P3
POLICY REPORT
DEVELOPMENT AND BUILDING
Date: May 3, 1996
Dept. File: 95043-PEM
TO: Vancouver City Council
FROM: Director of Land Use & Development
SUBJECT: Wholesale Clubs in Industrial Districts
RECOMMENDATION
THAT an application by the Director of Land Use & Development to
amend the definitions of Furniture or Appliance Store, Grocery or
Drug Store, and Retail Store in Section 2 of the Zoning and
Development By-law to include retail or wholesale clubs, be
referred to a Public Hearing, together with draft By-law
provisions generally in accordance with Appendix A and the
recommendation of the Director of Land Use & Development to
approve the application;
AND FURTHER THAT the Director of Legal Services be instructed to
prepare the necessary By-law for consideration at Public Hearing.
GENERAL MANAGER'S COMMENTS
The General Manager of Community Services RECOMMENDS approval of
the foregoing.
COUNCIL POLICY
Industrial Lands Strategy: On March 14, 1995 Council adopted a policy
framework to guide future decisions on industrial land. The objective
of the Strategy is to "retain most of the City's existing industrial
land base for industry and service businesses to meet the needs of
port/river related industry, and city-serving and city-oriented
industries."
Implementation of the strategy will involve an update of the industrial
zoning district schedules. Staff will soon report back on proposed
amendments to the Zoning and Development By-law.
CityPlan Directions: On June 6, 1995 Council adopted a broad vision
for Vancouver to guide City policy decisions, work priorities, budgets,
and capital plans. CityPlan directions for neighbourhoods include the
creation and strengthening of neighbourhood centres in all
neighbourhoods as places where people can find shops, jobs, and
services close to home.
CityPlan directions also include a commitment "to make sure decisions
about increasing retail space in the city support the creation of
neighbourhood centres, strengthen the downtown, and protect industrial
land". (page 30)
PURPOSES AND SUMMARY
This report recommends amendments to the Zoning and Development By-law
to clarify that "wholesale club", "warehouse store", "discount
warehouse" and "factory outlet" are Retail Uses. An amendment is also
proposed to make retailing which is ancillary to a Wholesale Use in
industrial districts a conditional approval use and subject to a
development permit requirement.
Wholesaling and retailing are increasingly undertaken within the same
business premises with no distinction between them, i.e., selling to
both other businesses and institutions as well as to households and
individuals. This gradual change has made the Zoning and Development
By-law's differentiation between Wholesale and Retail Uses a difficult
one to ascertain and enforce. This difficulty is exacerbated in the
case of wholesale clubs, warehouse stores, discount warehouses, and
factory outlets which claim to be Industrial Uses when they are Retail
Uses in everything but name.
Staff therefore recommend amendments to the Zoning and Development
By-law to prevent any further subverting of the intent of the By-law
and the objectives of the Industrial Lands Strategy.
BACKGROUND
Proposed Costco Outlet: On June 22, 1995, Council approved an overview
planning process for the False Creek Flats. During the subsequent
preparation of a preliminary concept plan for the Flats, staff received
inquiries about a proposal to locate a "wholesale club" in this area.
It was subsequently confirmed that Costco has obtained a large site,
38.4 hectares (9.5 acres) in size and comprised of three contiguous
lots, at 1660 Station Street and 455 Industrial Avenue (see map on the
next page).
In discussion with Costco representatives, staff advised that any
Retail Use exceeding 1 000 m2 (10,764 sq. ft.), including ancillary
retailing, cannot be approved under M-2 zoning, and that a rezoning
would be necessary. Staff further advised that a decision on any
rezoning application in the Flats would not be made until overview land
use and transportation planning was completed. In their last
conversation with staff, Costco representatives indicated they would
likely submit a development application for Wholesaling.
There are presently three Costco locations in Greater Vancouver:
Burnaby (3550 Brighton), Richmond (9151 Bridgeport), and Surrey (7423
King George Highway). Costco has also purchased Price Club, a
"wholesale club" at 3585 Grandview Highway.
Existing Price Club Outlet: Since 1987, three wholesale clubs in
succession have occupied the 11 334 m2 (122,000 sq. ft.) building on a
29 092 m2 (7.2 acres) site at 3505-3585 Grandview Highway. A
development application (DA205490) was submitted in February, 1987 on
behalf of Titan Wholesale Club, to alter and change the use of an
existing building to accommodate a "general-merchandise wholesale
club". Outright approval was sought under M-2 zoning for Wholesale use
with Accessory Retail use, but it was proposed to combine storage and
display space, and wholesaling and retailing, within the same floor
area without any separation between them.
