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Wild weather threatens Kelowna’s billion-dollar building boom

Developers, suppliers and truckers scramble to patch supply chain serving city’s record-city construction pace

Devastating damage to the 543-kilometre Highway 5, the Coquihalla, is among threats to the supply lines into Kelowna, B.C., which is on a $100 million-per-month construction pace this year.

Kelowna building permit values hit a record $1.07 billion as of the end of October, according to the city’s planning department, with 2,466 permits issued.

To put this into perspective, Kelowna’s October building permits were valued at $121.5 million, nearly twice as high as the City of Victoria, and higher than Regina and Saskatoon combined.

But the head of construction for Kelowna’s largest developer is confident they will keep work on track.

“In development we have to problem solve every day,” said Luke Turri, executive vice-president of Mission Group, which has three large residential and mixed-use towers under construction in the city.

“Our trade suppliers are finding creative solutions,” he said. “We have not been impacted to date, but of course there is room for concern.”

He said that, with the Coquihalla expected to be closed for months due to floods and washouts, suppliers are rerouting building materials from the Port of Vancouver through the U.S. and tapping distributors in Alberta and further east. The older two-lane Highway 3 is also being pressed into service.

B.C. Trucking Association (BCTA) president and CEO David Earle agreed that a pivot is already taking place.

“The supply chain is having to readjust and reset and redeploy assets and figure out how we can get trucks from where they are to where they need to be,” Earle said. “The goods will arrive. They may take a little longer, they may take a few days more, but they will get there.”

He said the BCTA is working with Canada and U.S. customs and border services and the Commercial Vehicle Safety Alliance to use routes through Washington state to get to areas of B.C. cut off by the highway closures.

He said meetings have been taking place at a “feverish pace” to figure out solutions, with government officials, carriers, national and other provincial trucker associations involved.

Earle said if products can’t be sourced from one area, they will be transported from another.

“A supplier, what they’ll do is they’ll source to from a distributor and, if the distributor can’t get it from the Vancouver warehouse, they’ll get it from Calgary, Edmonton, you name it. They’ll go south,” Earle said.

But delays will lead to higher construction costs, Turri cautioned, noting that prices for building materials were already increasing before the recent devastating B.C. rainstorms, which are expected to continue this week.

“We can expect cost escalation,” he said.

Everything people buy has transportation built into its costs, Earle said, but he doesn’t anticipate prices to jump too high due to the current station.

“A rule of thumb is about 10 per cent of any good is related to transportation,” he said, noting that can vary between truck, plane and boat.

“If it costs 10 per cent more to move something because it’s taking 10 per cent longer — instead of taking nine days it’s taking 10 — what that means for you and I is it’s one per cent more when we go to buy it,” Earle said.

He said he expects those incremental price increases to continue until the supply routes return to normal, which is something engineers will determine as they assess damage on area highways.

- With file from Castanet.