The grass isn’t always greener on the other side, but for BC businesses looking for industrial real estate, there are strong signs that Alberta could be a better place to s ‘install.
A confluence of factors has made it clear that those who need large amounts of industrial space in British Columbia are going to have a tough time, while making the other side of the provincial border increasingly attractive.
In interviews with STOREYS, three experts in the industrial real estate market – from Vancouver, Calgary and Edmonton – detailed these factors, how they came together at the right time, and the Alberta advantages companies are looking to take advantage of.
In a national Q3 report in the industrial and office market released this week, Colliers said Vancouver became “the first market in the history of our tracking” to exceed an average net asking rent per square foot of more than $20, at 20.44 $.
Part of the reason for this high price is location, but another factor is simply supply and demand.
“The supply of land suitable for industrial development is low”, Susan Thompsonassociate director of research at Colliers, told STOREYS.
In addition, the vacancy rate in the industrial market in British Columbia is also low. In the third quarter, the total industrial vacancy rate was just 0.2%, according to the Colliers report. This was actually a slight increase from the second quarter, when the vacancy rate was at an all-time high of 0.1%, but Colliers points out that the small increase was due to absorption catch-up and no to adding new offers. What happens when supply is low and demand remains strong? High prices.
Industrial facilities such as distribution centers or warehouses have traditionally had a single floor, either due to excessive weight on an upper floor causing problems or reduced efficiency with multiple floors. However, Vancouver is so “tight,” says Thompson, that companies hoping to stay in the market are now considering “stacked” (multi-story) industrial spaces.
One such example that Thompson points to is none other than Amazon, which took over a two-story, 707,056-square-foot space on 8351 Fraser Reach Court in Burnaby — near Queensborough — in August. Thompson thinks that once there are more success stories with stacked industrial spaces, the idea will start to take off. This is something that has happened before in Metro Vancouver’s residential real estate market, where land shortages and the housing crisis have led to increased density – building more space vertically rather than horizontally.
Alberta: the land of industrial abundance?
Meanwhile, these problems are not really registered in Alberta. Not only does the province have an abundance of land, but it is also much cheaper. David Saint-Cyrdirector of industry in Edmonton at Avison Young, told STOREYS that an acre in British Columbia that could cost between $4 and $5 million would be closer to $400,000 in Alberta.
And while the supply in British Columbia is clogging up, the supply of industrial space in Alberta is moving in the other direction.
According to Avison Young Second Quarter Industrial Market Report, Calgary alone recorded $792 million in industrial market investment sales in mid-2022, a 32% increase from the same point in 2021. Additionally, “the development pipeline is expected to deliver a unprecedented number of new constructions. With 8.7 million square feet under construction and in preparation, the 2022 industrial development frenzy will continue through 2023.”
And if the plentiful supply and lower costs aren’t attractive enough, Alberta will often have less red tape when it comes to things like permits. (A Greater Vancouver Board of Trade survey released earlier this month found that licensing and reducing red tape were the High problem for businesses.)
There’s more “working with businesses” and “cooperation between municipalities” and “less red tape,” St. Cyr says. His colleague, Tyler Wellwood, Calgary industry manager at Avison Young, told STOREYS there is also a focus on permit approvals, which take “much less time” than in British Columbia. Faster permit times mean construction can start sooner, resulting in less unnecessary cost and less risk for businesses.
Thompson, the expert for Colliers, also acknowledges this, saying Alberta jurisdictions are often willing to speed up the clearance process. “Businesses want their needs met quickly, not years and years later,” she said. “If they can’t meet their needs, they need to consider their options.”
The province of Alberta launched a witty new advertising campaign last month called “Alberta Is Calling”, which highlighted many of the challenges faced by residents of British Columbia and Ontario – and how much less of a concern they are in the land of wild roses – in an attempt to attract talent. “Find things you wouldn’t expect. Like a central home that you can afford,” reads one of the campaign slogans. “Bigger paychecks. Smaller rent checks,” another said.
When asked if housing affordability had a connection to the growing attractiveness of Alberta’s industrial market, Wellwood and St. Cyr said it was definitely an added benefit, both for labor than for employers concerned about labor shortages, another issue in British Columbia.
“These factors all come together,” says St. Cyr. Those who “can’t grow into tighter markets, can’t activate the next phase of growth in their current markets are looking to Alberta,” adds Wellwood of Calgary.
And it’s pretty much everywhere, when it comes to business. Wellwood says there are some small differences between the makeup of the markets in Alberta, with Edmonton seeing a bit more of the raw materials and manufacturing market, while Calgary has seen more of the distribution and logistics. Saint-Cyr agrees, saying that although the cities are distinct, the costs are very similar and it often comes down to preference.
It’s not so much that companies want to leave British Columbia, but rather that they are shifting more of their weight to Alberta. St. Cyr says British Columbia is increasingly losing deals with Alberta for large distribution centers. One example he cites is Lowe’s, the home improvement retailer, which signed on in late 2021 to lease a 1.2 million square foot facility in the High Plains Industrial Park in Balzac, Alberta. Another is De Havilland, the aircraft manufacturer, which announcement a new manufacturing plant in Alberta last week.
St. Cyr also points to other additional advantages of Alberta, such as the significant amounts of cargo space between Alberta’s two international airports and rail connection from Edmonton to the Prince Rupert Harbor in British Columbia, the closest North American port to Asia, which means businesses can still access the benefits of British Columbia without having to deal with exorbitant prices.
In his report, Avison Young notes that despite rising interest rates and higher construction costs, “Calgary’s position as a viable alternative to larger, more congested industrial markets continues to solidify. . The relative affordability of the market, even in the face of high costs, will always work in its favour.
It’s a “perfect storm of conditions,” says Thompson.
In other words, Alberta calls, and those in the industrial real estate market answer.