Denciti Development has sold the seven acre property at 2648 Kyle Road. Property in Kelowna. (Courtesy Denciti Development)
The lack of industrial space in major Canadian cities is well documented, but the problem is not confined to the largest centers. The city of Kelowna in Central BC is also booming, with industrial vacancies falling below one percent.
When Vancouver-based Denciti Development put a seven-acre, scarce development property for sale in the West Kelowna industrial park, it met with great interest.
Denciti had bought the 10 acre property at 2648 Kyle Road. about three years ago and built two layers of buildings of about 40,000 square feet each that sold out quickly. A third, larger building was originally planned at the rear of the site, but a rented facility would be a better option.
“We’ve seen a lot of tenants signing up for it,” Royal LePage Commercial Realtor Steve Laursen in Kelowna told RENX. “They wanted to occupy sales space, and for Denciti it just isn’t part of their portfolio to buy and hold. You are a dealer developer. “
Kelowna “no longer an industrialized country”
So Denciti marketed the remaining seven acres – instead of building, stabilizing and selling later. It was sold to a Vancouver-based developer who is planning a facility in the middle of the bay covering approximately 150,000 square feet. Plans and permits are still being finalized.
The property sold for $ 1.425 million an acre, Laursen said, reflecting the dramatic sustained surge in developed land values.
“Land in West Kelowna, there’s really nothing left,” Laursen said. Also, there isn’t much existing space in the market, only about 100,000 square feet for rental. “We literally no longer have an industrialized country at the moment.”
He noted that a new developed land directly across from this property with direct access to the freeway is charging $ 2.5 million an acre.
The small amount of available land is filling up quickly. Local company Callahan Property Group is in full swing and is building its Kelowna North Industrial Park on the northern edge of the city.
“(His) plan was to build a 60,000-square-foot building each year that would be phased out on this 38-acre property over the next five to six years,” said Laursen.
“(It’s) being finalized for the third building, about 180,000 square feet, and he has maybe 20,000 or 30,000 square feet of that building available.
“(It) has just started pouring the foundation on building number four, which will be another 60,000 square feet, but it will go into a smaller bay.”
The Okanagan is a hot market
A variety of factors make the Okanagan a hot market, not just in the industrial sector. Residential property sales are also booming as tired residents of COVID leave the big cities and see the region as an attractive alternative.
A North American Development Group and Kerkhoff Construction Group Water Street condominium is one of several major developments transforming Kelowna, BC (courtesy of NADG).
Projects such as the nearly sold-out luxury condominium towers and townhouses on One Water Street by the Kerkhoff Construction Group and the North American Development Group are emerging across the city. According to Laursen, 15 residential towers are either under development or in the planning phase.
“The people in my office and in every other office in town are busy with Toronto, Calgary, Edmonton and Vancouver. It’s the people who are just fed up with the city and say, “You know what? I’m going to the Okanagan. “
Average home prices are in the $ 850,000 range, according to Laursen, and Kelowna is no longer on the list of affordable cities to buy a home in.
The same thing happens with companies, especially with companies that have to distribute in the valley.
As distribution becomes increasingly important due to e-commerce and consumer expectations of getting goods faster, businesses need last mile depots that are closer to the customer.
Others are only pushed out of markets like Vancouver because there is no space for them.
“You just can’t get a lot of coverage in BC. It’s like Wayfair was looking at the market last year, ”he said.
“I think they were looking for 800,000 square feet to split between Calgary and Vancouver.
“In the end, I think they took whatever they could get, which was about a hundred and several thousand square feet in Van, and the rest went to Calgary.”
Kelowna between Calgary and Vancouver
Speaking of Vancouver and Calgary. . . Kelowna sits roughly in the middle of the two.
Demand for industrial space in Kelowna ranges from smaller local firms to dealers who need regional space.
“The smaller businesses are looking for this 2,500 square foot space,” said Laursen. “Then we get a lot of nationals looking for a space of between 5,500 and 30,000 square feet. On a national level, I’d say the sweet spot is now 10,000 nights, for small businesses it’s 2,500.
“And we find that a lot more of these groups are looking for dock loading these days.”
The West Kelowna Industrial Park development will be a good example. The company plans to change the orientation of the building to make it easier for 54-foot trailers to get in and out.
In addition to rising land prices for development, the trend has resulted in lease rates for new products in desirable areas reaching as high as $ 15. For layered industrial properties, the price is up to $ 300 per square foot.
Laursen doesn’t expect the situation to change anytime soon. A major reason for the city’s appeal – its mountains, lakes, and landscapes – is also an important factor in its growth.
“The mountains and the lakes are our biggest problems here,” remarked Laursen with a little irony. “They are nice problems, but they are problems when it comes to development.”
