Protection of Industrial Lands for Future Prosperity

Year: 
2016

Issue

With a growing population, and increasing housing demand in Metro Vancouver and other cities around the province, industrial lands have been significantly decreased through both absorption and rezoning over the last 30 years.  Much of the land base is lost due to market pressure to convert industrial lands to other land uses, such as multi-family residential and commercial developments, in order to accommodate ever more population growth.  The challenge is that low-cost, employment-generating industrial lands located near airports, rivers and roadways, that employ tens of thousands of workers, are being lost forever.

The last industrial land inventory, done in 2015, for the Metro Vancouver region showed there is just over 5,600 acres (2,261 ha) total available. Much of this land has severe constraints on development and will not be developed for the long term, if ever. At current growth projections and absorption rates, this translates into less than a 15-year supply of industrial land available in the region. There are only 1,000 acres available for large scale logistics, which is less than a 10-year supply. This is already contributing to a loss of jobs and revenue for the province. Calgary now accommodates numerous retailers who build large distribution centres there instead of Vancouver because they cannot find adequate land in the Lower Mainland. Outflow development to Calgary is estimated to be at least 50 acres a year and rising rapidly.

The Regional Growth Strategy established by Metro Vancouver in 2011 will make it harder for local municipal governments to rezone industrial lands, but it doesn’t go far enough to ensure important parcels are never rezoned. It doesn’t identify and generate new lands that have been rezoned and it still leaves decision-making in the hands of ever-changing municipal politicians.

Background

Industrial land use is an important issue across the province as populations continue to grow and there are competing demands on available lands.  Vancouver’s Lower Mainland is most at risk given its limited size, projected population growth and its strategic border/port location.  Various municipalities in the region have rezoned more than 3,000 ha worth of industrial land to other uses in just the past 30 years.

Site Economics Ltd. completed a study in October 2015 that specifically examined the inventory of trade-enabling industrial land, going beyond previous studies that have explored the supply of all general industrial land in the region. Trade-enabling industrial lands are lands required to support goods movement in and out of the region, housing marine terminals and buildings such as distribution centres and warehouses. To facilitate efficient trade, these activities must be in close proximity to major roads and rail lines.

The study found:

  • There are only roughly 1,000 acres of vacant trade-enabling industrial lands available in the region suitable for logistics and goods movement;
  • Based on average annual absorption rates and anticipated demand, the supply of vacant trade-enabling industrial land in the region could be depleted within a decade;
  • Roughly 1,500 to 3,000 more acres of trade-enabling industrial lands are required in the next five to 10 years to meet the demands of a growing Canadian economy;
  • Trade and logistics businesses account for most of Metro Vancouver’s industrial economy, and generate the demand for half of all industrial development in the region; and
  • The total direct and indirect economic impact of every 100 acres of logistics development is equal to approximately $1.9 billion of economic value. The full, long term and ultimate value of industrial land is often not considered by municipalities when they readily rezone those lands.

An additional million people are expected to move into the Metro Vancouver region by 2040.  To accommodate this growth, there needs to be a strong local economy, which will require readily available, high paying, employment-generating industrial lands. Lands zoned for industrial use typically generate jobs that pay double the average annual compensation rate per person.

Retaining industrial land is important for long term sustainability for local communities as it ensures high paying employment within the city core and contributes significantly to municipalities by subsidizing the residential tax base.  For every $1 in taxes, industrial lands typically receive on average $0.25 in services.

Industrial land is vulnerable as it is often prime ground for commercial, retail, or residential developments because it is typically the cheapest land in any region, after agricultural land, and it is often on or near the waterfront or in growing suburban areas.  Metro Vancouver relies on industrial as the office economy is small relative to any big city. It is less than half that of Seattle per capita or per worker and has minimal employment lands compared to any U.S. city.

The Metro Vancouver region saw a record breaking $975-million in industrial investment in 2015[1] and it is estimated that growth and demand for industrial land for distribution centres, trans-shipment facilities, manufacturing and processing will continue to increase.  Port volumes alone are expected to double by 2025 with the addition of Deltaport Terminal 2. We saw major investments in equipment and terminal upgrades in 2012, 2013 and more is anticipated for years to come, particularly on port lands such as Centerm. The business case for making such investments on industrial lands would be bolstered if there was certainty about the long term status of industrial land. It is important to note that without logistics oriented lands on which to expand the supply chain, the Port will become less competitive and it will harm the overall economy.