The proponents described the proposed business as selling goods for
resale (i.e., to smaller stores), business use (e.g., restaurants and
hotels), and personal or household use. It was also stated that
customers must hold a membership, either as "business members", or
"group members" which belong to qualifying associations, groups, or
companies. The proponents stated that in their experience to date, in
Ontario, about 80 percent of sales were to wholesale customers. They
acknowledged that retail customers made far more than 20 percent of the
visits, since their retail purchases were significantly smaller than
wholesale purchases.
In April, 1987 Planning staff sought Council's advice on "large-scale
retail uses" in industrial districts. They recommended that this
application be refused because the proposed hybrid retail/ wholesale
premises, with most of the floor area accessible to the general public,
was potentially a Retail Store in both perception and operation. With
no distincdtion between retail and wholesale floor area in the plans
and on the premises, staff would be unable to enforce By-law limits on
the amount of retail floor area.
Given this potential to be predominantly retail, and also the very
general membership qualifying criteria, staff concluded that the
proposed use was similar to retail. Council approved the staff
recommendation, and also requested a By-law amendment for restricting
the size of retail premises in industrial districts.
The development application was subsequently refused, but this decision
was appealed at the Board of Variance and overturned. The Board
allowed the proposed use for a period of 10 years (up to May 1, 1997).
Titan Wholesale Club was subsequently replaced by the Canadian
Wholesale Club, and then Price Club (which was subsequently purchased
by Costco).
The succession of businesses confirms a staff observation to Council in
1987 that while Titan might be able to claim, and demonstrate, that 80
percent of revenue is from wholesaling, a possibility always remains
that the premises could be acquired by a different business which
operates with a different ratio, a ratio over which the City has no
control.
Zoning By-law Amendments: Following the experience with Titan
Wholesale Club, in August, 1987 City Council approved By-law amendments
to industrial district schedules to limit the size of all retail floor
area on any site to 10,000 sq. ft. This was subsequently amended to
1 000 m2 (10,764 sq. ft.).
Following some additional experience with furniture stores in
industrial districts which, like wholesale clubs, also blurred the
distinction between retail and wholesale floor areas, and between
showroom and storage areas, in June, 1989 Council approved further
By-law amendments, requiring that any floor area in accessory uses
accessible to the general public be separated by a wall from floor area
in other uses.
DISCUSSION
1. City Concerns about Large-Scale or "Big-Box" Retail
Staff advise inquirers proposing large-scale or "big-box" retail
development of the following City concerns about such stores:
- conflict with CityPlan directions to create neighbourhood centres;
- the large sites required, representing a significant loss of
industrial land;
- the large amounts of traffic generated and parking supplied;
- increases in industrial land values beyond the ability of industry
to purchase; and
- impacts on existing stores and shopping districts.
Given these significant potential impacts, any large-scale retail
development proposed in an industrial district should be evaluated
through the rezoning process, and according to criteria established in
Council policy for large-scale retail uses, and other pertinent
policies (e.g., Clouds of Change Task Force Recommendations).
Since Council approved the rezoning of two M-2 sites for home
improvement centres in October, 1994 (Home Depot at 900 Terminal Avenue
and Eagle Hardware & Garden at 2750 Slocan Street), some inquirers have
questioned the City's intent to discourage "big-box" retail. On these
occasions, it has been helpful for staff to recall that at Public
Hearing, some Councillors saw home improvement centres as acceptable in
industrial districts because they would sell primarily building
materials and supplies that have traditionally been sold in industrial
areas. By contrast, grocery superstores and other "big-box" retailers
located outside of neighbourhood-serving commercial centres, where
grocery stores and other retailers are normally found, would have many
impacts.
2. Proposed "Wholesale Club"
Given the comments made to Planning staff by Costco representatives
about a proposed wholesale outlet in the False Creek Flats, staff fear
that the rezoning process will be avoided for a new Costco store and
that a development application will be submitted instead.
If a proposed wholesaling development in an M-1 or M-2 district is to
include some ancillary retailing, it would be an outright approval use
and would have to be approved only if two requirements are met:
- the floor area of all accessory uses, if any, including both
ancillary retailing and ancillary offices, cannot exceed 33
percent of total floor area; and
- accessory retail space, if any is provided, must be separated by a
wall from floor area in wholesaling use so that only the retail
floor area is accessible to the general public.
All other applicable regulations would also have to be met, the most
significant of these being the limitation in industrial districts on
floor area in Retail Use. Retail floor area, including accessory
retailing, cannot exceed 1 000 m2 (10,764 sq. ft.) on any site and any
development application which sought more than this would not be
considered, or would be refused.
