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.
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