Urban Intel: Surrey Industrial Market Intel

COVID-19 has not made a dent in the industrial market in the City of Surrey. The demand for industrial space is still high and the lease rates have also shown a lot of resiliency. As a reult, tenants are unlikely to receive any tenant inducements despite the pandemic. The City has witnessed strong absorption rates, roughly 1.2 million over the last year and the vacancy rates are currently around 2.0%, even after the delivery of 1.5 million SF over the past 12 months. Thus, the industrial market fundamentals of the City are very strong. 

The industrial lease rates in the City have shown strong growth over the last three years at an average rate of 9 percent per annum. Average industrial rents in Surrey have now increased to $13 psf. per year NNN. It is likely that the rents will either remain stable or decline modestly by the end of the year due to the current pandemic. However, considering that there is limited industrial inventory in the market, it is more likley that the rents will maintain their current levels. 

Industrial sales activity in Surrey averages around 50 - 60 transactions per year since 2016. The average sales price in the market are in the range of $275 - $375 psf. In addition, the current average cap rate is expected to range from 4.4% to 4.8%.  

Surrey is home to eight business parks including: Campbell Heights, South Westminster, Bridgeview, Port Kells, Newton, Cloverdale, Rosemary Heights, Highway 99 Corridor, and Douglas. The City has roughly 18% of total industrial land in Metro Vancouver, of which nearly 32% is either undeveloped or vacant. The City is favoured by the logistics and distribution related businesses as the properties have tended to be much newer, larger  and with taller ceiling heights compared to the other submarkets in Metro Vancouver.


Are home prices falling in Surrey and South Surrey White Rock area?

No Home prices in Surrey and South Surrey White Rock area are appreciating. Even though there remains a lot of uncertainty related to COVID-19 and its impact on real estate prices, Surrey's housing market has shown a remarkable amount of resiliency. Based on MLS HPI it is evident that the housing prices in Surrey and South Surrey White Rock area peaked in May 2018 and then declined till the end of Dec 2019, before showing signs of price appreciation. Even during the months of March - June 2020 the House Price Index displayed modest growth, i.e, housing prices appreciated, on account of limited inventory of homes for sale. 

While home sale activity is still below long-term averages, however the Surrey home market has witnessed an increase in sales in June and July compared to the last year and the spring season. Since the begining of July 2020, several realtors in Surrey have also reported a return to multiple offers on properties and of homes selling well above their asking prices. This was likley driven by the pent up demand, low interest rate environment and buyers adapting to the saftey protocals of buying and selling during the pandemic. It is also likely that some of the demand was driven by the buyers moving from higher density neighbourhoods within the Region to the relatively less dense suburban Surrey neighbourhoods. 

Price activity within the Surrey housing market showed an upward growth, average prices of single-family detached home (+7.5), townhomes (+2.6%) and apartments (+0.5%) displayed growth compared to price levels for June 2019. Within Surrey, the benchmark price of a home (residential combined) was at $886,800 by the end of June 2020, up by 0.4% from the month before, and up 3.3% from the same month last year.

Thus home prices in Surrey have stabilized and are appreciating, as compared to some of the other municipalities in British Columbia and the Country. This is likely to make Surrey and South Surrey housing market even more desirable to homebuyers and investors. This suggests that Surrey's housing market will witness continued price growth over the rest of the year. Also, buyers will be best served by buying now rather than waiting for decline in prices which might not materialize in Surrey.

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