Avison Young urges provincial look at Metro Vancouver land shortage

Metro Vancouver's severe shortage of industrial land will not be resolved without a change to B.C.’s land-use policy, according to an Avison Young spring 2013 Metro Vancouver Industrial Overview.
“It may be time for the province to step in,” said Michael Farrell, senior associate in Avison Young’s industrial division.
The Avison Young report maintains Metro Vancouver industrial market users, especially those requiring larger areas close to transportation and/or customers “cannot be satisfied without a new or amended land use policy in B.C.”
The land shortage comes as governments spend billions on infrastructure in the Lower Mainland to expedite the flow of goods via port and rail facilities, Farrell said.
Anne McMullin, president and CEO of the Urban Development Institute (UDI), points out that on one side of the new Golden Ears Bridge in the Fraser Valley there is unused land within the Agricultural Land Reserve, while the nearest industrial land is l0 miles away from the transportation arterial.
“Perhaps there is the opportunity to swap lands,” she said.
McMullin said it is necessary to examine how lands are allocated around specific uses in Metro Vancouver. “What is the future demand for those lands and the future growth and what transportation system is in place to service them?” she said.

Chart from the Avison Young Spring 2013 Metro Vancouver Industrial Overview
Tenants moving to Seattle or Calgary for larger spaces
The Avison Young spring report quantifies only what is already known in the market. Clients seeking large land tracts are heading to Seattle or Calgary because vacancy rates for Metro Vancouver industrial buildings larger than 100,000 square feet stands at 2.5 per cent and over-all vacancy rates have tightened to 3.5 per cent since fall 2012.
Of the properties with buildings larger than 100,000 sf, only 1.7 per cent are desirable because of their logistics and distribution location opportunities, said the report.
Port traffic is fuelling the increased demand.
“Total container traffic through the Port Metro Vancouver, which is driving the demand, has resumed its upward trajectory after stalling in 2009, rising 26 per cent from 2.15 million TEUs (20-foot equivalent units) in 2009 to 2.71 million TEUs in 2012,” said Avison Young principal Rob Gritten.
The growth has continued into the first quarter of 2013, rising 2.5 per cent over the same period in 2012, he said.
The report said that large-scale users are turning to creative solutions of purchasing freehold land. Avison Young’s senior associate Ryan Kerr said: “Some investors have purchased entire strata developments outright to then rent or lease to large format users.”
Both the UDI and Commercial Real Estate Development Association (NAIOP), said Farrell, “have done a good job in sounding the alarm” on the shortage of industrial land but are not positioned to resolve the issue. “It is really the province that has to do it,” he said.
There are two problems: the erosion of existing industrial land and how to add to the supply.
Industrial land not seen as tax generator by municipalities
Metro Vancouver's nearby ocean, rivers and mountains limits the available land base and increases competition for industrial land as the population increases. Although industrial land in the region accounts for approximately one-third of Metro Vancouver's jobs, it is not seen as a tax generator for municipalities.
“Industrial land is the low man on the totem pole” compared to commercial and residential development, said Farrell.
The 2011 Metro Vancouver regional growth strategy's objectives leading up to 2040, include the need to “protect industrial lands.” The initiatives included monitoring regional supply and demand, working with municipalities and the province to investigate industrial taxation rates and policies that support industrial activity and making changes within municipalities that protect and support the ongoing economic viability of industrial activities.
Metro Vancouver’s media spokesperson Bill Morrell said that while the regional plan attempts to protect industrial land, the power to preserve lands or rezone them for other uses still falls within the jurisdiction of the municipalities.
Metro Vancouver's October 2012 Best Practices for the Increased Use of Industrial Land report attempted to outline alternatives to increase intensity of activities on existing sites by techniques such as higher warehouse ceilings, multi-storey warehouses, utilizing roof tops for parking to free up space, and other related strategies that increase site utilization.
Existing industrial land to be absorbed by 2020
“There are 6,600 acres of vacant industrial land and if development continues at the (current) rate, by 2020 there will be no more industrial land as it will have been absorbed,” pointed out senior planner Carla Guerrera.
The Port of Vancouver's preference for an industrial land reserve system doesn't find favour with brokers such as Farrell or the UDI. “We think there are better solutions,” said Farrell.
McMullin wants a broader comprehensive review of agricultural and industrial land that considers how land is sited according the population users.
“Fifteen years ago, no one could have imagined the volume of container traffic going through the Port that we are seeing today,” she said, pointing out that land use is still aligned with an earlier reality.
Farrell favours a review to determine if unproductive agricultural land reserve property could be converted into industrial lands.
The City of Abbotsford, he said, removed several hundreds of acres of land nearly a decade ago, but was unable to convert it to industrial due to its hills and streams running through it.
“They got it half right,” he said. “They took out lands that were not suitable for agriculture but then found they were not suitable for industry either.”

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