Port uses driving industrial demand

Dwindling supply of well-located land highlights industrial development success in suburbs 

Debate over the Lower Mainland’s dwindling supply of viable industrial property has focused the spotlight on facilities such as Delta’s Tilbury Industrial Park | Chung Chow

Metro Vancouver is Canada’s gateway for goods from Asia and products moving out across the Pacific. To meet the needs of importers and exporters, vast swaths of the region are in demand to serve the logistics companies that handle goods moving into and out of the country.

The growth of the region has sparked fierce debates about the importance of industrial land, its loss to residential development and its impact on agricultural pursuits. The city’s strategic location on the Pacific Rim in a spectacular natural setting on fertile soils makes the debate less a question of which use should prevail, however, and more one of how uses can best coexist.

With large logistics users occupying more than 40% of Metro Vancouver industrial space, port-related activities set the agenda for discussions of the region’s industrial land. Most logistics space handles incoming goods, just 30% of which land at the Centerm and Vanterm container terminals on Burrard Inlet. Deltaport is the primary container-handling facility, which means most logistics demand – and, in turn, discussions about industrial land – focus on properties south of the Fraser.

This is why the South Fraser Perimeter Road, completed at the end of 2013 to connect Deltaport with the industrial parks along the Fraser from Tilbury to Langley, is key.

Yet even here, supplies are tight.

Metro Vancouver’s 2015 inventory identified 28,000 acres of industrial land in the region, of which just 5,585 acres are undeveloped. A report for commercial real estate association NAIOP pegged the readily developable acreage at less than 3,000 acres.

Zoning is a complicating factor, limiting where large distribution facilities requiring more than 100,000 square feet and cross-docks can locate. Site Economics Ltd. prepared a study for the Port of Vancouver in 2015 that identified just 1,067 acres of logistics-suitable land.

“The primary inventory of suitable logistics lands are located in the ideally located municipalities Richmond, Delta and Tsawwassen First Nation,” the report states. 

Meanwhile, other developments have been forced farther north and east, contributing to the success of Golden Ears Business Park in Pitt Meadows and the uptake of space at Campbell Heights in Surrey. These developments are primarily home to lighter industrial uses, from film companies to manufacturers and microbreweries, rather than large-scale logistics companies.

To secure the large tracts of land logistics facilities require, Oxford Properties Group and other developers have focused on infill opportunities such as Queensborough Logistics Park in New Westminster and Riverbend Business Park in Burnaby, which are transforming former mills and brownfield sites into next-generation space.

Queensborough operates on a land lease from the Port of Vancouver, which continues to seek land for port-related uses – a fact that has heightened competition for sites among users across the board.

“How many industrial users out there meet Port [of] Vancouver’s requirement for port-related uses?” asks Beth Berry, director of industrial development for Beedie Development Group. “At what point does Port [of] Vancouver purchasing land restrict other industrial uses that don’t have that amount of port requirement from being able to do business in Vancouver?”

Complicating matters is a 1999 agreement between Canadian National Railway Co. (CN) and Canadian Pacific Railway Ltd. (CP) that facilitates the shared use of tracks between Matsqui and Nepa, just south of Ashcroft. Goods heading east from Vancouver can travel non-stop between the two points on CP tracks while all westbound product travels on CN tracks. This has largely limited the development of major logistics facilities to areas west of Matsqui.

Once again, however, it’s the areas south of the Fraser that enjoy the requisite proximity to water and rail lines, as well as the space needed to accommodate large-scale facilities.

Site Economics principal Richard Wozny says constraints on the land base in Pitt Meadows and Maple Ridge prevent the scaling up of sites to create the large industrial estates seen at the mouth of Fraser River at Annacis Island, Tilbury and, more recently, along Boundary Bay.

“The northeast has the CP Rail intermodal yard and is a good location for logistics,” he says, “but there is very little flat, well-located, industrially zoned land in that area, so future logistics development is restricted.”

With the growing importance of Deltaport, areas north of the Fraser are outside the main corridor, now delineated by the South Fraser Perimeter Road (SFPR).

“This is a game-changer for logistics companies,” says Chris MacCauley, a senior vice-president with CBRE Ltd. focused on industrial properties.

The route’s opening has allowed Surrey and Delta to attract 64% of industrial demand, almost exclusively from large users. Vacancies south of the Fraser have dropped to 2.6%, undercutting vacancies north of the Fraser for the first time. Half of all the region’s new industrial space is located in the two municipalities, too.

“[SFPR] shifted people’s perception of the distribution wheel,” adds Lee Hester, senior vice-president with Jones Lang LaSalle. “Now you can locate in Tilbury and you’re minutes to Port Kells, you’re minutes to Deltaport, you’re minutes to Burnaby and Richmond. Prior to the South Fraser Perimeter Road, that wasn’t an option.”

Two key facilities serving the demand are Tsawwassen First Nation’s Deltaport Logistics Centre, a 300-acre facility leased to Port of Vancouver, Euro Asia Transload and Delta iPort, and Wesgroup Properties LP’s Pacific Link Industrial Park in Surrey.

“We’ve noticed, particularly in the past year or two, very strong interest from tenants, and it’s all related to the SFPR,” says David Wesik, vice-president of operations and corporate development with Wesgroup.

Demand led to Wesgroup recently acquiring a 40-acre site along River Road in Delta, where it hopes to develop 550,000 square feet of logistics space.

It was a rare opportunity, Wesik says, with developers forced to innovate to provide logistics space on an increasingly constrained land base.

“Centre ice for the true distribution logistics tenants will always be Tilbury, Bridgeview, East Richmond – but those areas are fairly mature and built out,” he says. “So then it becomes not ‘Where should my business be?’ but ‘Where the hell can I find a site that’s big enough?’”