly doubling the 1.9% recorded in Q4 2023. This growth is largely driven by the volume of newly delivered supply that remains unoccupied and available. In Q4 2023, only 8% of new supply was delivered vacant, whereas this quarter, that share surged to 43%, reflecting a significant year-over-year jump.

With absorption at -213,519 sf, negative for the third consecutive quarter, annual absorption totaled -990,085 sf. This marks the first time in over a decade that annual absorption has been negative.

02. Speculative projects nearing completion still have availability

In Q4 2024, 1,056,975 sf of new supply was delivered, pushing total annual completions to over 3.2 million sf. While this accounted for 1.4% of the existing 2023 inventory, it was the lowest annual new supply since 2016, when just over 3 million sf was delivered, representing 1.6% of the existing inventory.

During the pandemic years, speculative developments were often largely pre-leased or pre-sold before reaching completion. However, the amount of space under construction that is pre-committed to has declined. In Q4 2024, only 45% of space under construction had been committed to prior to completion, down from 61% in Q4 2023.

03. Despite increased vacancy, gross rents remain stable

For the tenth consecutive quarter, average gross rents have remained relatively stable, holding at $27.14 psf in Q4 2024. Since Q3 2022, gross rents have ranged between a low of $26.92 psf in Q3 2022 and a peak of $27.57 psf in Q2 2024. This stability contrasts sharply with the previous 12-month period, when lease rates surged 30%, rising from $20.02 psf in Q2 2021 to $25.94 psf in Q2 2022. This rapid jump was driven by historically low vacancy, which bottomed out at just 0.3% in Q2 2022.

Another factor in average gross rents staying stable is the increase in property taxes. While net asking rates have dipped from their Q3 2023 peak of $21.99 psf to $20.95 psf this quarter, additional rents have increased from $5.30 psf to $6.19 psf, balancing average gross rents.