Buying industrial property

General information, not tax or legal advice. Rules and rates change, and every situation is different. Talk to your lawyer and accountant before you act on anything here.

What makes industrial work

• Zoning that allows your use, or the uses tenants want.
• Ceiling height, loading (dock or grade), truck access and yard space.
• Power and whether it suits heavier equipment.
• Floor loads, sprinklers and office build-out.

Environmental risk

Industrial sites can have past contamination, and in BC the cost of cleaning it up can fall on the current owner. A Phase I environmental site assessment is standard, with a Phase II if the first one flags something. Make it a condition in your offer.

• Phase I (in BC, often called a Stage 1 preliminary site investigation) is a records and site review. A consultant looks at past uses, government records, old aerial photos and neighbouring properties, and walks the site. There’s no sampling.
• Phase II (Stage 2) is sampling. If the Phase I finds a possible concern, the consultant drills and tests soil and groundwater to see whether contamination is there and how far it goes.
• Site Disclosure Statement. Under BC’s Environmental Management Act and the Contaminated Sites Regulation, a Site Disclosure Statement (formerly a site profile) is required in certain cases, such as a sale or a permit application, when the site has had one of the industrial or commercial uses listed in Schedule 2 of the regulation. It’s a starting point for your Phase I, not a substitute for one.

The Province’s contaminated sites guidance and resources page has the protocols consultants follow.

Strata industrial

Small business owners often buy industrial strata units. Read the bylaws for use restrictions, check the depreciation report and ask about upcoming repairs.

How I help

I know industrial tenants’ needs from the leasing side, so I can tell you what will lease and what will sit empty.

Industrial property in detail

What drives value

• Clear height, loading (dock and grade doors), truck court depth and yard space.
• Power supply, sprinklers, floor load and office-to-warehouse ratio.
• Location near highways, the port and the border. Industrial land in Metro Vancouver is scarce, which keeps vacancy low and values high.

Typical lease structures

• Usually triple net: the tenant pays base rent plus property tax, insurance and maintenance.
• Terms of three to ten years, with fixed rent steps. Tenants often do their own improvements.
• Strata industrial units are common in the region, and owner-users compete with investors for them.

Due diligence

• Environmental history first. Ask for any Phase I or Phase II reports.
• In BC, a seller must give a buyer a Site Disclosure Statement if the land has been used for certain listed industrial or commercial uses, unless the buyer waives it in writing.
• Zoning for the actual use, including outdoor storage, and any building permits for mezzanines or racking.
• Leases, rent roll and operating cost statements.

BC and Vancouver specifics

• Property used for manufacturing, processing or transporting products is often assessed as Class 5, light industry; warehousing alone is usually Class 6. See BC Assessment property classes.
• In the City of Vancouver, industrial zones include I-1 to I-4, M-1 and M-2. Check the Vancouver zoning map.

Questions to ask

• What did the site used to be, and what reports exist?
• Does the zoning allow the use, including yard storage?
• What is the power service, and can it be increased?

GST. The sale of commercial property is generally subject to GST. If the buyer is registered for GST, the buyer usually self-assesses instead of paying it to the seller. See the CRA guidance on real property and GST/HST and talk to your accountant.

Single-tenant or multi-tenant

A single tenant on a triple net lease runs the building almost like an owner. A multi-tenant building has shared areas, common area charges and heavier management. Owner-built manufacturing plants are hard to reuse, so for a buyer outside that industry they’re often valued as a major redo.

For the building checklist, see industrial space in Vancouver.

Owner-users: other routes to the space you need

If your business needs a specific building, buying an existing one isn’t the only option. A developer can build to suit your specifications, and you then buy the finished building or take a long-term lease on it. If you already own your building and want the cash for equipment or growth, a sale-leaseback lets you sell it and stay on as the tenant. Each route changes your cash, your control and your tax position differently, so talk to your accountant early.

More specs to confirm

• Column spacing sets how racking and aisles lay out.
• Slab thickness matters for heavy racking and machinery.
• Floor drains: ask where they drain to. Connections to storm sewers can be a problem for some uses.
• Truck access: turning room, dock door count and parking for trailers.
• Past shared costs: ask for several years of common-area costs, not only this year’s estimate.

Questions people ask

Do I need an environmental report to buy industrial property?

It’s strongly advised, and most lenders require one. Start with a Phase I and make it a condition.

Is industrial strata a good buy for my business?

Often, if you’ll stay a long time and the unit suits your work. Check use restrictions in the bylaws first.