Market Overview
The Surrey and Langley industrial real estate markets continue to demonstrate remarkable resilience in the first quarter of 2025, despite broader economic headwinds facing the region. Demand for quality industrial space remains strong, with vacancy rates hovering at historic lows of 1.3%, reflecting the continued importance of these submarkets within Metro Vancouver’s industrial landscape.
Key Market Indicators
Vacancy & Availability
Surrey and Langley continue to maintain some of the tightest industrial vacancy rates in the Lower Mainland. At 1.3%, the combined vacancy rate represents a slight uptick from the 1.1% recorded in Q4 2024, but remains well below what would be considered a balanced market. This marginal increase can be attributed to several new developments coming online rather than any significant drop in demand.
The slight easing provides minimal relief for tenants who have faced challenging conditions for the past several years. Most available spaces are being leased before construction completion, with businesses continuing to compete aggressively for the limited inventory.
Rental Rates
Average asking net rental rates have reached $18.75 per square foot in Q1 2025, marking a 4.2% increase year-over-year. Premium properties in Campbell Heights and along major transportation corridors are commanding even higher rates, with some new Class A facilities seeing rates above $20 per square foot.
The UrbanTeamTeam has observed that landlords continue to hold significant leverage in negotiations, with limited concessions being offered. Tenants are increasingly accepting longer-term commitments to secure space, often signing 7-10 year leases compared to the traditional 5-year terms that were standard pre-2022.
Investment & Sales Activity
Sales volumes have moderated from the frenzied pace of 2021-2023, primarily due to higher interest rates and tighter lending conditions. However, investor interest remains strong with significant capital looking for quality industrial assets. The average sale price per square foot stands at $485, essentially flat compared to Q4 2024 but representing a modest 2.8% year-over-year increase.
Cap rates have stabilized in the 4.75% – 5.25% range for prime, fully-leased properties. This stabilization suggests the market has largely priced in current interest rate conditions, with investors appearing more confident that rates will remain steady through the remainder of 2025.
Submarket Analysis
Campbell Heights
Campbell Heights continues to be the crown jewel of Surrey’s industrial landscape. The business park has seen significant development activity with approximately 850,000 square feet completed in Q1 2025. Notable developments include:
- The completion of the 325,000 square foot build-to-suit facility for Pacific Logistics
- Blackwood Partners’ delivery of two speculative buildings totaling 275,000 square feet
- The commencement of site preparation for Phase 3 of Campbell Heights East
Pre-leasing activity remains robust, with 78% of buildings under construction already committed to tenants prior to completion.
Gloucester Industrial Estates (Langley)
Gloucester Industrial Estates continues to benefit from its strategic location and proximity to Highway 1. The submarket saw relatively limited new supply this quarter, but tenant demand remains strong with several significant leases signed:
- A national e-commerce retailer leased 125,000 square feet for last-mile delivery operations
- A building materials supplier expanded their footprint by 87,000 square feet
- Multiple mid-sized deals in the 15,000-40,000 square foot range closed during the quarter
The UrbanTeam has noted that Gloucester is particularly attractive to tenants requiring convenient access to both Metro Vancouver and the Fraser Valley markets.
Development Pipeline
The development pipeline remains healthy with approximately 2.3 million square feet currently under construction across Surrey and Langley. Key projects include:
- Golden Ears Business Park Phase 4 – 520,000 square feet
- Pacific Industrial Park – 410,000 square feet
- South Westminster Business Centre – 275,000 square feet
- Cloverdale Industrial Park expansion – 325,000 square feet
While supply chain issues have largely normalized compared to previous years, construction costs remain elevated, with developers reporting 15-20% higher costs compared to pre-pandemic levels. These increased costs are being reflected in the rental rates for new developments.
Market Trends & Outlook
Several key trends are shaping the Surrey/Langley industrial market in early 2025:
- Intensification of land use – With developable land becoming increasingly scarce, developers are maximizing site coverage and building higher clear heights. New developments are regularly featuring 36-40 foot clear heights compared to the 28-32 foot standard of just a few years ago.
- Focus on sustainability – Tenants and investors are placing greater emphasis on sustainability features. New developments are increasingly incorporating solar panels, EV charging infrastructure, and energy-efficient systems. The UrbanTeamTeam has observed that buildings with strong ESG credentials are commanding premium rental rates.
- Strategic relocations from Vancouver – Several major tenants have relocated from Vancouver to Surrey/Langley during Q1, seeking more modern facilities, better value, and room for expansion. This trend is expected to continue throughout 2025.
- E-commerce evolution – While the explosive e-commerce growth of the pandemic years has normalized, online retail continues to drive significant demand for industrial space, particularly for last-mile delivery facilities in locations with good transportation access.
Forecast
The Urban Team forecasts continued strength in the Surrey/Langley industrial market throughout 2025, with the following expectations:
- Vacancy rates will remain under 2% despite new supply coming online
- Rental rate growth will moderate to 3-4% for the remainder of the year
- Investment activity will increase in the second half of 2025 if interest rates decline as anticipated
- Development activity will remain robust but increasingly concentrated in the few remaining areas with developable land
For businesses seeking industrial space in Surrey or Langley, early planning remains essential. Competition for quality space continues to be fierce, and the Urban Team recommends that tenants begin their search 12-18 months before their requirement date.
About Urban Team
Urban Team is a leading commercial real estate advisory firm specializing in the Metro Vancouver industrial market. Our team of experienced professionals provides comprehensive market intelligence, strategic advice, and transaction services to landlords, tenants, developers, and investors. For more detailed information or to discuss your specific industrial real estate requirements, contact the Urban Team today.