The Future of Vancouver’s Economy

October 2, 2011

Once upon a time, Vancouver was a shipper of the endless resources produced in the province’s hinterland—logs, coal, minerals, oil. We were home base for powerhouses like MacMillan Bloedel, Westcoast Transmission, and Teck Cominco (and the accountants and lawyers who serviced them). Our role was clear. But then it blurred. Americans bought out many of our image-defining companies, and the head offices closed down. Weyerhaeuser, which took over MacBlo in 1999, still has some space in the old building, but the rest is leased out to high-powered law firms, small mining companies, and the Australian consulate. When North Carolina’s Duke Energy acquired Westcoast, the company’s distinctive head office was turned into condos.

Without name-brand resource captains or a recognizable industry hub—a Microsoft (like Seattle) or Nike (like Portland) or Silicon Valley (like San Francisco)—we’ve become a city with no clear understanding of what fuels our economy. In fact, many believe that we don’t really have a real economy, that we survive on lattes, made-for-TV movies, yoga pants, and illegal drugs. “You go to Calgary or Toronto or Ottawa and they know,” says Andrew Ramlo, from the Urban Futures Institute, a company in the business of economic and demographic number-crunching. “ ‘In Calgary, we dig holes in the ground and get oil.’ In Toronto, it’s ‘We’re a financial centre.’ Ottawa is a government town. But people in Vancouver have no idea. When you ask them, they just get this blank look on their faces.”

Robin Silvester believes he knows where Vancouver’s future lies. Standing in his office at the end of the Canada Place pier, behind the city’s original convention centre, he looks out the window of his wheelhouse-like office onto Burrard Inlet. The Hyundai Shanghai—stacked with 827 containers holding electronics, clothes, auto parts, furniture, and everything else China manufactures and we buy—is being unloaded. Meanwhile, the Tao Triumph is steaming out toward Lions Gate Bridge loaded with 7,300 tonnes of wood pellets headed for Japan.

“This is the fourth-largest port in North America, and the most diverse,” says Silvester, with his Lancashire accent. “If you look at simple economic impact, it’s 130,000 jobs, $200 million a day of cargo.” A tall, lanky 43-year-old engineer with a strong-featured face and the look of a nuclear-particle researcher, Silvester arrived from Sydney two-and-a-half years ago to take charge of Port Metro Vancouver, an entity some city-dwellers don’t even know exists.

Yet the operation, which includes the expanding port at Delta and facilities on the Fraser River, is one that an influential group of provincial and federal politicians believes is our best ticket to ongoing prosperity in the global economy. In their view, Vancouver’s economic destiny lies in its location. The mantra, as found in dozens of speeches and documents: our port is a day closer to Asia than L.A. In an industry where time and fuel are money, that’s a huge advantage. (A bonus selling point: we export so much that any ship offloading here is almost guaranteed a load back across the Pacific.) The $3-billion network of road and rail projects being built in the Lower Mainland these days is justified on the premise that if the infrastructure gets put in place, the economy will take care of itself. A model this group sees for the future Vancouver is Singapore (but with resources).

Silvester has seen what happens when a city bets against its port. In Sydney, pressure from residential development eventually pushed operations down the coast. That’s not really a danger here, despite our never-ending appetite for waterfront development; for reassurance, look to the Neptune terminal in North Vancouver, which is in the midst of over $100 million in improvements.

But Silvester would say that it’s a good example of the consequences that arise when no one understands the true underpinnings of an economy until it’s too late. “When the last carrier sailed out under Sydney harbour bridge, there was kind of a ‘You mean we won’t have ships any more? We quite liked seeing the ships.’ ” That’s one reason the port has spent the last several months building relationships with local communities, looking for ways to minimize the impact on neighbourhoods from noise and truck traffic, but also letting those communities know what the port means to their city’s economy.

A block west, Stephen Pearce stands in his office above Tourism Vancouver at the foot of Burrard Street. The information centre a floor below is packed this afternoon with visitors looking for hotels, directions, and help, while hundreds more roam aimlessly in the plaza between the city’s two convention centres.

“Right now, I see tourism as being the major economy in Vancouver. It’s $3.8 billion in spending,” says the quiet, intense Pearce, vice-president at Tourism Vancouver. “There’s nothing else like it.”

The Holland America cruise ship Volendam, heading for Alaska, blasts its horn, briefly drowning him out. For Pearce, Vancouver’s economic future is all about selling the city itself, either to visitors or to foreigners looking to invest or settle. Nor is he alone; a cluster of influential people share his belief. “This city is never going to be a head-office town,” says Bob Rennie, whose condo-selling empire defines for many the new Vancouver. “It’s not going to be a manufacturing city.”

