A land crunch is looming in Metro Vancouver’s industrial market and the potential safety valve may be found in the extensive First Nations reserves, six of which hold twice as many acres as in the remaining industrial land inventory.
According to a report from the Planning Institute of B.C, of approximately 28,200 acres of industrial land in Metro Vancouver, more than 21,600 acres have been developed – leaving approximately 6,600 acres available for development.
“There’s a finite amount that’s left,” said Gaëtan Royer, manager of metropolitan planning, environment and parks, for Metro Vancouver. “If we continue to build single-storey, tilt-up concrete warehouses we’re going to run out ... somewhere between 2020 and 2024.”
Some industry insiders say land base is even tighter.
Chris MacAuley, a vice-president specializing in industrial properties with CBRE Ltd., is concerned that the shortage is more acute than Metro Vancouver’s report indicates
MacAuley said he’s handling a million-square-foot project in Delta that will have 36-foot ceilings, but there are just five sites in the Lower Mainland that could accommodate similar, large logistics facilities. And it’s anyone’s guess how much land is available for immediate industrial development, he said.
A separate study by Avison Young found that most of the existing quality industrial product is already taken and with a limited amount of new construction being rapidly absorbed in most municipalities, “there is a sense that a seismic shift in the industrial landscape is approaching.
“There is virtually no ready-to-build and well-located land in the region for the next-generation warehousing and distribution space envisioned as necessary by the public and private sectors to leverage ongoing port and transportation infrastructure investments,” said Avison Young associate Michael Farrell.
There are very few developers who hold industrial land parcels large enough to accommodate the necessary large-scale distribution and warehousing facilities needed to keep pace with export demand, the report warns.
“Many of the very few parcels capable of accommodating large floorplate facilities are constrained by a wide range of factors, including prohibitive land cost and restrictive land use policies,” explained Avison Young industrial associate Ryan Kerr.
One telling statistic: in the third quarter of this year, less than 400,000 square feet was added to the industrial property inventory, but 1.8 million square feet was taken up. So far this year, just 1.2 million square feet of space has been built, compared to more than 5 million square feet in both 2008 and 2009. There is no industrial construction underway in Coquitlam or Abbotsford, despite nearly 1 million square feet being leased up this year in the two municipalities.
Developers often look longingly at the Agricultural Land Reserve as a potential land source, but as Avison Young notes. “Attempts to remove land from the ALR will be unlikely to succeed…particularly if the NDP [architects of the ALR in 1974] win the next provincial election.”
There is a dawning realization that leasehold land held by Port Metro Vancouver (PMV) and the Tsawwassen First Nation (TFN) will be a significant source of industrial land for development in the years to come, Kerr says. Two recent significant industrial transactions in Richmond involved leasehold land.
“It should be noted PMV and TFN do not compete in the same market as private landowners and investors who require a yield based on cost, including freehold land value,” he adds. “PMV, and to a lesser extent, the TFN, can underwrite the capital value of the land at a rate allowing for the development of the land based on broader principles than just economic yield.”
This is important to industrial developers, since industrial land is selling for north of $1 million an acre across Metro Vancouver.
It is not only the TFN reserve with extensive land holdings that, in theory, could accommodate industrial development. TFN has 1,789 acres in South Delta, some of which is already pegged for industrial leasehold property to accommodate demand from Deltaport.
Other First Nations, collectively, control more than 8,000 acres of land. These include the Katzie First Nation in Pitt Meadows, with 840 acres; the Kwantlen First Nation that has 1,373 acres in and near Fort Langley; the Matsqui First Nations, with 1,035 acres in the eastern Fraser Valley; the Musqueam First Nation in Vancouver, with 627 acres (much of developed for residential and golf); and North Vancouver’s Squamish First Nation that holds 5,461 acres on both sides of Burrard Inlet.
There is no guarantee that any of the First Nations reserve lands could be released for industrial development, but native bands have become much more savvy in adding commercial value to their holdings. The TFN, for instance, have released land for the largest shopping centre in B.C., a near 2 million square foot outlet mall; and the Squamish First Nation have developed retail projects on land in North Vancouver District.
