Photo Credit: Port Metro Vancouver/William Jans Photography

Partnership.Performance. I 1

Strong industrial sales and leasing activity in the Richmond and Delta, BC submarkets has continued

since mid-2014 even as new development redefines Delta’s industrial landscape and the transition of many of Richmond’s former industrial properties to higher uses accelerates. While sales activity in Delta in the first half of 2015 returned to more historical levels, the municipality recorded the greatest amount of leasing activity in the region during the past 12 months. The completion of a number of large industrial deals in Richmond in the first half of 2015, including two of the largest industrial transactions in the city’s history, will likely result in a record 2015 in terms of dollar volume.

Industrial sales dollar volume in Delta during the first half of 2015 ($49.8M/14 deals) has already surpassed the total dollar volume recorded in 2014 ($45.5M/22 deals) and is set to return to more recent historical deal and dollar volumes after a record 2013 that registered a very significant sales spike ($236.3M/46 deals). A number of large assets in Delta traded in 2013 that are unlikely to transact again for the foreseeable future. Falling debt costs compressed cap rates in 2013 and precipitated many of the deals that subsequently transacted. Owner/users are back driving the market again in 2015.

Vacancy declined in Delta to 6.8% at mid-year 2015 from 8.4% a year previous, as tenants leased up space in many of the new large-scale developments that have recently completed. These larger industrial users, typically logistics and distribution companies, were unable to locate and lease suitable space in 2014 and were awaiting the completion of projects that had kicked off in 2012/13. Average lease rates have risen due to the greater prevalence of new efficient premises. Smaller users either leased space in older, less efficient premises or purchased strata units – an important component of sales activity in a municipality where sites remain difficult (and expensive) to secure for those wishing to build their own facility.

Industrial sales activity in Richmond during the first half of 2015 ($191.7M/48 deals) is well on pace to set a new record in terms of annual dollar volume. The previous record was set in 2014 ($213.9M/100 deals) and will almost certainly be surpassed. Richmond is a market in transition as many of the sales registered in 2015 are properties that will be repurposed. As flex office/industrial users have increasingly gravitated towards premises near public transit, rising vacancy in more traditional light industrial parks provided an avenue for investors to acquire assets for repositioning.

Richmond/Delta, BCIndustrial ReportSummer 2015

Strong industrial sales and leasing activity reshaping submarkets

#

##

Number of Transactions

$ M

illio

n

0

$40

$80

$120

$160

$200

$240

$280

2008 2009 2010 2011 2012

DeltaRichmond

40

24 28

122

73

115

98 25

2013 2014

80

30

86

46100

22

Richmond & Delta Industrial Real Estate Sales and Transactions2008 - 2014

continued on page 4

Market Outlook

Richmond Delta

InsideTransaction Summary p. 2Project Construction Map p. 3Deal Tracker p. 4

Cap Rates

Industrial Vacancy

Absorption

Lease Rates

Sales Volume

Partnership.Performance. I 2

Ryan Kerr, Principal604.647.5094ryan.kerr@avisonyoung.com

Sean Keenan, Associate604.757.5267sean.keenan@avisonyoung.com

Jeron Dillon, Associate604.647.1330jeron.dillon@avisonyoung.com

Delta recorded some of the strongest industrial leasing activity in Metro Vancouver during

the past 12 months while sales were more muted. Richmond, on the other hand, registered significant levels of both industrial leasing and sales.

Dominion Warehousing completed a 15-year lease transaction with Bosa Development for 250,000 sf at 1020 Derwent Way in Delta. Dominion will move into the distribution centre space on Annacis Island that was previously occupied by LG Electronics.

The Dayhu Group of Companies successfully leased up phase one of its Boundary Bay Industrial Park development. Four tenants each took approximately 110,000 sf in the 440,000-sf project. The tenants included Apps Cargo Terminals, Speciality Distributors, Farrow Logistics and Pet Valu. Due to the success of the first phase, construction is currently underway on phase two, which includes a 428,000-sf distribution/logistics centre.

Direct LP will occupy the majority of Grosvenor Americas’ new Millennium VI development at 1005 Derwent Way on Annacis Island after it leased 103,000 sf of the 162,000-sf development. Direct LP is relocating from East Richmond after signing a 10-year deal in the recently completed next-generation distribution centre.

