Commercial & Industrial Lands Analysis Prepared for the City of Pitt Meadows

1. Commercial & Industrial Lands Analysis Prepared for the City of Pitt Meadows Prepared by G.P. Rollo & Associates

2. Introduction • G.P. Rollo & Associates (GPRA) have completed two analyses for Pitt Meadows in the last year – a Commercial Lands Analysis and an Industrial Lands Analysis. • Although the two analyses are combined in a single report and a single presentation, in reality this work represents two assignments conceived, designed, and carried out separately.

3. Introduction • Pitt Meadows Commercial Lands Analysis • Designed in 2017 and carried out in 2018 • Focused on retail and service commercial space (or just “retail” for short). Includes: • An inventory of all retail space that existed in 2018 • Profiles of each existing commercial area in the City • A forecast of future demand by area and year.

4. Introduction • Pitt Meadows Industrial Lands Analysis • A 2019 update of a 2013 report by GPRA. • Focused on office and industrial space. Includes: • An industrial demand forecast based on Metro Vancouver population and employment projections • A forecast based on real market data and interviews with local stakeholders. This forecast is much more realistic. • A forecast of the tax implications of industrial development at Golden Ears Business Park Phases 3 & 4 and the North Lougheed Lands as well as tax implications of not developing these lands.

5. Introduction • What is the difference between retail and industrial space? • Basically, retail space is designed primarily to be visited by customers but the goods and services are not usually made/prepared there. Things are sold in retail space but usually not made. • Industrial space is designed for use by industry. Things are made there but not necessarily sold. Logistical operations and storage fall into this umbrella as well. • Business park has attributes of both types – it is sometimes home to retail businesses but can also accommodate light industrial operations such as storage, distribution, and manufacturing. • In such cases, GPRA finds it easiest to look at a how a particular business park is actually used and classify the space on that basis. Golden Ears Business Park, for instance, has a lot of light industrial and office uses and relatively fewer retail uses, so these analyses treat this space as industrial.

6. Commercial Lands Analysis The first step was to personally inventory all of the retail space in Pitt Meadows by category and location. In doing so, I identified the four commercial areas shown here: • Golden Ears Way • Harris Road North • Harris Road South • Osprey Village

7. Commercial Lands Analysis All units are m2:

8. Commercial Lands Analysis • Pitt Meadows’ retail and service commercial market offers a wide variety of goods and services with few gaps. • The market’s extremely low vacancy rate of 2% indicates that retail and service commercial space is not currently over-supplied. • At the same time, stakeholders report that in many parts of the City rent is almost too high for the existing tenant community, and realtors typically have a hard time filling space quickly. • This indicates that retail and service commercial space is not currently under-supplied. • The combination of these factors suggests that at present Pitt Meadows’ retail and service commercial market is balanced, with just about the right amount of space overall. • Within this overall state of balance, however, some commercial areas are slightly over-supplied while others are slightly under-supplied.

9. Commercial Lands Analysis • The Golden Ears Way commercial area mostly consists of Meadowtown Shopping Centre and the West Coast Auto Mall • This is a regional shopping destination drawing customers from across Pitt Meadows, Maprle Ridge, and even Langley, and tenants report that business is good.

10. Commercial Lands Analysis • The remaining 46% of the City’s retail is mostly located near Harris Road and in Osprey Village. These are neighbourhood-serving commercial areas drawing customers mostly from Pitt Meadows. • Stakeholders associated with these areas report that Pitt Meadows is a saturated market, and that businesses here enjoy little drive-by traffic and a small catchment hemmed in by well-developed commercial areas in Maple Ridge, Coquitlam, and Langley. • The prospect for new retail centres in most of Pitt Meadows is seriously limited by the fact that all national grocery chains already have locations within a five-minute drive of the City. • Still, there is potential for slow and steady growth as Pitt Meadows’ population grows.

11. Commercial Lands Analysis • Of the four commercial areas, the most challenged one – with the highest vacancy rate and the highest rate of retail space used by non-retail uses – is Harris Road South. • Not only is its customer base limited to local residents, but more than the other areas it is constrained by the rail line which is a barrier to traffic. • It has a hard time competing with the newer and more accessible commercial areas to all sides. • Policy approaches that may help this area including focusing on increasing residential density in the area to increase the customer base, as well as completing the rail underpass to improve traffic.

12. Commercial Lands Analysis • Our next task was to forecast demand for new space. This required us to understand: • Each commercial area’s trade area, which is the region from which it draws customers. • Each trade area’s population and how it is expected to change over time • Each trade area’s income and how it is expected to change over time • Each commercial area’s “capture rate” of each trade area’s spending in each of about 30 retail categories • Each retail category’s “floor space performance” – annual sales per ft2 of floor area, and how it is expected to change over time.

13. Commercial Lands Analysis For example: I can comment on methodology at more length if requested.

14. Commercial Lands Analysis • Combining these forecasts produces a forecast of supportable new space by type and location. What does this mean? • This is the space that could be comfortably leased in a given year. • If these numbers are not met, rents will tend to rise and certain categories will have trouble finding space. • If these numbers are exceeded, rents will tend to drop and older spaces will tend to sit empty. • In general, it is better to fall short of these numbers than to exceed them.

15. Commercial Lands Analysis

16. Commercial Lands Analysis • Golden Ears Way • Nearly built out. We forecast demand for 4,500 m2 (48,400 ft2) by 2041, but that is an increase of less than 9%. • Overbuilt in the grocery category but underbuilt in the liquor store and pharmacy categories. • With the advent of online shopping, expect less comparison retail, but other categories will grow to fill that space.

