Q&A: What Happens if We Run Out of Real Estate for Industry?
We asked CBRE's Chris MacCauley to take a closer look at the future of Vancouver's industrial lands—here's what he had to say.
March 20, 2018
Chances are that, whether you walk, drive or bike, you have recently been stuck behind a lumbering industrial vehicle. Spare a kind thought for them and consider the plight of people like Chris MacCauley, senior vice president of industrial real estate firm CBRE. All those trucks going in and out of Vancouver are the most visible evidence on the streets of expanding industry here, and his clients are demanding more space to accommodate that growth. But Vancouver has run out of ways to increase zoning for manufacturing and distribution. Push far enough outside of the downtown core and, at some point, companies keep going eastward until they end up in Calgary—and the trucks to bring products back to the West Coast keep on rolling through.
Q: Why should we worry about how easy or difficult it is for trucks to get from point A to point B?
A: We spend a lot of time concentrating on moving cars, people…
Q: And bikes…?
A: Way too much time on bikes, and also moving people on rapid transit lines. But not a lot of time on moving goods through our Lower Mainland, especially since we’re a major port here. Where do the vehicles that you need to distribute the products go? Think of how difficult it is for truck maneuverability. We don’t consider how hard it is for these trucks to move around.
Q: Is your industry getting stuck as well?
A: For industrial land transactions, it’s been slowing down for the last several years—not because of the lack of demand, which is at an all-time high, whether it’s an owner or user looking for property to develop or someone from the outside wanting to get a footprint in Vancouver. It’s slower due to the lack of availability. We’re getting busier trying to be creative in finding homes for these businesses. We’re busier in other areas of Metro Vancouver as we try to exhaust every availability in the core.
Q: What kind of options are available in Vancouver’s core?
A: For industrial right now, Metro Vancouver is looking at historic lows of vacancy. We’re about 1.7 percent. Anything under three percent is considered no vacancy. Depending on the size of the business, many companies are going to find it very difficult to find a home. Vancouver proper is below one percent, and that means we have to look elsewhere.
Q: What kind of industries are we talking about?
A: We’re not a big manufacturing base, but distribution is the big driver here because we are a gateway. We do a lot of food processing here. We do a lot of food warehousing here. E-commerce is something we’ve seen trending upward in the last three to four years, but we are getting to the point where that’s also difficult because we don’t have the market to facilitate that growth. Amazon is here in a big way, but we don’t have the scale for them to find the space they need.
A: People look at us and ask that question all the time. Other places build up and densify. That’s great for some cities. We have issues with our soil and structure. It’s just not efficient or cost effective for us to build up. People talk about densification and residential growth. You can build higher buildings, but you can’t do that as easily when it comes to the industrial side.
Q: So the answer is to head east?
A: Companies are making the decision that if we need to have some footprint here in Vancouver, we’ll do it small. We’ll build big elsewhere, where we can get more for less. Calgary is about half the cost of what it would take to set up in Vancouver, and with oil as low as it is, the transportation costs to get from Calgary to Vancouver make sense for them economically.
Q: What does this mean for Vancouver?
A: It means we’re running out of employment lands on the industrial side. Small businesses don’t have options in Vancouver. It’s not just whether they have cost-effective options. That’s not the consideration. It’s not even an option.
Q: But it’s not like we’re going to run out of industrial land, is it? Won’t simple economics for business mean industry will change to accommodate availability?
A: We have about eight years of land supply left. But where is that land? Thirty-five percent is in Surrey; another 20 percent is in Maple Ridge. Half of the land we have left is in those two municipalities. But what does Vancouver have left; what does Burnaby have left? No one wants to talk about going into the Agricultural Land Reserve (ALR).
Q: Let’s talk about going into the ALR.
A: The conversation needs to start about what the needs are to keep our economy growing and what the needs are for the agricultural community and how we can help both. When the ALR came into effect almost 40 years ago, there wasn’t a lot of science put behind it. We need to look at what the lands are for in the Agricultural Land Reserve and how we can help facilitate the need for further employment in industrial lands.
Q: People wanting a home are looking at the agricultural lands; industries are looking at getting into the agricultural lands. Why should industry get in over residential homeowners?
A: There’s a lot of synergy between food and industry, whether it’s food processing, food storage or food distribution. We need those synergies to help our agricultural community.
Q: The last major exclusion was over 10 years ago. Is the time right to get more land out?
A: To get land out of the ALR is extremely difficult. It has been 10 years, and we haven’t had anything of substance to help with our job growth and employment opportunities. Politically, no one wants to talk about it because it’s considered sacred. We’re not talking about paving over all of our agriculture land. But there are certain areas where we can improve our industrial lands and get more economic base. That’s not going to happen from the province until they see some economic consequences of these companies who don’t have options to set up here, who move east or down south.