Four years after a 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 have been paved and roofed for industrial tenants, according to Avison Young.
“There is already an acute shortage of industrial land,” the broker stated in an industry survey.
NAOIP (Commercial Real Estate Development Association, Vancouver chapter) has estimated that there are fewer than 475 acres of privately owned land zoned for industrial use remaining in the region.
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.”
Recent industrial lease deals illustrate the demand for distribution space. They include 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.
The land shortage, which 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.”
Other agents point to roofing contract companies, manufacturers with large parking lots and other underused industrial properties as potential sites for redevelopment. Some say that aboriginal reserve lands could provide a safety valve for industrial demand.
Industrial agents warn that the shrinking land base not only will drive prices higher, but is also a threat to the Metro Vancouver economy.
“Until the myriad issues surrounding the availability and cost of industrial lands in Metro Vancouver are dealt with,” Avison Young cautioned, “economic growth will be hamstrung by the impending industrial land supply crunch [that is] rapidly approaching.”•
