(Port-related uses alone require an additional 1,000 acres of land over the next 10 years)
Metro Vancouver’s industrial land squeeze is no secret, but the pain it is expected to cause is becoming harder to manage.
With no simple fixes in sight, the stakes are rising for Canada’s largest port – and the local and national economies it supports.
The Port of Vancouver – the most-diversified port in North America – is struggling to acquire the land it needs to support trade, a growing population and economic activity. The consequences are already manifesting in businesses looking to other provinces for industrial land, and in inefficient supply chains at a time when job action also threatens the expeditious movement of goods.
“How that manifests in terms of inefficiency is a container that would arrive at the Port of Vancouver today, with goods that are destined for the local market, are actually being put onto a train and transported outside of the province to markets such as Calgary,” said Jennifer Natland, vice-president of real estate at the Vancouver Fraser Port Authority, the organization that manages federal lands and waters within the Port of Vancouver.
“[The goods] are then sorted and trucked back to the region before their final distribution within [Metro Vancouver].”
Natland said that this type of activity will only increase if land isn’t allocated for warehouses and distribution centres in the region.
Metro Vancouver as a whole needs 404.7 hectares (1,000 acres) of land over the next 10 years to properly support trade to Canada through the Port of Vancouver, she said.
Natland would not indicate how many acres of land the Vancouver Fraser Port Authority needs.
Chris MacCauley, executive vice-president at commercial real estate company CBRE, estimates that the port itself needs 607 hectares (1,500 acres) of land over the next decade.
“We simply don't have 1,500 acres of industrial land in Vancouver,” said MacCauley.
“And that's just what the port needs, that doesn't even take into account what our local industrial needs are, other things that are not port related, new entrants coming to the market or existing companies that need to expand. You have many stakeholders at the table looking for a piece of the pie and there's no pie.”
The Port of Vancouver borders 16 municipalities and encompasses roughly 16,000 hectares of water, 1,500 hectares of land and hundreds of kilometres of shoreline.
A potential solution to the land squeeze – albeit a controversial one – may lie in B.C.’s agricultural land reserve (ALR), MacCauley said.
“We've been talking about [multi-storey and stacked industrial] for years now and it's been proven across North America that it is not the answer. That is a solution for certain problems, but it's not a solution when we're talking about trade enabling lands,” said MacCauley.
Instead of constructing new industrial parks, MacCauley proposes adding ALR land to existing industrial parks. He emphasized that the focus would be on land that is not being utilized for agricultural purposes but is still protected under the ALR designation.
“I'm not saying that we have to give up food security or pave over good agricultural land that is currently producing,” he said. “I think what we really have to do is revisit a 50-year-old charter and find a balance of what is needed for the agricultural community and what is needed for the industrial community.”
Kim Grout, CEO at the provincial Agricultural Land Commission, said that she understands the need for more industrial land, but acknowledged that agricultural land is also in short supply.
“There's lots of ALR that's owned by people who intend to hold it, in some cases for a generation in the hopes that it'll be something else in the future.… There's no restriction on ownership in the ALR, which sometimes is the challenge,” she said.
The agricultural land commission would not support the ALR being bought by the port for industrial uses, said Grout.
(Banff's Rimrock Resort Hotel sold to Oxford Property Group in June for $170 million, or $515,200 a room -- Western Canada's biggest hotel transaction of the year.)
Record-high rates and revenue are attracting investor interest in Western Canada’s hotels.
The region saw $431 million worth of assets trade in the first half of 2023, or 41% of the national total, according to Colliers' second-quarter review of the hotel sector.
The second quarter some exceptional pricing for properties including the Rimrock Resort Hotel in Banff for $170 million, $515,200 a room, a price that reflected Oxford Property Group’s plans for a $100 million renovation.
Aldesta Hotel Group picked up Fairmont Hot Springs Resort in BC for $40 million, or $264,900 a room, in June. The deal included three golf courses, a 14-run ski hill, RV park, and more than 650 acres of excess lands.
The two properties ranked second and third after The Hazelton, a Toronto property that commanded an outlier price of $110 million or $1,428,000 a room thanks to the inclusion of 11,250 square feet of retail space, an underground parkade and a 50 per cent interest in the on-site restaurant.