Based on these By-law provisions, an application for Wholesaling -
Class A, or B, which proposed to combine storage and display space
within the same floor area without separating them, or which sought
more than a third of the floor area in accessory use, would be a
conditional approval use, and could be refused. Indeed, such premises,
which give both wholesale and retail customers access to the entire
floor area, whether called "wholesale club" or not, would very likely
be refused. (NOTE: Wholesaling - Class A refers to premises where
goods are sold in bulk and storage area exceeds showroom area, while
Wholesaling - Class B refers to premises where showroom area exceeds
storage area. See definitions for these and related use terms in
Appendix B.)
Given the foregoing, it can be speculated that a development
application on behalf of Costco would be just for Wholesaling, i.e., to
construct or renovate a building for Wholesaling - Class A, or B, with
no ancillary retailing. Proposing an outright approval use, the
application would have to be approved and a permit issued, if all
applicable regulations were met. (NOTE: Given the popular perceptions
of Costco stores, the applicant could be asked to describe how and why
this particular proposed development will be different from other
Costco locations, particularly if the amount of parking proposed
significantly exceeds the number of spaces required for a Wholesaling
use.)
If a development permit is issued for its Wholesaling premises, Costco
might later seek to obtain Retail Dealer and Retail Dealer - Food
business licenses, in addition to a Wholesale Dealer license. It might
claim that it had changed the use of part of its premises to ancillary
retail, with no development permit being needed for this change of use,
(according to Section 5.14 of the Zoning and Development By-law).
Whether or not a retail business license is obtained, property use
inspections of Costco premises might observe a significant amount of
retailing. By-law enforcement would then be necessary and would
revolve around the matter of whether retailing was confined to a floor
area not exceeding 33 percent of total floor area, or 1 000 m2, which
ever is smallest, and also whether and how this floor area is separated
from wholesaling area not accessible to the general public. The use of
portable walls and partial walls could frustrate the inspection and
monitoring activities of Permits and Licenses staff and make By-law
enforcement infeasible.
3. Proposed By-law Amendments
The scenario described above, admittedly speculative insofar as Costco
actions are concerned, could lead to "de facto" big-box retailing in
the False Creek Flats. However, in the context of City concerns and
policies about large-scale retail uses, it is not in the public
interest to allow a "wholesale club" to become established in this
manner in any industrial area.
Staff therefore recommend some Zoning and Development By-law amendments
to discourage inappropriate development applications and facilitate
By-law enforcement (see more detailed draft amendments in Appendix A):
(a) Amend the industrial schedules so that ancillary retailing in
conjunction with wholesaling would be permitted as a conditional
approval use only.
Wholesaling and retailing are increasingly undertaken within the same
business premises with no separation or distinction between them, i.e.,
selling to both other businesses or institutions as well as to
households and individuals. It is a hybrid format which is not unique to wholesale clubs (e.g., office supplies). There has concurrently
been a trend to combine display/showroom and storage within the same
floor area, which again is not unique to wholesale clubs (e.g., Ikea
and Staples).
These trends raise a problem in industrial districts because By-law
limits on the amount of retail floor area cannot be enforced in hybrid
retail/wholesale premises which do not have a separate area for
retailing. As staff indicated in 1987 when they reported to Council on
the first proposed wholesale club in the city, there is a potential for
these premises to be or become predominantly retail, contrary to the
intent of industrial districts, objectives of the Industrial Lands
Strategy, and CityPlan directions. (NOTE: This problem does not arise
in the C-2, C-2B, C-3A, HA, DD and other districts which permit both
Retail and Wholesale uses.)
The proposed amendment would require a development permit application
in industrial districts for ancillary retailing in new development and
or in a change of use in existing premises. Such an application could
be refused if the plans did not show a separate area for ancillary
retailing. (NOTE: A more restrictive provision in the I-1 district
schedule permits ancillary retailing only with manufacturing.)
(b) Amend the definitions of Furniture or Appliance Store, Grocery or
Drug Store, and Retail Store to include "any retail or wholesale
club where customers are limited to members and their guests", and
amend the definitions of Lumber and Building Materials
Establishment, Wholesaling - Class A and Wholesaling - Class B to
exclude "wholesale club".
The operation of a Retail Store or Wholesale Establishment as a "club"
that requires its customers to be members is not a characteristic which
determines whether a business is a Retail or Wholesale Use.
Furthermore, such membership requirements might exclude the general
public from the premises but, for purposes of Zoning and Development
By-law enforcement, what matters is whether or not there are a
significant number of customers making retail purchases.
If the customers include individual "members" who can make purchases
for personal or household use, then these premises are doing some
retailing. This type of membership was provided by the former Titan
Wholesale Club and Canadian Wholesale Club, and is available from the
present Price Club and Costco. Since the premises of these wholesale
clubs do not provide a separate and limited area for ancillary
retailing, there is a potential for these premises to be or become
predominantly retail.