In the City of Vancouver, only 10% of their land area restricts residential development and yet those lands hold more than 50% of the jobs.  Growth strategies for the Lower Mainland to create density around transit stations represents large scale rezoning of industrial land.  This strategy is necessary to accommodate future populations and transit use and shows the need for flexibility in a land use strategy to ensure the right lands are in the right locations.  However, there is no provincial strategy or mechanism to ensure the displaced industrial lands are being replaced elsewhere.

The Site Economics Report identifies the following threats to the industrial land supply in Metro Vancouver   Rezoning, Incompatible Development, Access – Lack of Rail, Road or Water.

The report also states; There is very little well located industrial land left in the Metro Vancouver region, as all of the well-located industrial lands have been developed. The inventory of vacant industrial lands tends to be remote and not well suited for the transportation industry.  At the current and projected rate of logistics land absorption there will be a significant negative impact from the land shortage before the year 2020 increasing in severity until buildout, perhaps by 2025.


SOURCE: Site Economics Report: The Industrial Land Market and Trade Growth in Metro Vancouver, October 2015. Pg. 64.

Industrial land along the Fraser River has been rapidly disappearing.  Mills and traditional water access-dependent businesses have gone further up the river or have gone out of business altogether, turning employment-generating land into residential neighbourhoods.  Recent examples include:

  • a site in Queensborough was converted to a shopping centre and casino;
  • the former Canadian White Pines mill site in southeast Vancouver will be a massive new residential neighbourhood;
  • the former Fraser Mills site in Coquitlam is now also a residential development; and 
  • at one time there were thirteen plywood mills on the Fraser River and now there is only one.

Over 1,153 acres of recently purchased port industrial land in Port Moody is under consideration for a special study area under the RGS.  Richmond has converted many acres of industrial land to residential/mixed use and have more land under consideration for special study areas within 88 metres of the rapid transit line and in areas which border the town centre (Cambie lands at Garden City and Alderbridge).  Also, 230 acres of agricultural land in Richmond is now owned by Port of Vancouver and has been designated as a Special Study Area in the Port’s recently completed Master Plan.

In 2011, Seaspan’s Vancouver Shipyards in North Vancouver announced that it had won an $8 billion federal shipbuilding contract.  That contract will create over 5,000 direct, indirect and induced high paying jobs over the next 20-30 years.  The infrastructure investment alone is at $250 million and that infrastructure will create a world-class shipbuilding facility that can compete globally for future contracts. 

They will produce almost $500 million per year in GDP for B.C.’s economy and rebuild a local workforce and expertise in world-class shipbuilding. That opportunity may have been lost if Vancouver Shipyards would have given up on the shipbuilding business after it had been dormant for so many years. 

The parcel of industrial land directly beside Seaspan sat empty for many years and was eventually rezoned and is today an auto mall and commercial/retail mix.  The remaining waterfront is slated for a new condominium development.  The area does generate employment opportunities and is a desirable residential/retail/commercial neighbourhood, but that strategic port side parcel will never generate the economic opportunity like that of its shipbuilding neighbour.

It should be noted, that without question, housing and commercial developments are necessary and have greatly improved many areas creating vibrant neighbourhoods and commercial areas that also create jobs.  Many areas like Coal Harbour, False Creek and Richmond have been revitalized and this has made a great contribution to the liveability of these areas.  However, without an economic land use strategy for the future, the province will be at risk of losing critical gateways to global markets and land parcels in viable locations needed for industry growth.

For industrial businesses involved in trade, transportation, warehousing storage, and logistics, proximity to highways, ports, rail yards and airports are of vital importance.  The rail-port connection is of national importance to Canada’s economy as commodity exports need to be serviced by ports connected to rail lines. Ports typically create a huge demand for storage and distribution centres around them to take marine containers off ships, re-sort and put goods into domestic containers before transporting them from the port inland by rail. 

