Entire inventory could be gone within four years
Frank O’Brien
Four years after Metro Vancouver report warned that the region would run out of industrial land by 2020, that timeline appears to have been pushed forward.
Since 2013, due largely to demand for big distribution warehouses for e-commerce retailers, more than 137 acres has been paved and roofed for industrial tenants, according to Avison Young. “There is already an acute shortage of industrial land,” the broker states in an industry survey.
There is less than 475 acres of privately owned land remaining that is zoned for industrial use in the region, estimates NAOIP (Commercial Real Estate Development Association, Vancouver chapter). At the current construction pace, that land would be gobbled up in less than four years.
“Metro Vancouver’s impending industrial land supply crunch is being exacerbated by the greater demands for land [from] the growing scale of logistics and distribution facilities required by modern retailers,” said Michael Farrell, a vice-president in Avison Young’s Vancouver office. “The region’s industrial development is now more a reflection of the demands of retailers and e- commerce than it is from more traditional industrial uses.”
This is reflected in recent industrial lease deals: retailers such as Lush Cosmetics, taking 60,000 square feet in Vancouver; Best Buy Canada securing 80,000 square feet in New Westminster; and Pet Valu, which leased 110,000 square feet in Delta, give an indication of the demand for distribution space.
Other notable retail-linked transactions include Orbit Distribution Systems’ relocation to 126,540 square feet in the former Honda Canada building in Richmond, as well as a prominent e-retailer’s lease of 554,530 square feet in New Westminster.
The land shortage has already driven average industrial land prices to Canada-wide highs of $1.5 million per acre is forcing lease rates higher, Avison Young said.
“Compounding the increase in land prices will be the acquisition of brownfield properties that require more remediation or sites that suffer from topographical or geotechnical issues that boost costs even further. These types of properties are rapidly becoming the only sites of scale that remain – and even those are being acquired at elevated prices,” Avison Young warns.
Other agents point to underused industrial sites – for example roofing contract companies and manufacturers with large parking lots – as potential sites for redevelopment.
The shrinking land base will not only drive prices higher, it threatens the Metro Vancouver economy, industrial agents warn.
“Until the myriad issues surrounding the availability and cost of industrial lands in Metro Vancouver are dealt with, economic growth will be hamstrung by the impending industrial land supply crunch [that is] rapidly approaching,” Avison Young cautions.