17. Commercial Lands Analysis • Harris Road North • Considerably more growth: 8,350 m2 (89,900 ft2) by 2041, (more than 35% growth). • Continuous growth for the whole duration. • No new grocery store until 2025. No new gas station (or future equivalent) until 2031.

18. Commercial Lands Analysis • Harris Road South • 3,050 m2 (32,800 ft2) of new growth by 2041, 100 – 400 m2in most categories. • Slow and steady growth, particularly slow at first. • More important to replace and/or fill old and vacant space that to build new space.

19. Commercial Lands Analysis • Osprey Village • No new space until about 2026. • It will continue to specialize in the categories it currently specializes in such as services, food & beverage, etc. • 950 m2 (10,200 ft2) by 2041.

20. Commercial Lands Analysis • Impact of industrial development on retail market: • Some retail and services can operate in business park space. • Consequently, business parks tend to ease the demand for new street front retail space. • In some areas this may be helpful (Harris Road North) whereas in others it may be detrimental (Harris Road South).

21. Industrial Lands Analysis That is the retail study. Now for the industrial study.

22. Industrial Lands Analysis • This study applies two different approaches to forecasting the demand for industrial space: • An approach based on Metro Vancouver’s population and employment projections. • An approach based on market data.

23. Industrial Lands Analysis Population: Pitt Meadows’ population has grown slightly faster than the region.

24. Industrial Lands Analysis Employment: Pitt Meadows’ employment has grown twice as fast as the region.

25. Industrial Lands Analysis • Some regional industrial trends: • As of 2015, the Metro Vancouver region had 11,331 ha of industrial lands, of which 80% (9,071 ha) were developed and 20% (2,261 ha) were vacant. Most of the lands in the 2015 Inventory were located in municipalities in the southern and eastern parts of the region: 23% in Surrey, 16% in Richmond, and 14% in Delta / Tsawwassen First Nation • Particularly in some parts of the region such as Vancouver and the North Shore, high demand for residential development has created significant pressure for conversion of industrial and commercial lands to residential and mixed-use lands. From 2010 to 2015, there was a net reduction of 350 ha of industrial lands • A notable amount of industrial land is used for non-industrial purposes, largely through mixed-use development that combines industrial, retail, office, and other commercial uses • Demand for industrial space – and the rental rates and prices of that space – in the region’s outlying areas such as Pitt Meadows and Langley has increased substantially in the last decade as industrial businesses and jobs are forced out of more central areas by market forces

26. Industrial Lands Analysis • Some regional industrial trends: • Intensification potential is limited on lands that are fully utilized; 93% of lands classified as “General Industrial” – which make up nearly half (47%) of the 2015 industrial lands inventory – are “fully utilized” • Over the 2010 – 2015 period, net industrial land absorption in the region was 75 ha per year, so vacant supply might be substantially absorbed by the 2030s • There are few available large sites for ‘trade-enabling’ logistics uses in the region. In particular, the region lacks large sites close to transportation infrastructure that would allow for efficient day trips • Given the overall lack of industrial land, relatively low interest rates, continually rising lease rates, and a general desire on the part of industrial occupants to build equity, strata developments have become very popular, often representing the highest and best use of development sites.

27. Industrial Lands Analysis • Employment by sector: • Pitt Meadows has a lot more employment in the primary sector (6% versus 1%), presumably due to its prominent agricultural industry • A lower share of social institutional employment (14% versus 22%), presumably because the City contains no hospitals or post-secondary institutions • A higher share of industrial employment (33% versus 24%), in part because industrial operations have relocated from places like Vancouver and the North Shore to places like Golden Ears Business Park • A slightly lower share of commercial services (46% versus 52%) because Pitt Meadows lacks a central office district.

28. Industrial Lands Analysis Pitt Meadows Metro Vancouver

29. Industrial Lands Analysis Metro Vancouver sent us a projection of employment by sector from now until 2050 (we extended it slightly to 2051):

30. Industrial Lands Analysis Using standard assumptions about office space, light industrial space, and retail space usage by sector and per employee produces the following forecast: Altogether that is less than 1 million ft2 in non-residential development by 2051. In light of recent growth trends (most importantly Golden Ears Business Park), this is very slow growth. Which is where the other forecasting methodology comes in.

31. Industrial Lands Analysis By comparison, look at real growth in Maple Ridge and Pitt Meadows:

32. Industrial Lands Analysis By comparison, look at real growth in Maple Ridge and Pitt Meadows:

33. Industrial Lands Analysis By comparison, look at real growth in Maple Ridge and Pitt Meadows:

34. Industrial Lands Analysis • This rapid growth and low vacancy is explained by trends at the regional level. • Land scarcity and housing scarcity has led to conversions away from industrial land use towards residential and mixed use development. • This in turn has caused industrial land scarcity throughout the region. • In short, Pitt Meadows is a desirable location for this kind of development. It is fairly central. So, due to availability at Golden Ears Business Park, Pitt Meadows has captured a sizeable share of the region’s recent industrial growth • The scarcity issues that caused this to occur are not going anywhere, so intuitively the high demand for industrial space in Pitt Meadows is not expected to diminish any time soon.

35. Industrial Lands Analysis From this market evidence as well as conversations with realtors and developers, we think the market can continue to absorb at least 250,000 ft2 of light industrial space every year for the foreseeable future. So based on a few simple assumptions about land usage in each of three sites, Pitt Meadows would have 14 years of industrial land supply (enough to last until 2032):

36. Question period Any questions?

37. Supplementary slides

38. Supplementary slides