Colliers cited strong growth in average daily rates, the resurgence of domestic travel and small to mid-size group activity as contributing the return of investor interest.
“Hoteliers are reaping substantial top-line gains driven by remarkable increases in average daily rates,” Colliers reported.
Canada’s hotel industry reported its highest average daily rate (ADR) and revenue per available room (RevPAR) on record, according June data from CoStar Group.
ADR soared 12 per cent to $221.86 a room while RevPAR increased 16.1 per cent to $164.97.
The increases came as average national occupancy rates rose 3.6 per cent versus last year to 74.4 per cent – the highest level since last August. With the increase coming ahead of the peak summer travel season, the prospects are good for new records being set in the third quarter.
“Canada’s hotel industry is benefitting from elevated spending on discretionary services,” said Laura Baxter director of hospitality analytics for Canada with CoStar.
Occupancies were highest at limited-service hotels, pointing to a trading down in activity, but group activity was up versus a year ago as this segment of demand continued its recovery from pandemic-era lows.
According to Colliers, full-service hotels accounted for 60 per cent of investor activity in the first half of the year. Limited-service-properties ranked second, at 26 per cent of transaction value.
But when the data was smoothed to account for the large number of high-value transactions, average sale price per room showed that investors were still willing to spend on limited-service properties as well as full-service hotels with equal enthusiasm.
The normalized price per room for all transactions in the first half of the year was $192,100, up 32 per cent from a year ago.
Plans for a new hotel in Chilliwack will help address a deepening shortage of rooms in the region as travel recovers from the damper imposed by COVID-19.
“There was a return to travel and tourism across British Columbia in 2022 and a resulting resurgence in the demand for hotel rooms,” says Jeff Krivoshen, CEO of P.R. Hotels Ltd. in announcing plans for a dual-branded Fairfield Inn and Suites & Town and Towne Place Suites by Marriott off Highway 1 at Lickman Road in Chilliwack. “Building a hotel is a significant investment. We chose this location because we see promise in Chilliwack and are committed to growing with the community for the long term.”
Built and operated by P.R. Hotels and Meridian Development Corp. of Saskatoon, the hotel is part of Fraser Gateway Centre, a new mixed-use development Denciti Development Corp. is undertaking on the 12.4-acre site, which it acquired in 2021.
The southern portion of the site will be commercial, with plans calling for a service station and family restaurant in addition to the existing Tim Hortons and private liquor store. The northern portion will feature a light-industrial business park with up to 25 small and large bay warehouse units.
While the warehouse units will address a shortage of industrial space at one the last major undeveloped intersections in the Fraser Valley, the hotel space is also much needed.
Speakers at the Western Canadian Lodging Conference last fall called out the Fraser Valley as an area that could benefit from new construction.
“There are markets in the Fraser Valley that are just dying for some new product,” said Carrie Russell, senior managing partner with advisory services firm HVS Canada in Vancouver.
Chilliwack was among the markets she identified, thanks to the acquisition and conversion of several older properties to alternative uses such as low-income housing, and Hope, which has plenty of older motels but lacks modern, mid-tier product.
More recently, a report accounting firm MNP prepared for Destination Vancouver this spring noted a diminishing supply of hotel rooms in Metro Vancouver, jeopardizing growth of the region’s tourism sector, and in turn, the provincial economy.
While the city of Vancouver has lost approximately 2,000 rooms over the past 20 years, the pace of loss has been greater throughout the region.
MNP reported that Metro Vancouver’s stock of hotel rooms peaked in 2011 at 14,424 rooms across 94 properties, but that was down to 10,002 rooms across 85 properties in 2022.
“Metro Vancouver’s infrastructure is not keeping up in delivering on our global profile,” Royce Chwin, Destination Vancouver’s president and CEO said when the report was released, noting that cities of a comparable profile have been steadily building their hotels stock.
“[The] lack of available hotel rooms will make visiting Vancouver even more expensive, and the city will be less competitive in attracting major conferences, large sporting events and leisure group travel,” Chwin said, noting that the city and region is set to play host to major international events including the Invictus Games, Grey Cup and, in 2026, the FIFA World Cup – the world’s largest single sporting event.
