Vancouver’s shortage of industrial land went from bad to worse during the pandemic, as a sudden increase in the popularity of online shopping sent companies scrambling for distribution space.
Now, with the vacancy rate for industrial space below 1 per cent in many parts of the region, two possible solutions are on the horizon: building taller structures on existing industrial plots, or converting some non-industrial land to industrial use.
Both approaches have their pitfalls, according to market observers.
“Right now, if you need 50,000 square feet, the earliest availability of anything is 2023. People are pre-leasing future projects for 2024. That’s not good for a market that has a 0.4-per-cent vacancy,” said Adam Mitchell, vice-president for industrial at Colliers International.
But he said recent efforts to alleviate that pressure are not promising. Building higher doesn’t work everywhere, he said.
And Metro Vancouver politicians recently stalled an effort to convert some land in Surrey to industrial use, partly over environmental concerns. Those kinds of concerns could become more dominant in future decisions, Mr. Mitchell noted.
Metro Vancouver’s new regional growth plan, Metro 2050, proposes requiring two-thirds board approval for certain land-use changes, “which can make development and accessible land that much harder to get,” he said.
James Stiver, who is in charge of growth management and transportation at Metro Vancouver, pointed out that the growth plan will also improve the region’s environmental controls over new development. “We don’t have any kind of structure now to do our own kind of environmental review. Metro 2050 gives us more tools for that,” he said.
A few developers in the region have already begun experimenting with building taller industrial structures.
Oxford Properties did it with a new two-level development in the River Bend area of South Burnaby. Amazon recently decided to lease 700,000 square feet there – the latest move in its acquisition of millions of square feet of distribution space throughout the region.
Oxford has other, similar projects planned now. A few other companies are also trying out multi-storey industrial structures, after decades during which developers said building such properties wouldn’t work in a North American market because the construction costs were prohibitive.
“The acceleration of lease rates … has now justified the cost to go to multi-level,” said Jeff Miller, the head of industrial properties at Oxford.
But Mr. Mitchell and others say multi-level construction is not going to be widely adoptable, not only because of costs, but also because of the large amounts of development land required.
“It will continue to be a novel solution for specific occupiers, but it is not a silver bullet,” said Michael Farrell, a principal at Avison Young.
Surrey tried the other approach. Its attempt to convert land to industrial use involved 243 hectares near an existing industrial hub in the city’s Campbell Heights district.
Companies had bought properties or started lining up to lease future developments there, as the concept proceeded through approvals at Surrey city council and then at Metro Vancouver.
Though the South Campbell Heights parcel is not in British Columbia’s agricultural-land reserve, it does lie outside the regional district’s urban-containment boundary. Surrey needed Metro’s agreement for the boundary to be moved.
But that effort hit a roadblock last month when a narrow majority of Metro Vancouver representatives voted to send the plan back to Surrey staff for more consultation.
Even though the concept had received conditional approval the previous November from the Metro board, votes shifted in January after environmental advocates and the Semiamhoo First Nation called for more consultation and expressed concerns about damage to forests, the local aquifer and fish-bearing streams. (The proposal says that 200 acres of the area would be preserved for environmental protection.)
Linda Annis, the Surrey councillor who made the surprise motion to refer the plan back for more consultation, said she needs to see more effort to address those concerns.
“We need industrial lands, but you’ve got to do it in the right way,” she said. “There’s no reason to rush it through.”
Burnaby Mayor Mike Hurley, who had to be absent from the meeting for medical reasons, said he’ll be weighing his vote carefully when the plan comes back to Metro Vancouver for consideration.
“I think there’s a lot of hurdles. We hear every day that we need this industrial land. But we have to protect the environment as well. There has to be a balance.”
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Frances Bula