Rodair International will expand its presence in Metro Vancouver with the recent lease of 1488 Derwent Way from Mason Investments. The freight forwarder’s 25,000-sf lease runs until 2020. Fountain Tire renewed the lease for its BC distribution centre, which is located in Morguard’s South Fraser Distribution Centre at 7510 Hopcott Road. The renewal term was for three years.

In one of the more recent significant sale transactions, Bentall Kennedy acquired the 77,101-sf Ocean Ridge Business Park on Annacis Island in Delta for

$11M. The building sits on a 3.61-acre lot.

Crestpoint Real Estate Investments made a dramatic entrance into Richmond’s industrial market by acquiring both Knightsbridge Business Park ($40.25M) and, more recently, Key West Business Centre in 2015. Crestpoint has indicated it plans to renovate and reposition both assets. Meanwhile, PCI Developments acquired 11480-11500 River Road ($17.5M) in Richmond and is currently retrofitting the building. The developer has implemented a leasing program for the remaining vacancy in the 222,755-sf asset.

Orbit Distribution Systems is relocating from South Burnaby to the old Honda distribution facility located at 13240 Worster Court in Richmond. Orbit’s lease for 147,000 sf in Sun Life Financial’s recently retrofitted building will run for a nine-year term. Bunzl Canada also recently renewed its 116,292-sf lease in Kingswood Business Park at 7433 Nelson Road in East Richmond for eight more years.

An Asian investor acquired the mixed-use flex office/industrial complex at 7911-7991 Alderbridge Way/4935-4991 No. 3 Road for $63M in February 2015 in the largest industrial deal in Richmond’s history. The property, which consists of four buildings and is located on a 7.89-acre lot, has a total gross leasable area of 169,070 sf along with 6,130 sf of second floor retail and office space.

Two well-known developers in Metro Vancouver acquired 5520, 5560 and 5660 Minoru Boulevard for $35.45M in December 2014. The properties, which are currently home to two multi-tenant industrial buildings and an auto dealership, were acquired with an eye to redevelopment. In a similar scenario, a developer acquired the Keybridge Centre at 6851 and 6871 Elmbridge Way for $31.3M based on an opportunity to redevelop the site.

Tilbury Distribution Centre, which is being developed by GWL Realty Advisors, is just one of a half dozen of the new logistics/distribution-focused projects currently under development in Delta.

Industrial leasing and sales activity powering submarkets

Mathew Sunderland, Vice-President604.647.1346mathew.sunderland@avisonyoung.com

Partnership.Performance. I 3

Avison Young tracks investment deals valued at more than $5 million. Sources: Avison Young and RealNet Canada

LANGLEY BYPASS

FRASER HIGHWAY

FRASER HIGHWAY

HARVIE RD

TRANS-CANADA HIGHWAY

TRANS-CANADA HIGHWAY

TRANS-CANADA HIGHWAY

TRANS-CANADA HIGHWAY

TRANS-CANADA HIGHWAY

TRANS-CANADA HIG

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56 AVE 56 AVE 56 AVE

DOWNES RD

HUNTINGDON RD HUNTINGDON RD

WELLS LINE RD

CAMPBELL RD

KEITH WILSON RD

VEDDER MTN RD

YALE RD

YALE RD

MACLURE RD

SOUTH FRASER WAY

58 AVE

64 AVE

36 AVE

24 AVE 24 AVE

16 AVE16 AVE16 AVE16 AVE16 AVE

24 AVE24 AVE

32 AVE32 AVE

64 AVE64 AVE

152 ST152 ST

152 ST

144 ST144 ST

156 ST156 ST

168 ST168 ST

200 ST200 ST

208 ST208 ST

208 ST

216 ST216 ST

216 ST

232 ST232 ST

224 ST224 ST

240 ST240 ST

248 ST248 ST

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72 AVE

88 AVE 88 AVE

96 AVEGOLDEN EARS WAY

96 AVE

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64 AVE

72 AVE

88 AVE

104 AVE

GROSVENOR RD

64 AVE

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STEVESTON HWY

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W 49 AVE

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W 41 AVEW 41 AVE

W KING EDWARD AVE

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SW MARINE DR

SE MARINE DR

W 4 AVE

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LOUGHEED HWY

GAGLARDI WAY CLARKE R

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KINGSWAY

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TENTH AVE

BYRNE RD

EIGHTH AVE

MCBRIDE BLVD

CANADA WAY

WESTMINSTER HWY

DELTAPORT WAY

ARTH

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72 AVE

88 AVE

104 AVE

96 AVE96 AVE

NORDEL WAY

RIVER RD

SOUTH

FRASE

R PER

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M A RY HILL B YPAS S

DEWDNEY TRUNK RDDEWDNEY TRUNK RD

240 ST

272 ST

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ABERNETHY WAY

Approximately 3.5-million-square-feet of new logistics space proposed or under construction in Delta

