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Vancouver tech companies worried about zoning changes

Cargo port in Vancouver Canada

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Business owners in an increasingly expensive industrial area of Vancouver are fighting a city proposal that they say will destroy its long-established status as a hub for tech and graphic design.

For the last couple of decades, tech companies, architects, and other design businesses that gravitate toward old, character industrial buildings have moved into the portside area known as Railtown and flourished. The community is strong, the neighbours know each other, and some have been so successful they've had to move out of the area in search of a bigger space.

Software startup Spot Solutions has leased space at 435 Railway Street since 2001. Today, the company employs 15 people.

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"Back then, it was still very Downtown Eastside, with drug deals and tricks being turned in the dumpsters in the alleys," says founder and president Cy Naumenko. "Over the past 16 years, it's really turned into this vibrant tech and design community."

Railtown used to be inexpensive, but speculators have since discovered the area. In 2016, the total value of all 58 lots in the neighbourhood was assessed at $200-million. By 2017, their total value was $467.8-million, according to data provided by Andy Yan, director of Simon Fraser University's City Program. The result is soaring lease rates and property taxes that are concerning local small businesses.

The area has also attracted city hall's attention. Planners are proposing a push to increase the amount of industrial start-ups making products locally, and restrict the area's office-type businesses, such as software developers, architects, interior designers, marketers and graphic designers. A public hearing was held in January, and council will make a decision on the zoning on March 28.

The city's definition of creative manufacturing includes industries that design and create clothing, furniture, appliances, leather, machinery, car parts and wood products. As well, it's allowing film processing, woodworking, dance, live music, ceramics, pottery and sculpture.

The planning department says it is aiming to protect the industrial zone by restricting building heights, limiting retail, and limiting office space up to 25 per cent of floor space. It's also offering incentives to protect pre-1951 buildings in the area.

About 15 Railtown business people have organized as an informal group and met with city planners. Staff told them that non-conforming businesses would not be pushed out, so that's not the big worry, says Mr. Naumenko. Instead, he worries that their thriving community will die off "by attrition." New startups won't be allowed in, and others won't be able to expand.

He also questions the rationale for the zoning change, arguing that many of the allowable manufacturing categories also involve sitting in a chair at a desk, and the actual manufacturing of products is often done elsewhere.

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"We are basically making up stories in order to meet some ridiculous definition in some bureaucrat's rulebook that is completely disconnected from the real world, and it really bothers me," he says. "What the city is doing is massively out of sync with what's going on down here."

The city recently approved new zoning for Mount Pleasant – another traditional industrial zone in the centre of the city– that will broadly open the doors to the tech industry. Ryan Holmes, owner of social media success story Hootsuite, partnered with developer Ian Gillespie to develop a block in Mount Pleasant's industrial zone. The city has approved rezoning of specific blocks between 2nd and 6th Avenues, east from Quebec Street, for higher density (including the one owned by Mr. Holmes and Mr. Gillespie). The city's goal is to drive digital technology to the area.

The Railtown businesses argue that it doesn't make sense that the city would push established tech companies out of one industrial area yet do the opposite in another. "That's the question on a lot of people's minds. Why push tech out of Railtown and into Mount Pleasant?" says Steve Fast, a Railtown landowner, broker and developer.

Josh Dunford, owner of a design company, has worked in the area for the last 16 years.

"It feels like it comes down to who's got bigger pull politically, rather than decisions that actually make sense," he says.

Peter Hall, professor of urban studies at Simon Fraser University, believes that non-industrial businesses are partly to blame for increased land prices in industrial areas, such as Railtown.

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"Land values are partly reflecting those non-conforming, non-industrial uses, because that's what [speculators] base the value on. It's speculation in anticipation of what might happen," he says, referring to the expectation that zoning could be changed to allow residential if the area moves further away from industrial.

"This is an attempt by the city to maintain and actually to give away some things to protect some old buildings, to protect an industrial area. ... Tech office zoning would do as much, and likely more, to open the door to residential."

Dr. Hall doesn't dispute that it will become harder for the tech industry to continue to do business in the area if the zoning passes.

"Part of the function of these areas is they are incubators for small firms that should move to different locations once they start to outgrow their startup phase," he says. "So, I'm not terribly sympathetic to the tech industry on this one."

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About the Author
Real estate writer

Kerry Gold is a born and bred Vancouverite, and knows her city well. More

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