|July 13th, 2006, 05:46 AM||#1|
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Vancouver tackles industrial land shortfall - 'There's no question there is a crunch.
'There's no question there is a crunch happening.'
Greater Vancouver will run out of available industrial land in 10 to 15 years, according to city and regional planners and real estate industry representatives who are studying the problem.
Studies by both the Greater Vancouver Regional District (GVRD) and City of Vancouver contend the region's 6,850 available acres of industrial land will by fully occupied around 2015, and up to one-third of those acres may be used for other purposes.
"We have long-term worries about the supply of industrial land, say to 2020 onwards," says Christina DeMarco, GVRD regional development division manager. "Then we'll have to look for another supply of industrial land - if we're not successful at intensifying the uses on (existing) industrial land."
Greater Vancouver has the tightest industrial real estate market in the country. The Lower Mainland is geographically constrained by water to the west, mountains to the north and east and the Canada-U.S. border to the south.
DeMarco says unexpected demand for industrial uses and municipalities who are thinking locally instead of regionally have contributed to the decline in supply.
"There was a lot of thought that the economy was changing, and we wouldn't be doing as much manufacturing and distribution in this region," says DeMarco. "But that's not the case - there's continued growth in those sectors.
"Another reason is that municipalities are using the land for other purposes than industrial. They're using it for offices that could easily be located in the (Vancouver) downtown or (suburban) town centres. They're using it for retailing and even recreational uses like hockey rinks, so it's depleting the supply of industrial land."
DeMarco says planners will have to watch whether municipalities restrict more lands and identify new areas for industrial use. Some potential new areas include Surrey, Delta and Pitt Meadows, where land will become more attractive for industrial purposes as new transportation projects are completed.
The GVRD's land-use study is part of its growth-management plan. The land-use study findings will be presented to industry groups, municipalities and the general public over the next year to help determine future policy.
City of Vancouver senior planner Ronda Howard says the studies indicate her department must look beyond its boundaries when assessing industrial-land use.
"It shows us that we can't just deal with industrial issues by saying, 'Oh, don't worry. They can go somewhere else' " in the region, says Howard. "Also, many of the (businesses) in the city - their customers are in the city as well. So (they) wouldn't necessarily want to go somewhere else."
The GVRD recommends that office towers be built close to SkyTrain stations, enabling employees to get to work without driving cars and adding to traffic congestion.
Howard is studying the metropolitan core's job market and land use. In a survey that was part of her research, 66 per cent of respondents said no other location in the city or region will meet their needs. Less than a third (28 per cent) said they could relocate within the core or city, but only six per cent said they could relocate outside the city.
Howard's research shows commercial and professional services are the fastest-growing jobs and make up more than 50 per cent of jobs in Vancouver, while industrial occupations comprise less than 10 per cent.
Most industrial jobs are confined to the city's eastern core. In outlying communities, industrial jobs rank third highest behind commercial and professional services, and the health, education and public administration sector.
Ron Bagan, a director with the Urban Development Institute's Pacific chapter, who is participating in the GVRD and City of Vancouver studies, says the prices of industrial buildings and land have risen dramatically in the past couple of years because of dwindling supply.
He says the cost of an industrial building has jumped to $80-$100 per sq. ft. from $20-$40, while the price of serviced industrial land (land that is ready to build on) ranges from $500,000 to $2 million.
Two years ago, the base price was $350,000.
"There's no question that there is a crunch happening," says Bagan, who is also the managing director for Colliers International's Vancouver brokerage.
The province's Gateway program - which includes new bridges, roads and highways designed to reduce traffic congestion throughout Greater Vancouver - "takes some of the pressure off and gives us some time to do some planning."
But planners and developers will have to consider whether to obtain under-utilized land from the Agricultural Land Reserve and other sources.
One solution is to identify under-utilized areas along highways and near ports and use them for industrial purposes. But the declining supply will eventually lead to a "stagnation" in sectors that use industrial properties.
"It doesn't mean there won't be (overall) economic growth, because (there will still be) the tourism industry, the technology industry, and the services industries," says Bagan. "We find new solutions."
Meanwhile, Chris Clibbon, a market analyst with CB Richard Ellis (CBRE), says Greater Vancouver's industrial vacancy rate continues to be extremely low but stable. CBRE's second-quarter report shows the region's industrial vacancy rate reached a record low of 1.7 per cent - which Clibbon says gives users few options when it comes to relocating or expanding businesses and creating new enterprises.
"As a result of sustained low vacancy, there has been upward pressure on lease rates, with average rents increasing 12 per cent over the last year," he says.
Record low vacancy levels spurred the construction of just under one million sq. ft. of new industrial space in the second quarter alone, while the amount of leased space climbed almost 1.2 million sq. ft. Clibbon says CBRE research shows another 1.7 million sq. ft. of supply is under construction.
Surrey was the scene of the most industrial-related construction in the second quarter, with just under 320,000 sq. ft. completed.
But Vancouver, where condo construction is booming, did not see any new industrial construction as industrial-lease rates ranged from a low of $5 to a high of $18 per sq. ft. - the most expensive in the region.
"Available industrial land is in short supply throughout Greater Vancouver, particularly when considering the amount of serviced and ready-to-build land," says Clibbon.
"The average price of serviced industrial land has increased between 10 and 25 per cent over the past 24 months."