Richard Kouwenhoven has his printing business spread out over three buildings in suburban Vancouver. It’s not the best situation.
“It would be great to operate from a single location,” says Mr. Kouwenhoven, whose 31-year-old company, Hemlock Printers, produces everything from catalogues to corporate reports to magazines.
He bid on one site that would have allowed him to consolidate at least two of his satellite sites into one.
“But there were multiple offers. It wasn’t in a range where we were comfortable. It’s like the residential market here.”
While much attention has been focused on the dire situation for Vancouver homebuyers and renters, with skyrocketing prices and a vacancy rate of 0.8 per cent for the region, the situation is almost as bad for the region’s industries.
The vacancy rate in industrial space for the region is around 1.7 per cent, which is considered unhealthy. And, just as residents have seen their already tight market further shrunk through Airbnb or empty investment condos, the industrial world has seen an influx of all kinds of uses that are not so industrial.
In the past year, it’s been movie studios that have sucked up an enormous amount of space.
“Film has been the use that has taken up the most space in the first half of 2016,” says Russ Bougie, a principal at the commercial brokerage Avison Young. In fact, movie studios absorbed 1.5 million square feet of space in the past year, more than any other kind of tenant.
One was Skydance Studios, which has produced the Star Trek films, which recently converted a former newspaper printing plant in Surrey into a 75,000-square-foot facility.
The big volumes taken up by the film industry are a recent surge, one that experts think is not likely to continue at the same pace.
But movies aren’t the only non-traditional uses absorbing industrial space, as different kinds of clients are drawn to buildings that have indoor room with high ceilings that isn’t cut up by walls or pillars, and often with hectares of parking outside.
On Mitchell Island, a small chunk of land in the north Fraser River that flows between Vancouver and Richmond, Jeff Cheng runs an 18,000-square-foot space called 6Pack Indoor Beach, which is dedicated mostly to indoor beach volleyball. He and his partner have branched out into some other activities, such as dodgeball and kids’ birthday parties.
“For our business, we needed a lot of space and high ceilings,” said Mr. Cheng. After hunting around the region, he landed on Mitchell Island five years ago – a place that is occupied mostly by businesses such as car wreckers, distribution warehouses, scaffolding companies and central yards for street-cleaning operations.
He was able to move in because the City of Richmond, of which Mitchell Island is a part, allows recreational uses on industrial land.
Shortly after 6Pack opened its doors, a giant badminton facility located next door. Elsewhere in Richmond, there are industrial buildings with Ping-Pong clubs, go-kart operators, “escape rooms,” laser tag, trampolines and volleyball facilities. One tenant even dug out the concrete floor of a building and put in a swimming pool as part of a new athletic club.
Those kinds of uses have taken over about 250,000 square feet in the past year.
Most municipalities in the region, except for Richmond and Port Coquitlam, don’t allow recreational uses on industrial land. But they have still seen the incursion of other types of businesses.
In Vancouver, there’s an application on the books for a new building that would combine a coffee roaster and a daycare on a block in east Vancouver close to the port. The city also has a vocational school operating on industrial land, along with a raft of businesses that skirt the edge of the definition of industrial: software production, animation studios, fashion operations where clothing is designed (but not manufactured).
The question now is whether there is any relief in sight.
One of the solutions that’s often been proposed for Vancouver’s longstanding industrial-space crunch is to densify – build new facilities that are multiple floors, instead of the old model of a giant single-storey building surrounded by parking.
Building and expanding is definitely something that people in the film business are thinking about.
“The existing facilities are all going to execute on expansion. There is definitely other space being considered for purpose-built,” says Peter Mitchell, the president of Vancouver Film Studios. It operates one of eight purpose-built studios in the region.
Prem Gill, the chief executive officer of Creative BC, which tracks all available film space (currently standing at two million square feet) as part of its mission to help the film industry thrive, said there’s interest in building for the constantly growing sector.
“We’re getting queries from investors. They’re looking at investment in purpose-built.”
But he and others in the film industry say there won’t be a massive building boom. The film business is just too uncertain to prompt any speculators to start investing millions in new production facilities.
“Ideally, we would love to have more purpose-built studios,” says Dian Cross Massey, the president of The Crossing Studios, which has been one of the larger absorbers of industrial space in the past year.
She said she has to turn away business on a daily basis because there’s not enough space that’s appropriate, even though she snapped up 185,000 square feet in three buildings in Burnaby recently. “But the problem is our industry fluctuates and it’s constantly evolving.”
As well, she said, “because the price of real estate is so expensive, to build makes it a really hard business model. And it takes three to five years and then who knows where we’ll be by then.”
Government changes in tax-credit policy, changes in the value of the Canadian dollar against the U.S. greenback and competition from other jurisdictions willing to give freebies to the film industry – they all affect the Vancouver film business’s need for space.
Another change that would help overall is any kind of new industrial building, not just construction for the film industry.
But that isn’t going to happen overnight.
“The next big cycle of construction is coming in late,” says Andrew Lord, a vice-president at Colliers International. And much of it will be in the areas of the region that have room to grow: Delta and Surrey.
That will help some traditional industrial users, though not the film industry and others.
They all want to be relatively close to downtown Vancouver and not anywhere that requires going across a bridge or through a tunnel, a desire that will continue to put pressure on existing swatches of industrial land.