The Boundary Bay Industrial Park, which the Dayhu Group of
Cos. opened three years ago in Vancouver, has two buildings that are each 36
feet high – a jump from the standard 26 feet in the region.
It has always
seemed like the ideal solution to Vancouver’s shortage of industrial land, one
that is talked about as an impending crisis.
Densify.
Build higher. Build two- or three-storey industrial buildings, planners have
urged, reminding everyone that developers around the rest of the world are
doing it.
A recent
report from Britain-based TechNavio identified multistorey warehouses as one of
the hot new trends in China. And an international company, which is building
one of those warehouses in Shanghai, has also just broken ground on an
85-foot-high warehouse facility in Seattle, 220 kilometres south of Vancouver.
The Prologis building will be the first of its kind in North America.
Vancouver,
where the prices of industrial land have gone up along with the prices of
residential land, seems the most likely city in Canada for this to make
economic sense.
This artist rendition shows how a two-storey warehouse works.
The building must include a long, gently inclined ramp that allows the
container trucks to climb easily to a second-floor concourse where they can
park, turn around and back up to loading bays. (Prologis)
But the man
whose company has built the region’s tallest industrial building so far says
that, although local developers and commercial brokers are carefully watching
all those trends, there are challenges in Vancouver that Seattle or Shanghai
don’t have.
“I think
Vancouver ultimately will have something similar but I don’t think we’ll see it
in the short term,” says Paul Tilbury, chief operating officer of Vancouver’s
Dayhu Group of Cos. “But we’ll see how the tenants in Seattle react to the
availability of that kind of space there.”
Dayhu has
conducted the most adventurous experiment locally in industrial building. Its
Boundary Bay Industrial Park, opened three years ago, has two buildings that
are each 36 feet high – a jump from the standard 26 feet to, at most, 32 feet
for industrial buildings in the region.
That kind of
height has been made possible because of the new technologies available for
warehouses, says Mr. Tilbury.
In one of the
buildings, which has been leased by TJX Canada’s Winners, the company installed
three-quarters of a mile of conveyor belts and uses a specialized system to
guide their forklifts.
“That allows
their forklifts to be more precise and it allows driverless forklifts to work
to the full 36 feet.”
That rise in
the use of technology is something TechNavio also identified as an emerging
trend in China, where labour costs have been rising rapidly.
It noted that
the huge e-commerce company JD.com has opened a warehouse in Shanghai “where
items are picked from shelves, packed up, and sent to distribution points, completely
by machine alone.”
But the moves
in China to multistorey warehouses are dramatic, as land costs in increasingly
packed cities such as Shanghai and Beijing have increased and are expected to
rise by as much as another 10 per cent in the next few years.
The response,
according to a TechNavio report: “Goodman Group , the second-largest logistics
developer in China, launched a 1,184,030-square-foot multistoreyed warehouse in
Shanghai’s Qingpu district in 2016. Similarly, Prologis , a global leader in
industrial logistics real estate, has set up a multistoreyed warehouse with
space of 1,067,780 square feet at Beijing Airport Logistic Park in 2016.”
But China is
not the only crowded place.
The idea of driving a container truck up to a second floor
may be novel for North American operators. It’s also more complex than it would
be in Asia, where the industrial trucks are smaller than the standard 53-foot
length on this continent. (Prologis)
And this
month, Prologis, the largest owner of industrial land globally, was to break
ground on an 85-foot-high facility in Seattle. The San Francisco-based company
thinks it’ll be doing more.
“One thing
that we’ve seen is the urbanization. People are moving back to the cities
everywhere and the desire of our customers is to be close to the population,”
says Dan Letter, the San Francisco-based managing director of capital
deployment for the company’s Northwest sector. “We are running out of space in
cities, so our solution is we’re building up.”
The demand to
be close to cities is especially true with the rise of e-commerce, which relies
on being able to deliver products quickly to customers in large urban areas.
In Seattle,
says Mr. Letter, the decision to move ahead with the company’s first
multistorey project on the continent is “really driven by land values. Rents
have skyrocketed and vacancies have dropped to all-time lows.”
Mr. Letter
says the company created the concept of the multistorey industrial building, so
adapting it for Seattle will be relatively easy.
One thing
that is key to the 580,000-square-foot Seattle project, which is being built in
the southern Seattle neighbourhood of Georgetown, a mix of old industrial with
a small cluster of hipster stores near a former brewery, is having a piece of
land large enough for the design. The Prologis site is 13.5 acres.
That’s
because the multiple storeys are only possible, he says, if the building
includes a very long, gently inclined ramp that allows the container trucks to
climb easily to a second-floor concourse where they can park, turn around and
back up to loading bays. That is more important than any technology solution.
Mr. Letter
acknowledges that the idea of driving a container truck up to a second floor
will be novel for North American operators. It’s also more complex than it
would be in Asia, where the industrial trucks are smaller than the standard
53-foot length on this continent.
On the other
hand, some things won’t be so different. “In San Francisco and Seattle, you’re
navigating hills anyway. And, even in flat areas, you have elevated ramps to
highways,” he says.
All of that
doesn’t seem so impossible for a Vancouver builder, at first glance. But those
in the know say there are hidden complications.
One, the soil
conditions in many parts of the region with industrial land available are
challenging for anyone building something bigger and heavier.
“We have a
lot of people locally looking at this, at what are our options for going a bit
more vertical,” says Chris MacCauley, a senior vice-president at the CBRE
brokerage in Vancouver. “For every four feet you go higher, you get 16 cubic
feet of space, so a lot of them are looking at it.”
But, he says,
the soil conditions in Delta – partly formed by deposits over the centuries
from the Fraser River – and along the banks of the river, which have big
pockets of land zoned industrial, are poor. “We wouldn’t be able to put that
kind of big building in our industrial-zoned land.”
The same
would be true for Vancouver’s False Creek Flats, a central industrial area that
was created by filling in part of the inlet early in the last century.
He also notes
that these kinds of buildings don’t work for every industrial use.
“Amazon and
e-commerce, yes. But it wouldn’t work for manufacturing or any sort of thing
that’s labour intense.”
As well, says
Mr. Tilbury, building a large facility like the Seattle Prologis one would
require a huge amount of land. And that’s one of the biggest difficulties for
industrial developers now – finding anything that big or several parcels that
are contiguous that could be joined.
Ultimately,
he says, Vancouver might see more multistorey buildings on industrial land
soon, but of a different kind.
Instead,
buildings that have one floor of industrial use on the ground level and then
office spaces above are the more feasible option.
That’s a
concept that has been taken up enthusiastically in Vancouver’s Mount Pleasant
industrial area, where a new set of zoning rules adopted a few years ago
allowed for that. New buildings are proliferating that have shoe-distribution
facilities on one floor, for example, and accounting offices above.
“You’re more
likely to see that,” says Mr. Tilbury, “before the Prologis model.”