Originally published in BC Business.
As developers face new demands from global logistics firms and run up against finite resources, it’s time to move beyond old debates about warehouses versus crops and find innovative ways to accommodate industry on scarce land.
There were high-fives all around last December when Transportation and Infrastructure Minister Todd Stone presided over the long-awaited opening of the South Fraser Perimeter Road. After five years of construction, a key piece of the puzzle was finally in place, transforming the Lower Mainland into a transportation hub that would link our ports and rail yards with manufacturers, exporters and consumers the world over.
There’s just one problem, though. As we build our transportation infrastructure, we also need land—and lots of it—to manufacture, store and sort all those materials and goods that are moving through our province. And land is at a distinct premium in the Lower Mainland.
Industry was long ago squeezed out of prime urban waterfront real estate by commercial and residential development: the sawmills that once lined the shores of False Creek and Coal Harbour have been replaced by forests of condos and offices. Forced to the urban periphery, industrial developers are now feeling the squeeze as they run up against agricultural land, much of it preserved by legislation.
But even as agriculture proponents mobilize to defend arable land against developers of distribution centres, it’s clear that the terms of debate have shifted fundamentally. Industry’s need for space no longer comes down to a simple either/or debate, a choice between sawmills or highrises—as it was a century ago—or between growing tomatoes and building warehouses today. Industrial developers must come to terms not only with a finite land base, but with the changing demands of global commerce.
When Metro Vancouver investigated the supply and future demand for Lower Mainland industrial land a few years back, it concluded the land could all be used up by the mid-2020s. That was the conservative scenario. If future port activity, and in particular the incoming flow of container traffic, is bigger than expected, the space to facilitate warehousing, distribution and logistics activity across the region will be gone—“absorbed,” in real estate parlance—by the year 2020.
Such exercises in crystal-ball gazing are always fraught with uncertainty. Both scenarios assume growth, ignoring the possibility that the global economy will contract. But Derek Corrigan, Burnaby mayor and chair of the Metro Regional Planning and Agriculture Committee that accepted the inventory results, was alarmed enough to call for action.
“What really brought it home to us, from the point of view of local governments, is that if the industrial land is eaten up, the pressure will immediately go to our agricultural lands,” says Corrigan. “In the next decade we’re going to see the implications of this.”
The most recent Metro land inventory (2010) scanned the entire Lower Mainland and identified about 11,500 hectares of municipally designated industrial land, of which more than three quarters had already been developed. Of the remaining approximately 2,700 hectares, scattered across such municipalities as Delta, Surrey, White Rock and Richmond, not all would be appropriate for industrial use.
Whereas a century ago demands on Lower Mainland industrial land came primarily from manufacturing, today service is king. Where the future growth lies, says Robert Gritten of Avison Young Canada Inc., who has 30 years’ experience in Metro Vancouver industrial real estate, is with businesses involved in logistics and distribution related to our growing ports. He says we will continue to see growth in this part of our industrial market (where it is already a dominant player), with a continued erosion of labour-intensive manufacturing. “Distribution continues to be our prime industrial activity,” he says, “and that’s not only for finished products like TVs, but coal and primary resources coming out of our province.”
As the developed world’s comfort with buying everything from cars to vegetables online increases, the way we distribute goods to consumers will need to change. Amazon is currently shopping for a million square feet of industrial space in Western Canada, and the choice has come down to Greater Vancouver or Calgary. Simultaneously, Best Buy is in consolidation mode, vacating a 200,000-square-foot facility in the region. “Best Buy’s needs are shrinking because Amazon’s needs keep going up,” says Gritten.
If Amazon and its peers in online commerce are challenging the old Walmart model of bricks-and-mortar stores supplied by dedicated warehouses, that would mean a sea change for the region’s third-party logistics businesses currently occupying industrial space. In the past, a company like Sony or LG would hire these logistics companies to provide warehousing and product management services out of an industrial space (typically in the 200,000-square-foot range), servicing four or five corporate customers. According to Avison Young’s Gritten, a company like Amazon needs to turn around its product twice as fast as the typical user of a third-party logistics service provider. “All these third-party logistics guys are looking over their shoulders and asking, ‘What is Amazon going to do to me? They’re starting to sell product that my customers sell—and they’re selling it more efficiently and twice as fast.’”
As users of industrial space are evolving, so too is the geography of operations. Squeezed out of the urban core of Vancouver-Burnaby-New Westminster, industrial land today is following a migration of people to the Langley-Surrey-Delta corridor south of the Fraser. The completion of the South Fraser Perimeter Road will hasten this shift.
Land close to this new four-lane expressway connecting Deltaport to Highway 1 is ideally situated for industrial use, and the Dayhu Group of Companies has already jumped in. Dayhu’s new Boundary Bay industrial park, scheduled to open this month, boasts ready access to the South Fraser Perimeter Road, Deltaport, the Canada/U.S. border and rail networks. The 440,000-square-foot facility is just phase one of a planned two-part development: Dayhu is planning a mirror development on an adjacent site, bringing the distribution centre to just shy of a million square feet.