Proposed industrial development plans in Richmond/Delta remain active

Address Project Name Developer Size Construction type Estimated Completion

1 6901 72nd Street, DeltaTilbury West Corporate Centre II, Phase 2

Beedie Group 98,512 sf Development Q2 2015

2 8181 Churchill Street, DeltaBoundary Bay Industrial Park, Phase 2

Dayhu Group Companies 427,400 sf Development Q4 2015

3 9450 River Road, Delta Tilbury Distribution Centre GWL Realty Advisors 289,000 sf Development Q3 2016

47927 Huston Road & 7927 River Road, Delta

Delta Link Business Park Beedie Group Up to 1.5 msf Development Q4 2016

5 16111 Blundell Road, RichmondHopewell Distribution Centre, Phase 4

Hopewell Development 336,000 sf Development Q4 2016

6 41B & 27B Avenue, DeltaTsawwassen Gateway Logistics Centre

GWL Realty Advisors Up to 1.2 msf Development Q1 2017

7 13240 Worster Court, Richmond Gateway Pacific Business Centre Sun Life Financial 147,378 sfRenovation/Reposition

NA

8 13200-13260 Delf Road, Richmond Knightsbridge Business Park Crestpoint Real Estate259,440 sf

(14.7 acres)Renovation/Reposition

NA

9 11480-11500 River Road, Richmond 11480-11500 River Road PCI Developments222,755 sf (9.5 acres)

Renovation/Reposition

NA

10 3810 & 3960 Jacombs Road, Richmond Key West Business Centre Crestpoint Real Estate271,388 sf (13 acres)

Renovation/Reposition

NA

11 4671 & 4740 Vanguard Road, Richmond Vanguard Industrial Estates South Street Development193,734 sf

(7.66 acres)Redevelopment TBD

12 11111 Twigg Place, Richmond 11111 Twigg Place English Bay Contracting 13.64 acres Development Site TBD

13 10651 No. 6 Road, Richmond 10651 No. 6 Road Ledcor 14.3 acres Development Site TBD

Source: Avison Young

D E L T A

R I C H M O N DS U R R E Y

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2

34

5

78

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Kyle Blyth604.647.5088kyle.blyth@avisonyoung.comJeron Dillon604.647.1330jeron.dillon@avisonyoung.comJohn Eakin604.646.8399john.eakin@avisonyoung.comMichael Farrell604.646.8388michael.farrell@avisonyoung.comRob Gritten604.647.5063robert.gritten@avisonyoung.com

Kevin Kassautzki604.646.8393kevin.kassautzki@avisonyoung.comSean Keenan604.647.1334sean.keenan@avisonyoung.comRyan Kerr*604.647.5094ryan.kerr@avisonyoung.com

Nabila Lalani604.647.1342nabila.lalani@avisonyoung.com

John Lecky604.647.5061john.lecky@avisonyoung.comJoe Lehman604.757.4958joe.lehman@avisonyoung.com

Mackenzie Leyland604.647.1354mackenzie.leyland@avisonyoung.com

Bennett Lutes604.646.8382ben.lutes@avisonyoung.com

Douglas McMurray604.647.5082doug.mcmurray@avisonyoung.com

Gord Robson604.647.1331gord.robson@avisonyoung.com

Struan Saddler*604.647.5077struan.saddler@avisonyoung.com

Mathew Sunderland*604.647.1346mathew.sunderland@avisonyoung.com

Terry Thies604.646.8398terry.thies@avisonyoung.com

Matt Thomas604.646.8383matt.thomas@avisonyoung.com

Ian Whitchelo604.647.5095ian.whitchelo@avisonyoung.com

Garth White* 604.757.4960garth.white@avisonyoung.com

Industrial TeamRICHMOND & DELTA INDUSTRIAL SALES TRANSACTIONS (>$1.5 MILLION) JUNE 1, 2014 TO JUNE 30, 2015

ADDRESS MUNICIPALITYTRANSACTION

VALUESQUARE FEET (SF)

PER SQUARE FOOT (PSF)

