Understanding Industrial Lease Rate Structures
Industrial lease rates in Metro Vancouver are typically quoted on a net basis — meaning the quoted rent does not include operating costs, property taxes, or insurance, which are paid separately by the tenant on a triple-net (NNN) basis. Total occupancy cost equals net rent plus operating costs plus tenant-specific costs (insurance, utilities, janitorial). Understanding the full occupancy cost structure is essential for budgeting and comparing alternatives.
Net Rent by Submarket
Vancouver-proper industrial net rents typically range from $22 to $32 PSF, with port-adjacent and last-mile-critical sites at the top of the range. Burnaby net rents range from $17 to $24 PSF depending on submarket (Big Bend trends lower, Lake City and modern Class A trends higher). Richmond net rents range from $17 to $22 PSF for dry distribution; cold storage commands $28 to $40+ PSF. Surrey net rents range from $15 to $19 PSF for modern Class A distribution. Delta net rents range from $14 to $20 PSF depending on specifications. Langley trades $13 to $17 PSF. Abbotsford trades $12 to $16 PSF.
Operating Costs
Operating costs (op-cost or TMI — taxes, maintenance, insurance) typically add $4 to $9 PSF depending on building class, submarket, and management structure. Modern Class A buildings with full property management often run $6 to $9 PSF in op-cost. Older or self-managed buildings can run lower. Op-cost includes property taxes (largest component), building insurance, common-area maintenance, snow removal, landscaping, and management fees. Op-cost typically escalates annually based on actual landlord expenses.
Total Occupancy Cost
Total occupancy cost combines net rent, operating costs, and tenant-specific expenses (insurance, utilities, janitorial). For modern Class A distribution in Surrey, total occupancy cost runs roughly $22 to $30 PSF. For comparable space in Richmond, total occupancy cost runs $25 to $33 PSF. For Vancouver-proper, $30 to $42 PSF. These figures vary by lease terms negotiated; tenants should budget against negotiated escalation schedules to project costs over the lease term.
Rent Escalations
Lease escalations in Metro Vancouver industrial typically take one of three forms: fixed annual increases (2.5 to 3.5 percent annually), CPI-indexed (variable based on inflation), or stepped (defined increases at milestones — typically year 3, 5, and 7). Modern Class A leases with institutional landlords typically use fixed annual increases. Older buildings with private landlords sometimes use stepped or CPI structures. The chosen escalation structure meaningfully affects total cost over the lease term.
Tenant Improvement Allowances
Tenant improvement (TI) allowances vary by deal size, term length, and tenant covenant. Larger leases (50,000+ SF) and longer terms (7 to 10+ years) typically attract meaningful TI from institutional landlords — often $10 to $30+ PSF for build-out work. Smaller leases or shorter terms typically trade as-is with limited or no TI. TI allowances are negotiated alongside rent, and the trade-off between rent and TI is one of the more common negotiation levers.
Free Rent and Other Concessions
Free rent periods (months of rent-free occupancy at lease commencement) are common in larger or longer leases — typically 1 to 6 months depending on deal size, term, and market conditions. Free rent serves as a concession that doesn't permanently reduce the rent rate, which preserves landlord underwriting. Other concessions include moving allowances, signage allowances, and parking accommodations. Concession value should be modeled into the total effective rent calculation.