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Posted Jul 8, 2009, 7:48 PM
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BANNED
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Join Date: Jun 2005
Location: lodged against an abutment
Posts: 7,556
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Quote:
Port Metro Vancouver steams ahead
Peter Mitham
Vancouver — From Tuesday's Globe and Mail Last updated on Wednesday, Jul. 08, 2009 10:06AM EDT
Container shipments from Asia are sagging as North America's consumers retrench, but in the Vancouver suburb of Delta plans are afoot for a $4.25-billion expansion of port capacity that will ensure the region's status as one of the West Coast's premier Pacific gateways.
The anticipated increase in container capacity promises to create opportunities for owners and developers of industrial land.
“Owners of industrial property are in a very good position these days,” said Tom Winkler, chief strategic development officer for Port Metro Vancouver, the entity formed in January, 2008, with the amalgamation of the Fraser River, North Fraser and Vancouver port authorities.
Port Metro Vancouver's facilities anchor the region's industrial landscape, from Delta in the south to North Vancouver and east to New Westminster and Port Moody. Owners of warehousing and logistics space, where imports are received for distribution locally and across the country, stand to be among the beneficiaries when the port completes a major expansion of the Deltaport container terminal later this year, boosting the terminal's capacity to 1.8 million TEUs (20-foot equivalent units, the standard measurement of container volumes).
Port Metro Vancouver is also planning a new, $2-billion container terminal adjacent to Deltaport to complement the existing terminal, doubling capacity and requiring upward of 250 acres for container storage and handling.
It all sounds a tad ambitious these days, given that the port handled just 114.6 million tonnes of cargo last year, down 10 per cent from 2007. The port forecasts an additional 10- to 15-per-cent drop in cargo volumes this year.
But the setback is widely regarded as temporary, with the port forecasting growth of 3.5 to 4.5 per cent a year between 2010 and 2013. The healthiest segment of the port's business – and also the one the port has been most eager to expand – is container traffic. Representing approximately a sixth of all cargo traffic, container volumes totalled 20.5 million tonnes in 2008, just 3 per cent less than in 2007.
Since up to 45 per cent of containers arriving in Vancouver are reorganized and distributed locally (the rest flows through the region to other parts of the continent), any increase spells good news for owners of industrial property.
“That's what creates demand for industrial land,” Mr. Winkler said.
It's a welcome change from recent years. On the one hand, industrial growth was hemmed in by the province's 36-year-old Agricultural Land Reserve that limits development. On the other, rising land values saw many industrial sites rezoned for more lucrative types of development. The region lost hundreds of acres of industrial land to home builders during the province's recent real estate boom, many of them in prime waterfront locations.
The competition for sites won't stop, Mr. Winkler said, but port expansion is renewing interest in industrial opportunities among developers.
But securing enough industrial land to serve future needs is going to be a challenge, he said. The port itself needs approximately 50 acres adjacent to the third berth currently under construction at Deltaport, and 250 acres to handle container shipments as part of the new container terminal. Regionally, a study for the province last year found that 2,700 acres of land are required to support port capacity over the next 20 to 25 years. These sites have to be large enough to handle traffic volumes, have adequate servicing and be close to transportation infrastructure – both highways and airports.
There's just one hitch.
“There's probably only approximately 600 acres of suitable industrial land,” Mr. Winkler said. To protect its interests, the port has started buying up available properties. It recently closed a $47.5-million deal for a 56-acre parcel on the Fraser River in New Westminster that was previously home to a Canfor Corp. fibre and panel mill. It will be leased to a construction company pending development for port uses. It has also secured a 50-acre mill site with a kilometre of river frontage from International Forest Products Ltd. for $30.1-million.
Buying now is a wise strategy for the port, as Mr. Winkler believes the port's demand for land will “create additional price pressures” over the long term. Rising prices are difficult to imagine in the current market, however. Metro Vancouver industrial properties are seeing slack demand and price declines after surging to more than $1-million an acre in some locales.
Meanwhile, the Vancouver office of CB Richard Ellis reports that 1.2 million square feet of industrial space returned to the market in the first quarter of 2009 – the single biggest quarterly return of space in the 11 years CB Richard Ellis has been tracking the local industrial market. While vacancies sit at 3.3 per cent, the actual proportion of space available for sale or lease is a much-higher 5.9 per cent.
The shift in fortunes has local brokers such as Ron Emerson, president of the Emerson Real Estate Group Inc. in Vancouver, less optimistic about the market's prospects in the short to medium term.
“I think the demand factor has really dropped off. And it's probably going to stay that way for the next little while,” Mr. Emerson said. “Our market won't collapse completely, but it's going to get very difficult for a minimum of 12 months, I think.” Development at the port will be a driver of opportunities when the market rebounds, but the short-term troubles highlight how much of the port's fortunes – and in turn, those of local industrial properties – are dependent on macroeconomic trends.
When demand does pick up, however, the movement of goods through the port will restore demand for sites.
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http://www.theglobeandmail.com/real-...rticle1208272/
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