A Fraser Valley land rush that has driven prices up three fold in the last two years has helped make land the dominant real estate investment in the Lower Mainland.
In the first quarter of this year, land accounted for 56.8 per cent of all the property transactions in the Lower Mainland, according to the Altus Group, with sales of residential development land alone worth more than $1.1 billion. Sales of non-residential land, primarily for industrial, tallied another $530 million in the three-month period.
But, as reflected in slumping housing sales, residential land sales in the Lower Mainland were down 46 per cent from the fourth quarter of 2017 and down 21 per cent from the white-hot pace in the first quarter of last year.
Fraser Valley home sales plunged 43.5 per cent in June compared with the same month a year earlier and were down 17.4 per cent from May of this year, according to the Fraser Valley Real Estate Board.
Sales of non-residential land also cooled in the first three months of this year, dropping 15 per cent from the fourth quarter of 2017 and 9 per cent below the first quarter of 2017.
Yet, with land sales averaging nearly $500 million a month so far this year, any talk of a downturn appears premature, especially in the Fraser Valley.
“The Fraser Valley is the future,” said Joe Varing, director of sales for Abbotsford-based Varing Marketing Group, with Homelife Glenayre Realty Company Ltd.
Varing specializes in land sales and, despite continual warnings of a land shortage, maintains there are plenty of shovel-ready residential parcels in the Fraser Valley.
Varing estimates valley land prices have tripled since 2016, which has convinced some owners of detached houses to join with adjacent neighbours in land assemblies. One recent example in the Yorkson area of Langley saw three lots assembled into a 3.6-acre parcel that sold for $8.3 million.
The planned extension of light rapid transit, Varing said, has boosted demand for land assemblies from central Surrey to Langley. Developers are land-banking on speculation, he said, and looking forward three to seven years for new multi-unit residential projects.
Investor demand for Fraser Valley industrial land is also ramping up, according to Avison Young.
More than 1.9 million square feet of speculative industrial construction is set for delivery in the Fraser Valley over the next 12 months, Avison Young confirms – and the speculators are willing to pay big money to get into the market.
This March, a B.C. numbered company paid $2.4 million per acre for a parcel on 66 Avenue in Surrey, and Zenith Development Ltd. paid $2.7 million an acre for 2.5-acre site on 88 Avenue in Surrey in the same month; these are considered record-high values. Abbotsford prices are also catching fire, with industrial land prices topping $1.1 million per acre this year in five recent deals.
Industrial vacancy rates in the Fraser Valley are at near-record lows of 1 per cent in Surrey, 1.5 per cent in Langley and 1.8 per cent in Abbotsford, among the lowest in the Lower Mainland, according to both Avison Young and CBRE commercial.
“We are at a critical stage and we need to find industrial areas for these companies,” CBRE vice-president of industrial Chris MacCauley said. “It used to be that when companies couldn’t find space in Vancouver, they moved to the Fraser Valley. But now the valley doesn’t have much inventory left either. There’s a threat we’re going to see companies relocating out of province or it will limit their growth potential.”