Real estate costs make this Canada’s most expensive city to locate a firm
Derrick Penner
Sun
Vancouver‘s high-priced real estate is helping to make the city the highest-cost place in Canada to locate a business, the accounting and consulting firm KPMG reported in its latest Competitive Alternatives survey.
Vancouver scored 96.9 on KPMG’s index scale, which considered 27 cost components of setting up a business, just behind Toronto at 96.5. Sherbrooke had the lowest-cost score at 90.1.
“One [factor] is to do with property prices,” said Glenn Mair, project director for MMK Consulting, which was involved with KPMG in conducting the study. “Land costs are relatively expensive in Vancouver.”
Mair added that higher construction costs, which push up prices of new buildings, and wages that are relatively higher to compensate for Vancouver’s higher cost of living all contribute to the higher ranking.
Mair said those high costs put Vancouver in a tough fight on Canada’s “east/west axis” with Edmonton (index score of 93.3) and Montreal (94.3) in attracting investment dollars from companies that want to locate in Canada and don’t care where.
However, on the bright side, Mair noted that on the “north/south axis” including the United States, Vancouver is the cheapest West Coast city in which to set up shop.
And Canada as a whole scored as the second least-expensive country in which to set up a company, just behind Singapore.
The KPMG index used the United States as its benchmark, with the average U.S. cost to set up a company equaling 100. KPMG noted that Canada maintained its advantage to the U.S. despite its rapidly appreciating currency.
“Typically, we do see a premium being paid [to locate] on the West Coast,” Mair said. “All the U.S. cities on the West Coast have business costs above the U.S. average.”
On average, the survey found Vancouver maintains a 5.5-per-cent cost advantage to its West Coast competitors.
However, in research-and-development-related business Vancouver’s advantage expands to seven to 10 per cent cheaper, and in software development it widens further to 15 per cent cheaper over the U.S.
Mark MacDonald, KPMG’s director for the Competitive Alternatives survey, added that the firm found, in recent work for the provincial Ministry of Economic Development, that B.C.’s principal trade links are strongly aligned north to south.
Mair said that while Vancouver is “absolutely more expensive . . . there are other considerations” in picking a city to locate a new business.
Mair added that while Calgary might be cheaper than Vancouver on a cost basis, Vancouver might have quality of life factors that weigh in its favour.
MacDonald said KPMG conducts the survey to give its clients an objective piece of information to use in making investment decisions. He added that it is also a tool government that economic development officials can use to guide policies.
Mair said policies that affect land costs would be one area for governments to focus on to improve Vancouver’s competitive advantage.
KPMG surveyed 128 cities in nine nations including all G7 countries plus Singapore and the Netherlands.