There are increasingly competitive global challenges for our B.C. resource and energy markets.  If we can’t deliver our products to global markets, we will be surpassed by the competition.  Washington and Oregon view their ports as having strategic importance and offer a more competitive regulatory and tax advantage to shippers.  B.C. municipalities often tax heavy and light industry property classes significantly higher than all other classes.  This represents a significant competitive disadvantage to B.C.’s industrial business.  The lack of available industrial lands compounds the disadvantage significantly.

Metro Vancouver, a corporate entity that delivers regional services on behalf of 24 local municipalities and authorities, is trying to protect industrial lands through a land-use plan called the Regional Growth Strategy (RGS) established in 2011.  The plan requires that municipalities get approval from the Metro Vancouver Board before rezoning any industrial land. 

There is concern that this process doesn’t go far enough to protect critical industrial lands from being rezoned.  About 2/3 of the region’s remaining industrial land is designated as industrial in the RGS. The remaining 1/3 is included in the RGS’s mixed employment lands designation, which also allows commercial development on included lands. That means that the industrial lands in that designation can be rezoned to commercial uses without seeking the endorsement of the Metro Board by way of an amendment to the RGS.  Also, all of the lands designated as industrial or mixed employment can be amended to general urban through a minor amendment to the RGS. In fact, since the RGS was adopted in 2011, a further 148 acres of industrial land has been lost.[2]

Further, the RGS process does not identify and generate new industrial land to replace lands that have already been lost.  Industrial densification is part of the solution and is starting to happen, but likely won’t be enough to meet the projected future demand.  Also, the RGS still places decision making in the hands of local politicians who may be under pressure to generate revenue for their municipalities by up-zoning from industrial uses.

So while it is better than nothing, the RGS is not a provincial solution that would give certainty that critical industrial parcels will be preserved well into the future and that would generate viable new industrial lands in the right locations.

Much as the provincial Agricultural Land Reserve has protected farmland since 1978, a similar mechanism is needed to protect industrial land. In fact, protecting industrial land would have the dual effect of protecting agricultural land, as it eases the pressure of agricultural land being converted.

Conclusion

Due to the uniquely severe land shortage, preservation of industrial lands cannot be accomplished at the local level. It will require provincial leadership.  An economic strategy will need to be initiated by the province to prevent further depletion of critical industrial parcels and to ensure the replacement of lost industrial lands and a potential increase in the size of the industrial land base.   

This is an important investment in the future of the province of British Columbia in order to ensure lands are preserved to accommodate growth without inducing further sprawl, and ensure a balanced, sustainable economy for ongoing local job security and prosperity for future generations.

Finally, the BC Jobs Plan outlines the following three pillars:

  1. Working with employers and communities to enable job creation;
  2. Strengthening our infrastructure to get our goods to market; and
  3. Expanding markets for B.C. products and services, particularly in Asia.

Protecting B.C.’s critical trade-enabling and job creating industrial lands must be a top priority of the provincial government to support the BC Jobs Plan strategy.  The Chamber acknowledges that some strategic work in this area has been started by the Province, but more attention is needed to:

  • identify strategic trade-enabling industrial parcels that are proximate to transportation connections and global gateways that need preserving;
  • assess current permitted uses of unusable lands and ensure the right lands are in the right locations;
  • determine a process or mechanism to preserve and grow industrial lands while considering local OCPs and allowing for market flexibility; and
  • identify ways to recover and increase key logistics oriented industrial land base by identifying under-utilized or contaminated lands currently reserved for rural uses.

THE CHAMBER RECOMMENDS:

That the Provincial Government:

  1. Take immediate action to review the current inventory of industrial lands in the province;

  2. Engage in a review of solutions with key stakeholders;

  3. Continue to develop a comprehensive provincial land use strategy, perhaps as part of an overall economic strategy for the province; and

  4. Enact a policy to establish clear provincial oversight and establish a forum for all relevant land use authorities to monitor implementation of newly created provincial policies and regulations.

Footnotes

[1] Colliers International Research and Forecast Report Year End 2015