This downtown Kelowna industrial complex is now built and pretty much sold out.
Photo credit: Packersjunction.ca
March 02, 2021 – 6.30 a.m.
As the real estate market in Kelowna has recovered, the demand for industrial space has remained strong despite the COVID-19 pandemic.
According to a recently published Re / Max Commercial Real Estate Report for Western Canada, only two percent of the city’s 11.4 million square feet of industrial building space is currently empty.
“It looks like the institutional, industrial and multi-family classes in particular have stayed strong,” Kris McLaughlin, commercial real estate specialist at MCL Real Estate Group in Kelowna, told iNFOnews.ca. “Because of COVID and different kinds of restrictions for different industries, I’m a bit of a wait and see in the office and retail classes.”
Another 735,000 square meters of commercial space is under construction and there is great demand for it.
Seats in the Powerhouse District along Clement Avenue near Richter Street in downtown Kelowna are pretty much sold out at market prices.
When McLaughlin last checked the PC Urban complex east of Richter Street a few weeks ago, which had sold for $ 400 per square foot, the last few spaces were listed as $ 450 per square foot.
Base rental rates are around $ 20 per square foot in nearby Clement Business Park, which is also nearly full. This is comparable to other industrial space in the $ 11 to $ 18 range.
One difference in the Powerhouse District is that it is a new industrial area that allows uses like brewpubs and is near a number of high-rise developments, more of which are either under construction or planned.
With the move to e-commerce, the demand for warehouse space is increasing and McLaughlin is dealing with a number of customers who, for example, are in the construction business, need warehouse space, but also want a showroom for their products
There is 6.6 million square feet of retail space, 4.25 percent of which is vacant. Another 85,000 square meters are under construction.
“The Kelowna retail environment is evolving in the wake of the pandemic. Most retailers are conforming to imposed guidelines on distancing, capacity and contact tracing,” McLaughlin wrote in the report. “This is especially true of the city’s restaurants, some of which have installed isolation bags to improve safety and the customer experience.
“To keep tenants safe, landlords are offering incentives such as longer free leases or longer leases with lower tariffs to enable retailers to survive during these difficult times.”
There are also a growing number of companies sublet their space.
Lease rates range from $ 12 to $ 40 per square foot in the Kelowna and Pandosy Street neighborhoods, but can go as high as $ 50 per square foot along Harvey Avenue, reflecting the higher value of Drive Thrus, the report said.
“Looking ahead, the demand for smaller retail stores is expected to increase as retailers focus on new realities, while big-box locations in powerhouses like Central Park decline as inventory levels rise,” the report said.
The vacancy rate for the city’s four million square meters of office space is 4.5 percent, similar to that in retail.
A further 304,000 square meters are under construction in the Landmark 7 Tower and the upcoming Bernard Block in the city center, but these will not be open for another year or more.
This sector is affected by the shift from COVID-19 to work from home.
“Companies are therefore trying to cut excess office space, a trend that began in late 2020 with an influx of subleases,” the report said. “The vacancy rates will be slightly higher when the users of office space start adapting their space to their needs.”
Due to strong interest from investors and developers across Canada, land prices for office space are expected to rise. Builders will be more inclined to sell their space than rent it, the report predicts.
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News from © iNFOnews, 2021