DATE

12155 Riverside Way Richmond $4,750,000 24,635 $193 June 2015

11400 Twigg Place Richmond $2,100,000 13,751 $153 May 2015

12211 Horseshoe Way Richmond $13,000,000 106,380 $122 May 2015

CDF Corporate Centre Richmond $2,350,000 11,041 $213 May 2015

11400 Twigg Place Richmond $1,853,250 10,591 $175 April 2015

Knightsbridge Business Park Richmond $40,250,000 259,440 $155 April 2015

Maycrest Business Centre Richmond $1,892,000 7,919 $239 March 2015

7911-7991 Alderbridge Way; 4935-4991 No. 3 Road

Richmond $63,000,000 169,070 $373 February 2015

11480-11500 River Road Richmond $17,500,000 222,755 $79 February 2015

18371 McCartney Way Richmond $5,875,000 21,150 $278 January 2015

5520, 5560 & 5660 Minoru Boulevard

Richmond $35,450,000 97,853 $362 December 2014

6600 Fraserwood Place Richmond $5,605,000 31,051 $181 December 2014

4131 Vanguard Road Richmond $2,431,000 9,875 $246 November 2014

Keybridge Centre Richmond $31,300,000 78,195 $400 October 2014

CDF Corporate Centre Richmond $2,100,000 11,041 $190 October 2014

5760 Cedarbridge Way Richmond $3,238,000 10,080 $321 October 2014

12211 Vulcan Way Richmond $2,665,000 25,819 $103 October 2014

4455 No. 6 Road Richmond $9,300,000 56,236 $165 October 2014

9291 & 9311 River Drive Richmond $20,400,000 200,505 $102 October 2014

4460 Jacombs Road Richmond $8,100,000 40,084 $202 August 2014

2480 Viking Way Richmond $6,313,622 50,495 $125 August 2014

11180 River Road Richmond $3,030,000 27,015 $112 August 2014

12111 Bridgeport Road Richmond $8,900,000 40,700 $219 June 2014

11060 Horseshoe Way Richmond $4,100,000 28,359 $146 June 2014

1639 Foster's Way Delta $4,250,000 22,548 $188 June 2015

6537 River Road Delta $4,750,000 9,550 $497 May 2015

Tilbury West Corporate Centre II - Phase II

Delta $5,323,465 33,137 $161 May 2015

1659 Foster's Way Delta $4,700,000 17,280 $272 April 2015

7046 Brown Street Delta $6,600,000 20,938 $315 March 2015

575 Ebury Place Delta $3,230,000 20,730 $156 March 2015

7464 Hume Avenue Delta $2,311,888 20,884 $111 January 2015

Ocean Ridge Business Centre Delta $11,000,000 77,101 $143 January 2015

7543 Vantage Place Delta $1,675,000 6,400 $262 December 2014

616-640 Chester Road Delta $4,800,000 46,151 $104 October 2014

7388 Hume Avenue Delta $2,625,000 18,190 $144 October 2014

1668 Foster's Way Delta $3,750,000 25,461 $147 August 2014

1500-1520 Derwent Way Delta $9,750,000 79,475 $123 July 2014

Tilbury West Corporate Centre II - Phase I

Delta $1,602,029 11,203 $143 July 2014

7504 Vantage Place Delta $2,400,000 22,135 $108 June 2014

Vacancy remained stable in Richmond at 3.3% as of June 30, 2015, virtually unchanged from 3.1% at the same point in 2014. With no new supply recently added to Richmond’s industrial inventory and the municipality seeking to consolidate industrial operators in East and South Richmond, owner/users have had an increasingly difficult time locating suitable premises. Another factor complicating industrial development is the high cost of Richmond’s development cost charges to build new flex office/industrial space in comparison with other Metro Vancouver municipalities. This has encouraged the widespread retrofitting of older less efficient industrial premises. Lease rates have remained stable, but upward pressure could manifest if vacancy remains tight and retrofitted space starts to come available in the popular submarket.

continued from page 1

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E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young Commercial Real Estate (B.C.) Inc.; DBA, Avison Young.

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For more information please contact:

Michael Keenan, Principal & Managing Director604.647.5081michael.keenan@avisonyoung.com

Andrew Petrozzi, Vice-President, Research (BC)604.646.8392andrew.petrozzi@avisonyoung.com

Khushboo Wanchoo, Industrial Research Manager604.647.1345khushboo.wanchoo@avisonyoung.com

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