From Kelowna in the Okanagan to Victoria on Vancouver Island, B.C.’s industrial real estate has been filling up, leaving low vacancy rates everywhere
Industry owners who feel like they are being squeezed out of the Lower Mainland by soaring costs and lack of land for expansion won’t necessarily find relocating is an easy option.
Even if it makes sense to move in terms of the business, while opting for the less hectic, and less costly lifestyle of say, Kelowna or Victoria, similar limitations with real estate still apply.
“(In) Vancouver, Victoria and Kelowna, at least, the core areas are squeezed in by mountains and rivers,” said Garry Fawley, CEO of Vancouver-headquartered Denciti Development Corp.
That has Denciti putting an expensive bet on building out a four-hectare (10.37-acre) industrial park just off Highway 97 outside of West Kelowna in the Okanagan.
Denciti spent about $10 million on the site with plans to divide it as a strata-titled property, with the first phase being marketed to smaller potential clients looking for between 1,250 and 10,000 square feet of industrially zoned space.
Fawley said his firm is putting together a database of potential buyers for the development, starting with smaller Okanagan firms struggling to find space for expansion in an industrial market that has 1.65 per cent vacancy.
However, Denciti also plans to test the Lower Mainland market for potential relocation targets, dangling the enticements of less-expensive housing and commuting times in the range of 20 minutes, not an hour or more, on top of less-expensive industrial real estate.
“In engaging the market, we’re going to learn more about who’s open minded to a relocation or expansion,” Fawley said.
Much of the news about industrial real estate in Metro Vancouver and the Fraser Valley has been about the continuing squeeze on space.
Last June, the province’s Agricultural Land Commission rejected a proposal by the city of Abbotsford to remove almost 200 hectares from the agricultural land reserve, which would have relieved some of the pressure on the region’s industrial land base.
“People need to have a place to work, not just to live,” an exasperated Abbotsford Mayor Henry Braun told Postmedia at the time.
While the unfamiliar might look at the Fraser Valley’s seemingly wide-open spaces as having plenty of room for an overflow of industrial users from Metro Vancouver, it too is becoming increasingly constrained.
Metro Vancouver, near the end of 2018, saw a slight uptick in industrial vacancy, according to a report from commercial realtor CBRE. However, it was only a small change to 1.8 per cent from 1.5 per cent, with the report remarking that almost 90 per cent of all new industrial-oriented construction delivered by the end of the quarter was already occupied upon completion.
Considering a relocation isn’t a simple calculation of comparing real estate prices — industrial and residential — and commuting times. It has to factor in where raw materials are coming from and the markets that finished goods have to be shipped to.
“If your finished product goes back to the Lower Mainland, it’s probably pretty challenging” to move to the Okanagan, said Eric Weber, an associate vice-president with commercial realtor Colliers International in Kelowna. “But if your distribution is through Western Canada, it could be a real benefit.”
Kelowna is not a good fit for businesses in the logistics and distribution sector that depend on long-haul links between the Port of Vancouver and Calgary, because Kelowna is not on the Trans Canada Highway, Weber said. “It’s not like a long-hauler is going to stop in,” Weber said.
And it’s not easy finding space in any major urban area in B.C.
Southern Vancouver Island, for instance, has a strong labour pool and lower cost of living, said Ty Whittaker, a senior vice-president with Colliers, but much of its available industrial space has been filled up by businesses that service ship maintenance at the Esquimalt navy base.
“Victoria has the lowest (industrial) vacancy in all of Canada at 1.3 per cent,” Whittaker said. “It’s ridiculously low.”
And in B.C.’s Interior and the Okanagan, Weber said conditions are almost equally limited.
“We’ve got tenants and buyers calling, saying ‘here are my requirements, what have you got for me,’” Weber, said. “And regrettably, we don’t have a heck of a lot we can show them.”
“In the good old days, we could say, “here’s four or five, which one do you like.’”
Now, brokers have maybe a couple of options to show clients, but those options might not meet specialized requirements for loading bays, ceiling heights or power.
“Even Kamloops, which for quite a while had reasonable selection for land inventory and (industrial) lo, appears to be quite limited,” Weber said.