Business travel is also on the rise, with many observers expecting a normalization of conditions by 2024.
While not a silver bullet, the 150-room hotel will be the largest in Chilliwack when it opens in 2025. It represents an upgrade from the Best Western-flagged hotel that formerly stood on the site but closed during the pandemic.
“[It] will bring extended stay into the Chilliwack market that doesn’t exist currently, and will bring a Marriott to the Fraser Valley,” Krivoshen said, describing the dual-branded format as “very efficient.”
The property’s 150 rooms will see 90 allocated to the Fairfield brand, which will focus on serving the short-term and leisure market, while 60 rooms will be allocated to the Towne Place Suites banner, an extended-stay brand that features in-room kitchenettes.
“We can market as two independent hotels gives the travelling public a couple of different options to go with,” Krivoshen said. “We can still use the same employee base, same housekeeping core, same front desk, just service [the market] with two hotels, one general manager, one sales department.”
The project in Chilliwack follows P.R. Hotels’ and Meridian’s completion last December of a 124-room Delta-branded hotel attached to the Cascades Casino Delta on the former Delta Town & Country Inn site.
In July 2021, the Residential Tenancy Act was amended to encourage more environmentally sustainable housing developments. Landlords who incurred a capital expenditure to reduce energy consumption at their property or reduce greenhouse gas emissions became eligable to obtain a higher than standard rent increase.
Given the strict limitaitons placed on increasing the rent for residential properties in B.C. over the last serveral years, this legislative amendment opened the door for more thoughtful building design and ultimately, offered a critical financial incentive to construct more modernized and sustanable retan housing stock.
To learn more about the additional rent increase available for capital expenditures, read the news release from the B.C. Residential Tenancy Branch.
A new report by Destination Vancouver warns demand for hotel rooms in the Lower Mainland could outstrip supply as early as the summer of 2026, forcing up prices and putting our ability to host world-class events at risk. Paul Haysom reports – Mar 6, 2023
A new report from Destination Vancouver warns a lack of hotel capacity could cost the city billions in economic impact and thousands of ‘unrealized’ full-time jobs, with demand set to outpace supply in as little as three years.
The report estimates about 20,000 new hotel rooms are needed in Metro Vancouver by 2050, about half of which would be in the city of Vancouver.
From the Rugby 7s, Grey Cup, Laver Cup and the Invictus Games, to the FIFA World Cup in 2026 or something as simple as the Canucks and Whitecaps weekend home games, Destination Vancouver says the economic impact would be extensive.
It warns not keeping up with demand would cost the region more than $30 billion by 2050 and more than 168,000 full time jobs.
“It’s a conversation we need to have around strategy with the federal government, First Nations, the City of Vancouver, so everyone is well aware of it,” said Minister of Tourism Lana Popham.
“We’re going to be looking for solutions,” she said.
The City of Vancouver itself is down 1,500 hotel rooms since 2010. 550 were also purchased by the city and B.C. Housing to convert rooms into supporting housing.
“We’ve lost hotels as they have converted due to the high cost of real estate, into housing. We’ve lost hotels with the use of them being turned into supportive housing, with programs that came forward during the pandemic, but what we really want to see is flexible, more nimble policies that allow hotel use across the city,” said Coun. Sarah Kirby-Yung.
It says significant investment is needed to recoup the losses, and existing development applications and permits submitted are currently insufficient.
Airbnb, which currently offers about 3,500 listings in the area., would like to play a bigger role.
“I’m thinking all these events coming to Vancouver, people are looking towards those as opportunities to leave town, and opportunities to make extra money by engaging in short-term rentals even for short periods of time,” said Nathan Rotman, Airbnb Regional Lead for Canada and US Northeast.
One of the biggest issues, the report points out, is space. One idea being floated is a hotel barge in Coal Harbour, that the city is open to.
Annual Resonance Consultancy ranking lists five Canadian cities among the 100 best metro regions on the planet in its annual report released November 28.