For this group, Vancouver’s main asset is its look, feel, and safe environment. Even the influential American urbanist Edward Glaeser—who argued in Triumph of the City that cities need to develop diversity to thrive (as Chicago did) and not depend on one asset (as Detroit did)—praises Vancouver’s success in the post-industrial era by building nice towers in pleasant city settings, thus enticing outsiders to settle here. To Pearce, Rennie, Glaeser, and co., Vancouver is a more temperate, accessible, and stable Honolulu. Or Phoenix.

Pearce, too, has seen what looked like an economic pot of gold turn to dross. A decade ago in Niagara Falls, where he worked before coming to Vancouver, local businesses got contemptuous of tourists. Their attitude showed, and the number of overnight visits plummeted. Tourism Vancouver is working to find ways to expand the type of tourism that the city will support. “Nothing works,” he says, “if local residents don’t want it.”

Several blocks up Burrard Inlet, in a Gastown office that overlooks the railyards and the port, Lee Malleau has her own perspective. For Malleau, the 45-year-old ceo of the Vancouver Economic Development Commission, it’s not the tourists on the convention plaza that point to Vancouver’s future. And while the port is key to Vancouver, it can’t be the only economic driver. Instead, she’s looking at who’s going into the convention centre.

On this particular August day, it’s 600 or so tech entrepreneurs from around North America heading to the centre’s third floor, plastic grow 2011 badges dangling from their necks, eyes on their smartphones. Among them are some local stars, like Ryan Holmes from the rapidly expanding HootSuite, a three-year-old TweetDeck competitor that’s on the verge of breaking the 100-employee mark. In the conference room, Holmes—a Bradley Cooper-ish 36-year-old in jeans, runners, and suit jacket—uses his 10 minutes on stage (amid a lineup of speakers from Google, Facebook, LinkedIn, and other heavy hitters) to make the case for why Vancouver is such a great base for entrepreneurial operations. We’re blessed with an embarrassment of top-level local talent, he says. We’re away from the crazy, employee-poaching, rumour- and startup-filled hothouse of Silicon Valley. Venture capitalists are more willing to look outside the Valley. And the number-one reason: “We’ve got the most livable city in the world.”

HootSuite’s offices, like those of many other creative digital or social-media operations in town, is just east of the economic development office, on the edge of Vancouver’s industrial land. For Malleau (whose office is funded by the city) and a whole contingent of economy watchers, HootSuite is part of a new economy pointing the way to Vancouver’s future. Green jobs, clean tech, biotech, digital animation, niche food production—the companies range from startups with a handful of staff to gorillas like Rainmaker Entertainment, the city’s biggest homegrown animation studio, and Westport Innovations, which has grown from 135 to over 650 employees worldwide over the last three years with innovative technology that allows companies to adapt conventional truck engines to run on natural gas, hydrogen, or other cleaner, cheaper fuels.

The challenge in Vancouver is to build up clusters in key areas and find a way to encourage small companies to take the leap to the next level. The building blocks are there, these folks argue, but it needs to happen now.

“This is a pivotal moment for Vancouver as we see the global trend puts an emphasis on trade between cities, not countries,” says Malleau. “It’s a window for us to sell ourselves.” She doesn’t name a city that’s her model, but the obvious one is San Francisco, once a city of longshoremen, now a hub for digital media, software, and animation.

But there’s a fragility to this potential economy, too—it’s still a young, green shoot. Vancouver has attracted a lot of “lifestyle entrepreneurs,” as she calls them, people who don’t want to work for a larger company, who have created businesses that employ only one or two people, or that run on their own creative labour in tiny offices or in our ubiquitous cafés. (Or abroad. Building on our resource economy, we’ve developed a small army of consultants who now work around the world helping with pulp mills in Louisiana, mines in the Congo, oil drilling in New Zealand. That army includes architects, planners, and engineers who live off the cachet of Vancouver’s reputation as a well-planned urban environment.)

It’s no surprise that the region has the highest level of self-employment of any Canadian metropolitan area—almost 60 percent of licensed businesses in Vancouver have fewer than five employees. Only 15 percent of businesses get beyond 100 people. If the region is going to develop a non-port, non-resort economy, more of those small companies need to start making their way up the ladder.

In a region with scarce land and no cohernt regional economic planning, a region at the mercy of decisions made by levels of government that don’t always coordinate, these three economic visions—one based on location, one on looks, one on local smarts—have been rubbing and grinding against each other with increasing frequency. The port has pushed energetically against allowing condos to be built near port lands, for example, while condo developers push energetically back.

The port’s most enthusiastic proponents argue that if it’s going to grow as it should, land will have to be taken out of the Agricultural Land Reserve. Which enrages those defending that land for food production (which Vancouver is unique in having within its regional boundaries). The city and the region, meanwhile, are fighting with developers and parts of the business community to hang on to their real estate for offices and industry that future entrepreneurs can use. Companies like HootSuite want to be allowed to colonize industrial land with their office space, while the city discourages them, wanting to reserve it for companies like Westport, whose operations—which include testing giant engines by running them attached to computers—can’t be done in high-rises.

