Planning a real estate development project in the Metro Vancouver region is a uniquely challenging undertaking not only from our natural and man-made restrictions (think ALR, mountains, water, transportation network) but also due to the fact that no fewer than 20 jurisdictions hold sway over development processing and approvals in this relatively compact area. To provide our members with some consistent information that they could utilize to assist them in making global decisions on where to deploy their capital and resources, NAIOP developed a survey in the year 2000 that was sent to all of the municipalities in what was then the GVRD (the survey initially didn't go to Abbotsford, Chilliwack and Mission which were not part of the GVRD at that time). The Survey required each municipality to identify the costs and processing times associated with the parameters of a mock development project which was the rezoning and subdivision of a 2.5 acre parcel of land on which a 2 storey, 50,000 square foot office was to be built. The survey was published in May of that year and received positive feedback from both the development community and the cities as a useful publication. NAIOP followed up the survey in 2001 with an Industrial version for a 100,000 square foot distribution warehouse on 5.5 acres and has released alternating surveys up to the most recent issue in 2012 for the Office scenario.
In producing this annual publication, NAIOP strives to provide its membership and the business community as a whole with a reference tool that quantifies the costs and processing times associated with typical development projects within Metro Vancouver municipal jurisdictions. The Survey has also become a valuable tool for the municipalities, whose active participation makes this survey possible, as a gauge for their own development costs and approval processes.
Economic growth continues at a measured pace with the US fall elections approaching and the local office market appears to have taken a pause in the first half of the year by posting roughly 100,000 square feet of negative absorption with a vacancy rate of 7.5%.
The pause may be well justified as the market awaits what is sure to be an active period for the City's local brokerage and interior design community, with the introduction of a combined 1.0 million square feet of new product scheduled for completion in the downtown core by 2014. Suburban markets continue to struggle with the five key local submarkets experiencing vacancy rates of 10% to over 19%.
In 2000 when the Office Survey was started, the vacancy rate was roughly 9% and in 2002 roughly 1.0 million in new product was brought into the market. By late 2002, the vacancy rate shot up to 14% and it was 3 years before it again dipped below the 10% mark. According to the participants at our recent Investment breakfast held at October 18th at the Hyatt, the majority of this space is spoken for and the remainder is leasing well so it doesn't appear that we'll see history repeat itself.
NAIOP will be acknowledging the municipalities that have excelled in creating environments positive to business creation. The 3 categories of NAIOP Awards for Municipal Excellence, or NAME Awards are:
- Most Improved - The most improvement compared to previous survey results
- Most Fiscally Responsible - Cost increases kept in line with overall inflation
- Most Business Friendly - Implementation of policies to support the creation of new job spaces
The awards will be presented at the October 18th breakfast meeting.
This year's winners of the NAME Awards are:
- Most Improved (Joint award) - Port Moody and the City of Surrey - these cities recorded an overall drop in costs of 18% and 19% from the previous survey results in 2010
- Most Fiscally Responsible (Joint Award) - City of North Vancouver and West Vancouver - these cities have managed to limit cost increases to a rate that is below the average rate of inflation since the survey's inception in the year 2000
- Most Business Friendly - City of Chilliwack - In 2011 City Council established an Industrial Revitalization Tax Exemption program wherein Construction of new industrial buildings with a value of construction in excess of $1 million (or an alteration/addition of an existing industrial building with the same value), can qualify to save on industrial property taxes for five years with this new industrial incentive.
By the Numbers
Two municipalities managed to keep their cost increases below the rate of inflation over the 12 year period from 2000 to 2012.
Four municipalities had no cost increases since the last survey in 2010 and 7 municipalities reduced costs from 2% to just under 20% during this time period. This represents the best result in the survey's 12 year history.
Business to Residential Tax ratio's have remained relatively static since 2010 with roughly half of the municipalities meeting or exceeding the ideal ratio of 3 to 1.
Processing times appear to be on the increase with 6 municipalities experiencing increases in approval timing offset by a decrease in one municipality.
Read the full copy of the 2012 Municipal Report Card.
Blog contributed by:
Vice President Project Development