Resonance is a leading advisor in tourism, real estate and economic development, and its Best Cities rankings quantify the relative quality of place, reputation and competitive identity for the world's principal cities with metropolitan populations of 1 million or more,
Bloomberg calls it “the most comprehensive study of its kind; it identifies cities that are most desirable for locals, visitors, and business people alike, rather than simply looking at livability or tourism appeal.”
In Canada, Toronto is ranked No. 24; Montreal is No. 57; Calgary is No. 65, Vancouver is No. 69 and Ottawa came in near the bottom, ranked at No. 96, just ahead of Hanoi.
Calgary, the top-ranked city in Western Canada, topped Vancouver due to the Alberta city's business acumen, according to Resonance.
A wildly successful tourism season has Western Canadian hoteliers looking to build on the lessons of the past three years as a recession looms.
Occupancies rose 60 per cent nationally in the nine months ended September versus a year ago, pushing average daily room rates to $183.76, or 34 per cent above last year. This boosted revenue per available room (RevPAR) to $110.11, up 113 per cent versus a year ago.
“It’s been a remarkable recovery, and for us it’s been right across the country,” said Brian Leon, CEO of Choice Hotels Canada, speaking at the Western Canada Lodging Conference in Vancouver on October 25. “We’re going to end this year with RevPAR probably a little more than 10 per cent higher than it was in 2019. We would never have expected that.”
Vancouver led the country, with an average occupancy rate of 70.3 per cent in the period. Room rates followed suit, rising 49 per cent to a nation-leading $243.72 a night. RevPAR increased a stunning 153 per cent to $171.34 from just $67.69 a year earlier despite ongoing border closures.
“This market has really seen great recovery over the past year,” said Jim Chu, executive vice-president and chief growth officer of Hyatt Hotels Corp. “And that’s without China.”
The strength of demand in Vancouver stands out next to Calgary, where hotel performance continues to lag Western Canada. Occupancies averaged 57.1 per cent in the first nine months of 2022 while room rates are also below average at $153.63 a night. This compares to 62.5 per cent occupancy in the same period of 2019 when rates averaged $145.92.
RevPAR in most major markets has yet to return to pre-pandemic levels but hoteliers have also reopened with an eye to keeping costs in check. Shorter wine lists, smaller menus, and offerings tailored to visitors – primarily leisure and group stays – have been critical.
“A lot of job-sharing, a lot of engineering of processes and tasks” took place, said Jiri Rumlena, president of SilverBirch Hotels & Resorts, which saw its workforce fall to 18 per cent of normal during the pandemic. It rebuilt its staff to 80 per cent of normal this summer, but guest experiences took longer to recover. “Standards didn’t come back in certain areas as they normally should have,” Rumlena acknowledged.
While consolidation of roles has helped address the labour shortage, and cutbacks in housekeeping helped control costs, Cindy Schoenauer, vice-president, hospitality and gaming with Cushman & Wakefield, isn’t sure it’s a strategy for long-term success.
“I don’t know if that’s something hotels want to keep doing because at the same time you’re talking about really rapid [room rate] growth,” she said. “There needs to be value to what you’re paying as well.”
The sector’s revival should be good news for workers after two years of turmoil.
“We’re not blind to the fact that the entire hospitality industry, ski included, have been in the forefront of media over the past two years and the basic narrative has been lack of stability,” said Christopher Nicolson, CEO of the Canada West Ski Areas Association, based in Kelowna. “As stability returns, that will definitely help recruiting as well.”
It won’t be easy, though. The sector was down 400,000 workers during the pandemic but recouped about 200,000 people this summer before returning to a deficit of 300,000 workers this fall.
While the federal Temporary Foreign Workers program has been tweaked to allow the sector to bring in up to 30 per cent of the workers it needs, the sector needs to continue working to secure domestic workers.
“We have to get out and tell our story,” said Susie Grynol, president and CEO of the Hotels Association of Canada.
Part of that story is that 90 per cent of hoteliers increased wages this past summer to attract workers.
“We want to be the sector people want to work in,” she said.
“We’ve seen leisure recover, but we have yet to see corporate [incentive travel] and meeting, conference group demand recover,” Schoenauer added. “It’s started, it’s just taking a little longer.”
Leon believes this year’s recovery will support fresh investment in properties that will improve the guest experience and position hotels for the future.
