One of the last frontiers of developable industrial land in Metro Vancouver is fetching prices up to double the assessed values as developers and businesses scramble to acquire disappearing space.
One of the more recent sales at Campbell Heights North industrial zone in southeast Surrey near the U.S. border involved a 1.72-acre serviced lot that sold in late November for $3.18 million, nearly twice its assessed value of $1.65 million, according to the listing agency, Colliers International.
Brokers who are active in Campbell Heights say about six million square feet of industrial space in the zone has been built out so far, with that number expected to grow to about 25 million square feet when the 1,800-acre zone reaches its potential.
The creation of new logistics, warehouse and other light industrial space in the latest phase of the park, however, has done little to ease the overall shortage of industrial space in the region. Land values also continue to skyrocket on the resale market.
During the early stages of development of the newest, northern tract of Campbell Heights — around 2011 — lots were selling for about $600,000 per acre, said Randy Heed, a senior vice-president at Colliers’ Surrey branch.
“We sold our first 10-acre piece to a local developer for $625,000 an acre,” he told RENX. “That owner optioned another 10 acres for $650,000 an acre, and those were the first deals we did there.”
Prices have “just kept climbing”
Since then, the prices have just kept climbing, he said.
“Our final phase (of Campbell Heights North), Phase 5, we sold at $1.1 million per acre,” Heed said, noting the prices include a development cost charge of $145,000 per acre for city services.
Heed said the Campbell Heights North section of the park sold out before it was even serviced.
“The demand is so high in the Lower Mainland for industrial land that a few of the groups that bought (earlier) saw what was going on and said, ‘You know what, what do you think you can get us for this land now?’ “
Heed said he worked with one owner who decided to sell three lots and ended up flipping them for $1.85 million per acre.
“We figured based on past demand and absorption that we had a 10-year supply (in the park),” Heed said. “We sold out a year ago.”
He said Campbell Heights has become a symbol of the Metro Vancouver industrial market.
Vancouver’s Lower Mainland running out of land
“There is no land left in the Lower Mainland for industrial development,” he said.
Buyers and companies from the U.S. and other parts of Canada don’t believe the prices, he said. “They’re like, ‘That’s not possible’ . . . especially companies from Toronto.”
Heed said the cost to buy and develop industrial land in Calgary costs a third of what it costs in Metro Vancouver.
“It’s at a critical point where it is now affecting our economy here,” he said.
The vacancy rate in Campbell Heights is currently 0.9 per cent, said Garth White, a principal with Avison Young, another brokerage that’s been busy in the park.
Beedie Industrial, Hopewell Development and Onni Group have been among the most prominent developers in the park. The latest, northern section of Campbell Heights lies between 32nd Avenue and 40th Avenue, and is wedged between agricultural land and a conservation area to the west and 192nd Street to the east.
About 600,000 square feet of developed space is being added each year in the latest phase, White said.
“We’re at 5.6 million square feet in Campbell Heights right now,” White said. “We’ll be over six million (square feet) by the end of next year. The business park itself is 1,800 acres and if you apply efficiency and site coverage metrics to that, the park is probably going to be 25 million square feet when it’s done.”
From a land perspective, that makes it one of the largest business parks in all of Metro Vancouver. It will double the overall inventory of Surrey’s industrial stock, he said.
“We’ve seen a huge run-up of land values over the last couple of years,” White told RENX. “I would say land value for (serviced lots) two years ago was about $1 million per acre and now you’re probably $2 million an acre.”
City targets light impact industry in park
He said the zoning for Campbell Heights North is fairly restrictive, meaning heavy industrial uses are not permitted, making it a home mostly for logistics centres, research and development companies, high-tech firms and warehouses.
“Really, the city is pushing towards a clean business park-type look, which is actually turning a lot of groups away that would love to be there, but they can’t fit with the zoning,” White said.
From a location and transport standpoint, the park is central, but not ideal, White said.
“It’s one of the last frontiers,” he said. “If you are in distribution logistics, traditionally access to Highway 1 is extremely important, and Campbell Heights does not have great access to Highway 1,” he said.
“That said, if you’re distributing across the border to the U.S., it’s great — or if you’re distributing regionally.”
The shortage of space elsewhere means businesses are “making it work,” he said.