Construction has begun on a major 140-acre industrial park in Abbotsford, one of the rare large-scale industrial projects to be built in the region.
“I’d say this is the largest tract of land that we have left to build, not just in Abbotsford, but throughout Metro Vancouver,” said Jeff Rank, senior vice-president of leasing at QuadReal Property Group.
Those buildings will be 120,000 square feet and 140,000 square feet, respectively, and designed for either multiple tenants or a single tenant, according to Rank.
The design, with high ceilings and dock loading doors, is geared toward a number of uses, such as e-commerce distribution or last-mile distribution.
The schedule for occupancy is early 2024 and while the first buildings undergo leasing and construction, Rank said they will continue to build out the nine remaining buildings.
Once built, the project will total 1.3 million square feet of light industrial space.
Demand for space remains high
Rank doesn’t expect it to take long to complete.
“I think it will be quite quick given the lack of vacancy and lack of overall supply in the market that people have to choose from,” said Rank, who has already received plenty of tenant interest.
“There is very little in the way of vacancy and in the land-constrained environment we are in, demand has been outstripping supply for the better part of a decade in Metro Vancouver, so yes, we’ve seen a lot of activity.
"We waited until we were entitled and under construction before we could create the certainty around when our buildings would be finished. It makes it easier for our tenants to be able to commit at that point.”
While the first two buildings are to be built on spec, there remains the possibility of building to suit as the project progresses.
The future buildings will be a similar size and configuration in keeping with the mid-size buildings that will make up the project versus large, single-user warehouses.
It has the appeal of direct access to Hwy. 1, two border crossings within a short distance, as well as access to the Okanagan, about three hours away, and Vancouver, about an hour away.
It’s expected the business park will create 1,900 jobs either directly or indirectly, $27.1 million in federal taxes, $23.6 million in provincial taxes and $1.9 million in City of Abbotsford property taxes, according to an economic impact study commissioned by QuadReal.
Changing light industrial market
The developers have committed to preserving more than 40 acres of green space. As well, there are discussions underway to provide an amenity for the Matsqui First Nation.
About 10 per cent of the Xchange will include office space.
“What’s gone on in our market is warehousers are looking to put their goods closer to the end customer,” said Rank.
The days of having a centralized warehouse in Calgary or Toronto are mostly over.
“Some people refer to it as ‘just-in-case inventory,’ rather than ‘just-in-time inventory,’ ” said Rank.
The market is changing and rising rates and inflation have created uncertainty in other sectors of the market.
However, because demand for industrial space has outstripped supply for five or six years, Rank said vacancy rates have stayed below one per cent and rental rates have gone up seven to 10 per cent per year on average.
“We are strongly believing that the market dynamics will let us fill the gap and have these buildings leased by the time they are complete,” said Rank.
“At this stage, with the amount of land we have, and just getting started, a build-to-suit is certainly something that’s possible as we go through the process . . . we’ll see what the market does as we go along.”
Hungerford assembled the site after it had been removed from the Agricultural Land Reserve in 2011. The tract of empty riparian land had multiple owners, so the assembly was a drawn-out process.
“(Hungerford) managed to get all these owners cobbled together and we agreed to be the capital in helping with executing and acquiring these lands,” said Rank.
“We came on about 2015, right near the formation of QuadReal.”
QuadReal's The Post in Vancouver
The Xchange is QuadReal’s only industrial project underway, but Rank is also involved in the office project The Post, another large-scale project, in downtown Vancouver.
The conversion and addition of the old Canada Post building will include 1.1 million square feet of office space for more than 7,000 workers.
Amazon will occupy more than a third of the space. Workers are to begin moving in at the start of the new year, said Rank.
He thinks inflation might have some impact on the industrial market, but demand pressure will balance it out. E-commerce, he said, is here to stay.
“What it might be doing is slowing the growth of the annual rental rate. You might see that come down. But again, (with) the vacancy rate as low as it is and the lack of any kind of sublease inventory, people still need to have warehouses.
"I think the market will continue to be strong and that’s why we are building these buildings on spec, to fill the gap for people wanting first-tier warehouse space.
“I think we are still quite bullish,” he added.
“This is a sector where we have strong conviction in this asset class, Vancouver industrial, so I don’t think we are being more or less aggressive than we might otherwise have been, given the current environment we are in.”