Amazon Effect is a factor behind potential job losses at Burnaby tile maker

Yesterday, Global B.C. reporter Aaron McArthur covered the sad story of a Burnaby business that's in jeopardy because of rising land values.

Interstyle Ceramic and Glass faces a $400,000 increase in its property taxes because of a 250 percent hike in the assessment of its site at Brighton Avenue and Winston Street.

McArthur's story noted that the sale of a Saputo plant several blocks away has caused land values to rise sharply.

As a result, 125 people at the tile factory could lose their jobs.

Interstyle was founded in 1977 by Ernesto and Georgia Hauner, and the local company takes pride in using 100 percent recyclable glass obtained from domestic materials.

But there's a bigger issue lurking behind this story—and one that should concern factory workers across the region.

And that's the impact of e-commerce giants, most notably Amazon, on the industrial land market in this region.

"Metro Vancouver has gone through 22 consecutive quarters of positive net absorption," says CBRE in its third-quarter report on industrial land in the region. "Over that period, nearly 22 million sq. ft has been absorbed, while just over 16 million sq. ft. of new supply has been delivered."

That's what's ultimately behind the absurd increase in property taxes that Interstyle is facing.

"Burnaby continues to feel increased pressure from tenants looking to escape the comparably high average leasing rates of the Vancouver core, but maintain a central presence in the overall market," the CBRE report states.

So what was the largest leasing deal in the region in the third quarter? Amazon, of course.

The Seattle-based corporation inked an agreement for 453,650 square feet of space for a distribution centre at 4189 Salish Way on Tsawwassen First Nation land.

This was for Amazon's third "fulfillment centre" in Metro Vancouver. It's in Delta iPort adjacent to Roberts Bank Superport.

The next biggest deal in the region was BMW Canada taking up 281,650 square feet at 7676 Beedie Way in Delta for a training and distribution centre.

CBRE's Jason Kiselbach told the Financial Post last year that "new retail is really direct warehouse sales".

Metro Vancouver is aware of potential crisis

All of this has raised fears that the region could soon run out of new leasing opportunities on industrial land, pushing out other companies that require industrial land.

According to Metro Vancouver, about 23 percent of the region's jobs—275,000 positions—are located on industrial land.

Last June, a report on this subject was presented to the regional district by UBC professors Tom Hutton and Trevor Barnes, looking at the history, management, and economic importance of industrial land around the world.

The two academics paid particular attention to the experiences in Seattle and San Francisco, which have become world hubs for high-tech jobs.

They also examined the impact of containerization, just-in-time delivery, the rise in air transportation, and the evolution of inner-city districts (like Yaletown) that used to be centres of industrial activity.

"In sum, from the experiences of Seattle and San Francisco, cities and regional governments must be patient," Hutton and Barnes wrote. "Innovation economies are often turbulent, characterised by frequent change involving growth, contraction and new phases of development. Those governments also need to be far-sighted in the provision of space for the 'next generation' of industrial innovation."

In their conclusions, Hutton and Barnes stated that it was "critical to retain and to manage the region's industrial land supply" in order to maintain a prosperous and growing region.

"Determining the exact amount and locations of industrial land for Metro Vancouver's innovation economy is challenging given the frequent episodes of restructuring within that sector in terms of technologies, labour and outputs," they wrote. "Nevertheless, a successful calculation here has the potential to yield large payoffs."

Some cynics, however, might question if the region's industrial land prices are going to be so distorted by Amazon and other e-commerce players that those working in other industries will see their employers driven out of the region.

That's to say nothing of Amazon's impact on bustling retail districts Metro Vancouver.

"Amazon, and e-commerce more generally, is also disrupting the labor market," CNN reported in a series last year. "Brick and mortar retail jobs are quickly falling behind other employment growth for the rest of the economy.

"And it's not yet clear whether all the warehouse pickers and delivery drivers Amazon is hiring to support its ever-growing shipping commitments will totally close that gap—especially as Amazon perfects fulfillment center robots and delivery drones in order to reduce its personnel needs in the future."

Metro Vancouver has an industrial lands strategy task force, which is chaired by Delta mayor George Harvie. It also includes Tsawwassen First Nations chief Bryce Williams. Both their communities are the sites of Amazon fulfillment centres.

Williams, of course, welcomed Amazon to the Tsawwassen First Nation's land when the announcement was made last year.

"The investments we’ve made in infrastructure, and the industrial and commercial projects that we’re moving forward, are creating opportunity and contributing to our community’s long-term economic sustainability," he said.

Other members of the task force are Port Coquitlam mayor Brad West, North Vancouver District councillor Jordan Back, Richmond mayor Malcolm Brodie, City of North Vancouver mayor Linda Buchanan, Vancouver councillor Sarah Kirby-Yung, and Surrey councillor Brenda Locke. 

Various organizations—including TransLink, the Urban Development Institute, Port of Vancouver, Beedie Group, and the Agricultural Land Commission—have representatives who are nonvoting members.

To date, none of the voting members with the exception of Brodie has said much publicly about e-commerce—and even he has not talked about Amazon's impact on the availability of industrial land in the region. Perhaps this will change in 2019.