Land isn’t the only trophy to be won in these wars. There are billions of public dollars involved: as Victoria and Ottawa commit money to the Gateway program for the port, some people fret that money for research and development is minimal or poorly managed.

The truth, of course, is that these economies, and economic visions, don’t have to conflict. The port’s cruise ships bring tourists. The convention centre draws gatherings like grow2011 and, earlier this summer, siggraph, the continent’s legendary gathering of the computer-graphics world (attendance 16,000). Enticing foreigners to Vancouver condos can result in an even richer pool of potential businesspeople who take advantage both of the port and of their links across the Pacific. And green jobs could expand into green maritime jobs, a niche that Los Angeles has already profitably identified.

In fact, many economists, planners, and business leaders point to a healthy balance as the wisest course. Leaning too far in any one direction exposes the city to unnecessary risk. In the competition among West Coast ports, we’re up against Los Angeles, Seattle, and San Francisco. (We’re also betting against a future in which the cost of oil might make shipping everything all over the planet unappealing.)

If we commit to condos and tourism, we’re in equal peril: tourism dollars, as we’ve seen with the weak U.S. economy and strong Canadian dollar, are discretionary and easily lost. And foreign investors looking for safe havens for their money and their kids have choices around the world. Vancouverites like to imagine we’re a Top 10 destination, but we only notice the immigration because we’re so small. Other cities absorb more people, just with less fuss about it.

As for becoming a capital of green jobs, sustainable buildings, high tech, digital animation, or athletic and outdoor-rec clothing: again, other cities aim for that niche. Portland set out a new economic development strategy two years ago after its analysts determined that although the city had done a great job creating a cool image that was drawing young creative types by the thousands, the result was not a better economy. Some of the goals in its strategy: brand Portland as “the leader in sustainability throughout the world.” Make high-tech a focus. Establish eco-districts. Figure out how to get small entrepreneurs to jump to larger operations by “economic gardening.” To Vancouverites, it all sounds eerily familiar.

The biggest risk to the city’s economic future is that the region, the province, and the federal government will make a series of small, apparently disconnected decisions—about emphasis, money, and, that sticking point, land—that will favour one economy over the others. “There are certain choices that will foreclose other options,” says Thomas Hutton, a UBC planning prof who has analyzed this city’s unique, post-industrial transformation. “If we’ve decided we’re only an international gateway and a place for residential investment, it’s going to have a squeeze effect on the land market and the labour market.”

Other close observers of Vancouver’s economy echo the concern about the unintended consequences of choices. Commercial real-estate consultant Richard Wozny, who’s studied Metro Vancouver’s industrial land closely, worries that the port will be starved of necessary land because people cling to the idea of an Agricultural Land Reserve, even for land no longer used for farming.

Michael Goldberg, professor emeritus at ubc’s Sauder School of Business, is a staunch defender of the alr (“They’re not making any more of it”) but thinks, as Wozny does, that cities should stop fighting to preserve industrial land for old-style uses. Instead, it should be used more intensively. And he doesn’t understand why the city is resisting the resort economy, banning condo development downtown. “It’s spectacular that people want to come here. Every international city has some of that.”

It’s politicians who will have to be the leaders on how these three economies will work together, but they’ve been short on explaining the mesh. Provincial politicians have largely promoted the Gateway dream. Local politicians tend to focus on growing local talent in targeted clusters. Mayor Dianne Watts promotes Surrey as a clean-tech hub; Burnaby is focused on info tech, biotech, film, and television. In Vancouver, the disconnect is likely to be sharply played out in the fall election campaign. Vision Vancouver Mayor Gregor Robertson talks almost exclusively (and, as the campaign ramps up, probably continuously) about green jobs, digital animation and, particularly, building a sustainability brand—the very future that former premier Mike Harcourt started pitching a decade ago. npa councilor (and mayoral hopeful) Suzanne Anton is dismissive of what she labels the green-jobs focus. She’s going into battle echoing the provincial and Business Council of B.C. line, saying the city’s real economy is tied to Vancouver as a gateway port that is still dependent on big resource industries. “The mayor of Vancouver needs to have an economic strategy broader than the green sector.”

UBC’s Thomas Hutton refers repeatedly to Vancouver’s “exceptionalism.” Unlike other Canadian cities, he says, “Vancouver exemplifies the city as space of flows and recurrent restructuring, rather than as a durable construct of stable industries, labour, social class, and communities.”

His UBC colleague, Michael Goldberg, puts it more simply: “Nobody really understands what makes this economy run.” And that, perhaps, is the greatest threat of all: “My biggest fear is that we’re going to continue to be smug. We’re in a global competition, and nobody seems to realize it.

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