(c) Include the expressions, "warehouse store", "discount warehouse",
and "factory outlet" in the By-law definitions of Furniture or
Appliance Store and Retail Store.
This amendment would remove ambiguity about the land use classification
and applicable zoning regulations of these types of stores which all
represent forms of retailing, notwithstanding the use of industrial
terminology to describe them.
CONCLUSION
The presence in industrial districts of wholesale clubs, warehouse
stores, discount warehouses, and factory outlets which claim to be
Wholesale or Warehouse Uses when they are Retail Uses in everything but
name would undermine the intent of industrial zoning districts, the
objectives of the Industrial Lands Strategy, and CityPlan Directions.
Planning staff therefore recommend amendments to the Zoning and
Development By-law to clarify that "wholesale club", "warehouse store",
"discount warehouse" and "factory outlet" are Retail Uses. An
amendment is also proposed to make retailing which is ancillary to a
Wholesale Use in industrial districts a conditional approval use and
subject to a development permit requirement. The Director of Land Use
& Development recommends that an application to amend the Zoning and
Development By-law be referred to Public Hearing and approved.
* * * * *
APPENDIX A
DRAFT BY-LAW PROVISIONS
1. Amend the IC-1 and 2, M-1 and M-2 zoning district schedules by
adding the following to section 2.2.A:
"but not including ancillary retail use in conjunction with
wholesale uses".
2. Amend Section 2 of the Zoning and Development By-law by adding the
following to the definitions of Furniture or Appliance Store, Grocery
or Drug Store, and Retail Store:
"and including any retail or wholesale club where customers
are limited to members and their guests".
3. Amend Section 2 of the Zoning and Development By-law by adding the
following to the definitions of definitions of Lumber and Building
Materials Establishment, Wholesaling - Class A and Wholesaling - Class
B:
"but not including any wholesale club where customers are
limited to members and their guests".
4. Amend Section 2 of the Zoning and Development By-law by adding the
following to the definitions of Furniture or Appliance Store and Retail
Store:
"and including "warehouse store", "discount warehouse", and
"factory outlet".
* * * * *
APPENDIX B
Page 1 of 2
DEFINITIONS EXCERPTED FROM SECTION 2 OF THE ZONING AND DEVELOPMENT
BY-LAW:
1. From the list of Cultural and Recreational Uses:
Club, which means the use of premises by a non-profit society,
association or corporation organized solely for the promotion of
some common object and which is operated for club members and their
guests only, but does not include Church, Hospital, Social Service
Centre, Special Needs Residential Facility or premises used for
residential or administrative purposes;
2. From the list of Retail Uses:
Furniture or Appliance Store, which means the use of premises with
a floor area greater than 500 m2 for the retailing or renting of
household furniture, major household appliances or household
furnishings such as carpets and draperies;
Grocery or Drug Store, which means the use of premises for the
retailing of a full range of food products and ancillary household
supplies, toiletries, cosmetics, patent medicines or prescription
drugs, including food and drugs which are manufactured on the
premises as an integral part of the retail operation, but does not
include Neighbourhood Grocery Store or specialty shops such as
bakeries, butchers, delicatessens, candy shops and ice cream
parlours where sales are limited to a particular type of food;
Neighbourhood Grocery Store, which means the use of premises with a
maximum of 110 m2 [1,184 sq. ft.] of retail and storage area for
the retailing of groceries and ancillary convenience goods and
services in any R District except FM-1;
Retail Store, which means the use of premises for the retailing or
renting of merchandise including that which is manufactured on the
premises, provided the total floor area in manufacturing use does
not exceed 300 m2, but does not include any retail use otherwise
listed in this section 2 or included in a Manufacturing Use, a
Wholesale Use, or an Adult Retail Store;
APPENDIX B
Page 2 of 2
3. From the list of Wholesale Uses:
Lumber and Building Materials Establishment, which means the use of
premises for wholesaling and retailing primarily of lumber,
plywood, millwork and related building materials;
Wholesaling - Class A, which means the use of premises for the
wholesaling or renting of merchandise in bulk to retailers, other
businesses, institutions or government agencies for their own use
or for resale, where merchandise for sale or rent is kept on the
premises and floor area in storage space exceeds floor area in
showroom or display space, if any, but does not include any other
Wholesale Uses included in this section 2;
Wholesaling - Class B, which means the use of premises for the
wholesaling or renting of merchandise to retailers, other
businesses, institutions or government agencies for their own use
or for resale, where merchandise for sale or rent is kept on the
premises and floor area in showroom or display space exceeds floor
area in storage space, but does not include an office for an import
agent or broker, manufacturer's agent, or similar establishment and
does not include any other Wholesale Uses included in this section
2;
* * * * *