Metro Vancouver will run out of industrial land by 2020

May 19 2017, 3:28 am

A major industrial space shortage in Metro Vancouver could cripple the region’s economy and lessen its competitive edge against international markets despite being the location of Canada’s biggest port. Two separate reports on the matter with the same findings were issued this week by commercial real estate brokers CBRE and Avison Young.

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According to the CBRE report, the region will likely run out of industrial land supply by 2020, which is 10 years earlier than expected. With only an industrial availability rate of 2.7%, down from 3.6% in 2008, the local marketplace now has the lowest industrial availability in North America.

Industrial spaces are required by companies in the construction, manufacturing, film and television production, and e-commerce businesses, and such spatial needs mainly relate to large warehouses. Currently, there is a boom with these types of businesses in the region.

Demand for industrial space in the region this year is 2.5 times greater than the new supply being added to the market. And at the moment, there is currently only one 100,000-square-foot building available in Metro Vancouver.

“We are facing an extreme supply crunch that will have serious consequences for the future growth of business in BC,” said Chris MacCauley, Senior Vice-President at CBRE Vancouver, in a statement.

“If more industrial land is not made available for development, it will stifle the economic growth of our province. It will prevent existing companies from growing and there won’t be room for new entrants into the market.”

Pressure on farmland

With demand outpacing supply, there will be an inevitable pressure to utilize more of the region’s protected agricultural land reserve for industrial uses located south of the Fraser.

The CBRE report states that 64% of all leasing activity has shifted further south and east from Vancouver, Burnaby, and Richmond to Surrey and Delta over the last two years, due to a “severe lack of supply” in the traditional municipal markets for industrial land supply.

For instance, Molson Brewery was looking for 400,000 square feet of space on a 35 acre lot to replace its existing Burrard Street location in Vancouver. Last month, it announced that it had to resort to a site in Chilliwack.

Other findings in the other report by Avison Young indicate the expansion of Deltaport and the completion of the South Fraser Perimeter Highway have accelerated industrial development in North Delta, such as the recent opening of the Delta iPort distribution centre. It also blames long delays for permit application approvals in the region, with approval times taking up to 300 days in some jurisdictions.

As well, municipal governments are allowing non-traditional industrial uses on industrial lands, thereby contributing to the supply issue. This includes changing zoning regulations to permit offices, showrooms, retail and light industrial uses in industrial areas such as Mount Pleasant and Railtown. And in some cases, large plots of industrial sites have been turned into residential developments.

Multi-level warehouses not the solution

MacCauley asserts that more land needs to be dedicated for industrial uses and discredits any suggestion that space-saving multi-level warehouses could be the solution to the region’s industrial land supply shortage.

“We need more all-encompassing solutions to the supply crunch,” he said. “We often hear the suggestion that simply building multi-level warehousing is the solution to the problem of Vancouver’s lack of industrial supply.”

“However, what most commentators don’t realize is multilevel warehousing is only feasible for a very small segment of industrial users. Building up is not going to solve our problem, we need to think bigger.”

Kenneth ChanKenneth Chan

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