Industrial revolution

Round Table

As Vancouver’s unrelenting real-estate story continues to hog headlines, now is a good time to step back, take a breath and ask a few big questions. How exactly did we get into this prolonged hot market? Where is it taking us? What are the consequences for B.C.’s economy?

With the U.S. economy slowing, our trade potential with Asia waxing and real-estate prices spiking, guessing the future isn’t a simple game. But two local experts help us get our bearings, sharing their thoughts on the major economic shifts that have transformed the Lower Mainland’s real-estate market and highlighting the trends that will shape the future of the region.

As private investors buttress neglected rental stocks, high-rise density transforms urban hubs and fleets of container ships put the squeeze on our precious industrial lands, there’s plenty to think about.

Cameron Muir is chief economist for the B.C. Real Estate Association, having previously served as the senior market analyst for B.C. and Yukon at Canada Mortgage and Housing Corp. Gurch Ollek is a 23-year veteran at CB Richard Ellis Inc. in Vancouver, where he’s a VP specializing in industrial real estate.

B.C.’s industry has been hit by the slowing U.S. economy and the high dollar, but finding industrial land is another big issue in Metro Vancouver. What’s the ­situation?

Gurch Ollek: The industrial market has always been tight. The biggest thing we have to understand about Vancouver is the restric­ted land supply: we’ve got an ocean to the west, we’ve got a border to the south, we’ve got mountains to the north, and on top of that we’ve got the agricultural land reserve.

And industrial land is typically really the least-valued land there is, so when you’re getting pressure from housing markets moving out [and] suburban office markets moving out, typically what they’ll do is take industrial land. So we’ve always faced a shortage, a so-called shortage, and that’s kept vacancies low.

But we’ve really seen a fundamental change in the markets, shifting from more of a manufacturing base – with sawmills and other secondary manufacturing – to distribution. What’s happening in the world is this shift in manufacturing from North America to Asia, and it’s really translating into a huge amount of container traffic. The logistics market has just boomed, and that’s expected to double probably in the next 10 years.

You take a look at some of the major ports like Los Angeles: I mean,

it’s at capacity, and if that container traffic’s going to double, where’s it going to go? A lot of it has been funnelled into Vancouver. It’s now recognizable at the provincial level and at the federal level as a gateway to supply goods across Canada.

So what does this new demand do for industrial land?

Ollek: It puts a lot of strain on it. We’ve had some projects sitting around for a long time. Joe Segal had 90 acres on Nelson Road in East Richmond, for instance. About five years ago he decided it was time to develop it, and now he can’t build fast enough. Every building he’s put up in speculation has been filled up prior to its completion. The companies that have gone in there are all involved in the container business.