Cost of business rises in Vancouver

It's the most expensive city in Canada, according to KPMG study

Bruce Constantineau, Vancouver Sun, Friday, March 28, 2008

High real estate values have bolstered Vancouver's position as the most expensive Canadian city in which to conduct business, according to a KPMG study.

The study -- which examines 27 cost components and assigns a value of 100 to average costs in the U.S. -- said Vancouver's cost index has risen from 96.9 to 104.2 in the past two years.
Calgary is the second-most expensive Canadian business city, with an index that has risen from 94.7 to 102, while Chilliwack is third, with an index that has gone from 94 to 101.6.

MMK Consulting representative Glenn Mair, an author of the study, said high house prices and other real estate values continue to drive up business costs in Vancouver.

"Industrial property costs, construction costs and office leasing costs are all quite high in Vancouver as a result," he said.

Mair said Chilliwack's proximity to Vancouver has clearly driven up business costs in that Fraser Valley community, which also faces high real estate values and labour shortages that have driven up wages.

The study noted the strong Canadian dollar has taken away much of the business cost advantage Vancouver used to enjoy over Seattle. Vancouver's cost index is just 1.3 points lower than Seattle's but in 2006, it was 7.5 points lower.

"The strong increase in the Canadian dollar has really closed the gap in business costs between Canada and the U.S.," Mair said. "But even with the dollar at par, Canada can still be competitive with the U.S. because of some significant cost-competitive changes that have occurred in the past decade."

He noted federal and provincial cuts to corporate income taxes across Canada have been a major boost to businesses throughout the country.

The study said Canada (99.4), the U.S. (100) and Australia (100.2) are the business cost leaders among nine developed countries surveyed. Mexico, an emerging industrial country, had a business cost index of just 79.5 -- the lowest of 10 countries examined in the study.

Mexican labour costs were the lowest by a wide margin but Canada ranked much higher than Mexico on quality-of-life issues like health care, crime rates and education.

Germany (116.8), Japan (114.3) and Italy (107.9) had the three highest national business cost ratings in the study. The three countries face the added challenge of having the oldest populations -- having the largest proportion of citizens older than 44 and the smallest proportion under 25.