“Our hotels this summer, from a financial perspective, are in a lot better shape than they were a year ago,” he said.
The market is also benefitting from the removal of 6,800 rooms, primarily older product, since 2020, when governments stepped in at the onset of the pandemic to snap up properties for alternative uses, primarily social housing.
“You have rooms coming out that’s going to help our recovery,” McCluskie said.
However, with urban hotel markets still challenged by a lack of business travel, many of the 15 sales seen in B.C. this year have been in smaller, secondary markets outside the main centres. An example is the Kanata Hotel & Conference Centre in Kelowna, which sold this year for what is said to be highest price paid for a hotel in the region.
Just one hotel property changed hands in Vancouver, that was not purchased for redevelopment or an alternative use.
(Looking for Hotel for sale BC , we are happy to help.)
Well located and well-maintained apartment building, built in 1949, with stunning ocean views along desirable Crescent Road, Victoria, B.C.
Type of property; Multi-family
Location: 1860 Crescent, Victoria, B.C.
Number of units: 8
Property size: 14,857 square feet (approx.)
Sale price: $3.6 million
As a commercial tenant, the monthly base rent you pay your landlord for leasing commercial space may not be the only rent you pay! Many commercial tenants will also pay a secondary amount for property operating costs. The good news is that both these rents are often negotiable.
To clarify, operating costs (also referred to as Common Area Maintenance/CAM, Triple Net/NNN Charges, or Additional Rent) are the costs of maintaining and managing a property. Examples of valid operating costs include property taxes, property insurance, maintenance, utilities, landscaping (which includes snow removal), and garbage collection. Valid operating costs will benefit all of the tenants in a commercial property—not just one or two. Commercial tenants need to understand and remember that operating costs are charged proportionately to all tenants. Therefore, a tenant occupying seven percent of a commercial property will, typically, pay seven percent of the total operating costs.
Operating costs are not, however, used equally. For instance, we are familiar with one tenant who created only one bag of garbage per week. He chose to load this bag into his own van, take it home, and place it outside with his own trash. Despite this, he was still obligated to pay his proportionate share of operating costs. In this case, it may be possible to exclude these charges for an individual tenant who can argue they are receiving no benefits from such operating costs.
Any costs that are not covered by the commercial tenant’s contribution to Operating Expenses become the responsibility of the landlord. Understandably, landlords want to ensure that tenants’ fees cover all the building costs. What is wrong, however, is when all the tenants within a commercial property are paying needlessly to subsidize capital improvements on the building. The capital improvements costs could mean the construction of a new building or the installation of new pylon signs on a property when none existed before.
Another common scenario when operating costs can increase dramatically is when a new landlord purchases a building that has a large amount of deferred maintenance to be completed. The landlord’s motivation to complete this maintenance is to charge higher rents and fill vacancies, but this comes at the expense of higher operating costs for the current tenants. Commercial tenants should be looking at other similar buildings in the area to compare operating costs. If operating costs at one particular building are quite low and the property appears in need of updating, it is reasonable that these costs may rise significantly in the future.
A commercial property’s operating costs need to be completely spelled out in a tenant’s lease agreement. When this occurs, a tenant can examine, question, and negotiate each listed item. Beware that commercial landlords can be quite creative when it comes to listing operating costs. We have seen cases where landlords require all of their tenants to pay an annual fee to have a pool of money available for damage not covered by insurance. In most of these cases, the tenants were required to pay this fee for the entire duration of their tenancy. If damage occurs during a tenancy, a landlord will tap into this reserve fund; if a tenant relocates, the money that he/she paid into the pool will not be refundable.
When a building is fully occupied (or close to fully occupied), the landlord may be less motivated to try to charge their tenants more than their fair share. Before signing the lease, a tenant must ensure that there is no language within the lease permitting the landlord to charge back shares of operating costs for any vacancies to the tenants currently occupying the property. Even if your lease does not permit this, tenants must review their Operating Statements closely every year to ensure that they are not absorbing operating costs that should be attributed to any vacancies.
When it comes to deciphering operating costs, read carefully! These are a few of the potentially detrimental issues that can negatively affect commercial tenants: