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Environmental Concerns Provide More Reason to Start Looking at Solutions to Increase Greater Vancouver’s Local Industrial Supply

vancouver industrial

Greater Vancouver is currently facing an extremely tight industrial market. High demand and limited supply are causing vacancy rates to plummet and rental rates to skyrocket. According to Colliers’ Q1 2022 Vancouver industrial market report, rental rates reached a record high of $16.93, while vacancy rates remained at an all-time low of 0.4%. And we still expect to see a substantial increase in rates as we move into the second half of this year.

As supply remains tight and remaining new construction from 2022 is limited in availability, rental rates are anticipated to continue to trend upwards and those looking for industrial space need to start thinking about planning their moves at least 24 months in advance, as much of the 2023 product has been claimed. This is not a healthy market for businesses as it’s difficult for the vast majority to make decisions about occupying a building, that far out.

As a result, many larger businesses have begun to look at other areas such as Calgary for lower-cost and available industrial space. While this option may offer a solution to those struggling to find industrial space in the Vancouver market, its environmental consequences will be significant.

Transporting goods back and forth by truck over the 1,000 kilometre trip between Vancouver and Calgary is drastically increasing our carbon footprint. Data published in 2019 found that 10.5% of greenhouse gas (GHG) emissions in Canada come from freight transportation, mainly from heavy-duty trucks. In order to mitigate the effects of climate change and minimize the knock-on effect of moving business operations elsewhere in Canada, it’s time to start looking at solutions to increase Greater Vancouver’s local industrial supply.

Be creative when it comes to space

The unique topography of Greater Vancouver is such that there will always be a strain on industrial space. As B.C. is surrounded by mountains and ocean on either side and a border to the south, there is no secondary market for industrial land compared to other major metropolitan areas in Canada such as Calgary, Edmonton, Toronto and Montreal. Each of these areas is located an hour or more from secondary markets where additional land is available, whereas Vancouver is landlocked. Therefore, it is essential to look at ways to make better use of land that is currently available.

With Vancouver being located on a river delta with delicate soils, part of the solution needs to be increasing density on the lands that can support multi-storey buildings, especially in the Fraser Valley markets where the soils are typically more stable. As such, innovation from landlords and developers is required. For example, in South Surrey, a warehouse with rooftop parking was recently constructed as a way to increase density on the ground floor. However, municipalities also need to reconsider their overall parking requirements. Often the number of parking stalls developers are required to build exceeds the number actually used by employees, thus limiting the potential for increasing industrial space. 

Another move that needs to be considered to help tackle the industrial space shortage is reconfiguring ceiling heights in new buildings to allow tenants to stack their products as high as possible. Vancouver has been slow to adopt increased ceiling heights as we have only recently begun building ceiling heights 32 feet clear or greater, whereas this was already being done in both Toronto and the U.S. ten years ago. Those markets have since moved on to heights greater than 40 feet clear; however, Vancouver is just starting to see a select few buildings with 36 or 40 feet clear ceiling heights — this option is limited to very large buildings.

Important discussions need to happen around land-use flexibility

While increasing the density of available land is essential to addressing Greater Vancouver’s industrial shortage, it cannot be the only solution. Adding stories to buildings will not inherently double the square footage available as developers will also need to build in additional parking, along with supplementary stairways, elevators and access ramps to support them. Assuming the soils permit additional stories on a particular site, the extra construction also greatly increases the cost of the building, further exacerbating the increase in rental rates.

Important conversations need to be had in order to seriously look at increasing Vancouver’s local industrial supply. As a significant portion of B.C.’s land is reserved for agricultural use, there need to be discussions around increasing the flexibility of lands that are not designated as ALR (agricultural land reserves). This also means shifting how we view development. One of the major barriers to increasing density in Vancouver is community pushback. As ALR lands are generally deemed off-limits, community groups often target lands slated for development, resulting in less density, fewer buildings and in some cases no development at all, which does not make the best use of the land available.

Greater Vancouver’s industrial market is showing no signs of slowing down as demand for warehouse space continues to remain high. With population growth anticipated in the coming years, this will not change. As supply remains limited and rental rates continue to rise, more and more businesses are likely to start looking at other areas for low-cost industrial space — resulting in more freight trucks on the road transporting goods to greater distances. With climate change reaching critical levels, the time is now to start looking at solutions for increasing Greater Vancouver’s industrial supply. 

Pat Phillips is Vice President at Colliers International Canada in Vancouver



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Pat Phillips

Vice President | Personal Real Estate Corporation

Vancouver

I've been working at Colliers since 2002 with a focus on industrial real estate sales, leasing and investments. I represent tenants on a regional, national and multi-national basis.

I focus on the Greater Vancouver and Greater Toronto markets with over 16 years of experience. As a result of this national focus I have strong, well established relationships with developers, landlords and tenants across the country. I also represent a number of large corporate tenants across Canada and internationally. 

I have been a member of SIOR (Society of Industrial and Office Realtors) since 2012, which recognizes excellence in service level, ethics and recognition across the industry. I am one of only 30 SIOR members in all of Western Canada, encompassing BC, Alberta, Saskatchewan, Manitoba, Yukon and Northwest Territories).

I received of the top Net Promoter Score within Colliers Canada in 2014 - this is a measure of service level as measured by Colliers clients. Given this award is decided exclusively by clients it's my proudest achievement in my work career.

 

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