While the shores of Vancouver’s False Creek may have once been where industry and commerce fought over scarce land, today places like Delta and Richmond are the battleground pitting the needs of industry against agriculture. In Delta, hundreds of acres were removed from the ALR as part of the Tsawwassen First Nation treaty, while the South Fraser Perimeter Road—much of it built on ALR land—is providing new access to an ever-expanding Deltaport. A proposed second container terminal at Roberts Bank, now in the earliest stages of an environmental assessment, would see a 50-per-cent increase in container capacity. And last December a consortium led by Vancouver developer Ron Emerson extended multiple option-to-purchase agreements for ALR land near to both rail lines and Deltaport, with a vision to create a new “intermodal” yard to load and unload rail cars.
For its part, Port Metro Vancouver owns and manages more than 1,000 hectares of land as an agent of the federal Crown, which gives it the power to remove ALR land it owns without recourse from the province or municipalities. The port’s ongoing land-use plan includes packages of port-owned farmland that is also in the ALR, much of it in Richmond. “The last thing we want to do is develop agricultural land for industrial purposes; we really don’t want to do that,” says Tom Corsie, Port Metro Vancouver’s vice-president of real estate. But eventually, he concedes, exclusions will have to take place.
Avison Young’s Gritten admits he is frustrated by the ALR. He says provincial politicians are afraid to make necessary changes because they risk alienating a well-meaning, uninformed public. “It’s easy to stand up with a placard and say we need the farmland to grow tomatoes, but maybe tomatoes shouldn’t be grown here,” he says. “We’ve just spent billions on this road; let’s get some land available so we can take advantage of it.”
There is, of course, another side to the argument. Agricultural proponents say that preserving farmland close to urban populations is more than a question of enjoying the luxury of local tomatoes, but is an essential hedge against dependence on cheap imported food. It’s a view that resonates with the public: the impacts of rising energy costs and climate change will converge and conspire to make local agriculture a necessity, they say—provided we still have the land. “We established the B.C. Agricultural Land Reserve in 1973 to avoid a future food crisis,” wrote Harold Steves, a farmer, Richmond city councillor and former NDP MLA who helped create the ALR, in a recent editorial. “That crisis has arrived.”
The best solution to scarcity of industrial land lies in using our existing industrial space better, says Burnaby mayor Derrick Corrigan. “The old idea that it is for vast parking lots on acres of land, just isn’t acceptable,” he says. “We have to have more intensive uses of those industrial lands and we have to be more aggressive to be sure we’re maximizing the use.”
In the past, Corrigan says, industrial land owners and developers have been more than happy to “up-zone” industrial land to commercial and residential use for fat profits. “Taking land out of the ALR is a massive temptation, and the biggest profit to be made is by developers in changing the use of land,” Corrigan says. Now some are trumpeting an industrial land crisis in hopes of cashing in again, he alleges. (Metro Vancouver statistics appear to support that “up-zoning” does occur: Metro Vancouver reports that between July 2011 and December 2013 about 40 hectares of industrial land were lost to other uses.)
The solution to the growing creep of industry onto agricultural land is in some ways similar to the “smart growth” approach to densifying urban cores to maximize efficient use of space on residential land, as seen in Vancouver. What proponents refer to as “intensification” of industrial land will mean a new look to the old industrial parks we’ve become accustomed to. So-called “next generation” buildings are more automated and have higher ceilings to rack more goods on the same footprint. Parking can be moved underground or to a roof, while creative zoning allows for multi-level buildings with multiple related uses under one roof.
In its 2012 discussion paper, “Best Practices for the Intensive Use of Industrial Land,” Metro Vancouver points to examples of industrial intensification even within the urban core. The MP Lighting building at the corner of Fourth Avenue and Ontario Street in Vancouver, for example, incorporates manufacturing, a showroom and office space, and also includes underground parking and loading bays for shipping. The Terra Breads building in Vancouver’s Mount Pleasant neighbourhood includes an industrial bakery that supplies local retailers, along with an office space and a retail store.
Metro says most municipal intensification efforts to date have involved adjustments to zoning bylaws to allow for larger and higher buildings. Coquitlam, for example, recently amended its zoning bylaw to allow higher building heights and increased density in its industrial zones. Corrigan admits creating multi-level, mixed-use industrial buildings is unorthodox, and is confounding to many city planners. But he believes that by necessity, this will change.
Another potential solution to the growing scarcity of industrial land is to move some port-related activities outside of Metro altogether. The Village of Ashcroft, for example, is home to a private facility that aims to be in essence a land-locked port: a 320-acre terminal connected to highways and the mainlines of both the CP and CN railways. Offering logistics, materials handling and transloading services, the facility is looking to grow. “It’s a great thing for the Lower Mainland,” Village of Ashcroft Mayor Andy Anderson said last year of the terminal. “They stand to lose 600 acres of prime farmland in Delta. Do they really want to do that?”