Posted on May 03, 2011

Metro Vancouver warehouse world booming

BY GLEN KORSTOM - Business in Vancouver 

The Beedie Group is preparing for the construction of the largest single-level warehouse ever to be built in the Lower Mainland in one phase. The 504,000-square-foot facility for tissue-maker Kruger Inc. is another sign that corporate confidence in the region has returned to pre-recession highs. 

However, the buzz over the Beedie project, which would be the largest structure in the company’s 57-year history, has overshadowed several underlying Metro Vancouver industrial real estate trends that brokers say include: 
 • mid-sized companies increasingly wanting to occupy larger warehouses of up to 150,000 square feet;
 • more companies that import products via Port Metro Vancouver (PMV) wanting large warehouse space; and
 • renewed interest in building warehouses larger than 400,000 square feet. Beedie is in final negotiations with the City of New Westminster and PMV to build the Kruger warehouse. 

The city approval appears straightforward. So does the lease that Beedie must negotiate with PMV to secure tenure over about two acres of infill land that is legally considered the Fraser River and is therefore owned by the federal government. According to the Canada Marine Act, PMV manages that land. “We are rushing and doing everything we can to help them get permission [from the City of New Westminster] to make sure that they get this building built on time for the customer,” said PMV’s vice-president of real estate Tom Corsi. Kruger considered a range of options to consolidate two Annacis Island warehouses: one 194,000 square feet, the other 110,000 square feet. 
 
The paper products manufacturer has been so pressed for space that it has used some at its New Westminster paper mill for storage and has had to store some products in third-party warehouses, said its broker, Cushman Wakefield senior vice-president of industrial properties Bob Stokes. “There were many options for how Kruger could get more space,” Stokes said, “but there weren’t that many options for a single building.” 

The Onni Group has land in Pitt Meadows that can accommodate a 500,000-square-foot building footprint, but Stokes said it was not considered because Kruger wanted its warehouse to be close to its decades-old paper mill in New Westminster. That mill has operated since the 1930s – long before Montreal-based Kruger bought Scott Paper Ltd. from U.S.-based Scott Paper Co. in 1997 and rebranded the subsidiary Kruger Products Ltd. Kruger considered building its new warehouse on PMV land that’s more than a kilometre east of the Beedie site and therefore closer to Kruger’s mill. 

However, executives decided that hiring Beedie to build t he structure on 20 acres of Beedieowned land was the best option. “Beedie is the best,” Stokes said. “They can build a building better, faster and less expensively than anyone.” Kruger’s future warehouse won’t be Metro Vancouver’s largest. That title belongs to the 685,000-squarefoot warehouse near the Braid Street SkyTrain station that Woodward’s built in the 1980s and is now used in part by Best Buy Canada. It has 95,000 square feet of available space. “Historically we had one-offs such as the Woodward’s warehouse, the Eaton’s warehouse or the Sears warehouse,” said CB Richard Ellis vice-president Gurch Ollek. “What we’ve seen more recently is the emergence of larger distribution centres that are more than 400,000 square feet.” Examples include: 

• Beedie competitor Hopewell Development Corp. building a 486,000-square-foot warehouse in East Richmond in 2008 for Containerworld Forwarding Services Inc. to store British Columbia Liquor Distribution Branch inventory; 
• Hopewell building a 480,000-square-foot warehouse nearby that now counts BMW Canada, Samsung Canada and AcklandsGrainger Inc. as tenants; 
 • Beedie building a 412,000-squarefoot warehouse for Home Depot in Delta in 2009; and
 • Beedie building a 450,000-squarefoot warehouse for Brewers Distributor Ltd. in 2009 in Port Coquitlam. Mid-sized companies are also thinking bigger. 

Historically, Metro Vancouver warehouses tended to be between 40,000 and 75,000 square feet. Ollek said they’re now usually between 75,000 and 150,000 square feet. The 124,000-square-foot warehouse that Caterpillar Logistics Services Inc. earlier this year contracted Beedie to build at Beedie’s Gloucester Industrial Estates in Langley is an example. 

Avison Young principal Rob Gritten believes the recent boom in warehouse construction marks the end to a lull that started during the 1990s when the New Democratic Party was in power and many companies chose to locate in Alberta. “In the last few years there have been several million square feet built in the 400,000-square-foot size range alone,” Gritten said. “That’s really unusual for our market. We haven’t seen that before.”