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The Amazon Era is Making Vancouver the World’s Hottest Warehouse Market

Forget that multi-million-dollar condo on Vancouver’s waterfront. Invest in a warehouse instead.

The Canadian city is the world’s hottest industrial real estate market with lease rates up 29 percent in the first quarter year-on-year versus a global average of 3 percent. IKEA and BMW AG are among companies that have snapped up the biggest industrial and logistics spaces, according to data provided by CBRE Group Inc.

“Industrial previously was almost like a forgotten asset class,” Jason Kiselbach, vice president and sales manager at CBRE Vancouver, said by phone. “But we haven’t even scratched the surface of the demand that’s going to continue to grow and put more pressure on the industrial market.”

E-commerce giants like Inc. are driving the need for more logistics and storage space in urban centers. Consumers demanding quick online deliveries are forcing companies to carry more inventory in the city where the last-mile deliveries take place. Those dynamics are playing out across Canada and the U.S.

“The big household retail names—you don’t realize that everything that they provide you has to come through a warehouse,” said Kiselbach. “The new retail is really warehouse direct sales.”

It’s great news for landlords but underscores how Metro Vancouver is running out of the kind of land that supports one in four jobs — and often some of the best-paying ones. Geographic constraints like mountains and water are one issue. But vast swathes of prime property near the city are reserved for agricultural use, while rezoning industrial land to residential use can mean a big bump in revenue for municipalities.

Industry forecasts indicate the region could run out of industrial land within a decade—some even say as early as 2020. If that happens, it could hollow out Vancouver’s economy, relegating the Pacific Coast city into a playground for wealthy retirees and tourists, Robin Silvester, chief executive officer of the Port of Vancouver, Canada’s biggest, has long warned.

A site needs to be at least 100,000 square feet to be of any use to most major industrial business. As of June, Vancouver had five, according to CBRE.

“These rising lease rates really speak to the strength of the economy—the growth in population, consumer spending,” says Kiselbach, but adds, “there’s definitely the potential that we might lose some economic benefits if we can’t address the supply issue.”