Not long ago, Josh Gaglardi got a call from the company that supplies his building firm, Orion Construction, with glass. Input costs were going up, the supplier explained, and there was no choice but to raise prices—by 40%. Gaglardi, like most anyone who builds stuff these days, had begrudgingly grown used to such news. Steel, concrete, rebar and just about everything else is more expensive than it was a couple of years ago. At least, Gaglardi could tell himself, the light industrial projects that are Orion’s specialty don’t require much glass.
Rampant inflation marks a new test for his four-year-old company. Until now, Orion has grown rapidly—more than 12,000% in the past three years—thanks to the niche Gaglardi spotted, not to mention good timing. The next phase of its growth might not be so straightforward.
Based in Langley, B.C., Orion bills itself as a one-stop shop. It helps clients find land for such industrial buildings as warehouses and distribution centres, assists with permitting, spearheads design and manages the construction process. “There wasn’t really anybody doing that as a contractor in our market,” says Gaglardi, 34. “By building out that team and that tailored solution, we’ve had a lot of success.”
As any local prospective homebuyer knows, there’s not a lot of land in the Lower Mainland. That’s particularly vexing for companies that need industrial space, where plots might not even be zoned for such applications. Demand for warehouses and distribution centres is intense owing to the rise of e-commerce and consumers’ expectations for fast delivery, all the more so during the pandemic. But the industrial market in the Greater Vancouver Area is experiencing record-low vacancy rates: A recent report from Colliers pegged it at 0.4%. Rents, meanwhile, surged 20.2% in the past year.
Industrial projects can be complex, partly because of local regulations and potential rezoning requirements. “The general contractors just weren’t keeping up, in my mind,” Gaglardi says. He started Orion to fill the gap, getting involved with clients earlier in the planning process and shepherding developments to the end. Since 2018, Orion has built about 1.5 million square feet of real estate, including a distribution centre for a tools and hardware importer in Chilliwack, and a warehouse for steel manufacturing equipment in Abbotsford. Another 1.5 million square feet is under construction, with a few million more in the permitting process, Gaglardi says.
By now you’re probably wondering about his last name, and the answer is: Yes, those Gaglardis. He’s the nephew of Bob Gaglardi, the B.C. business magnate and founder of Northland Properties, which owns dozens of hotels and restaurants, a couple of resorts, and the Dallas Stars NHL team.
While all four of Bob’s children hold leadership positions at Northland, Gaglardi says he always wanted to leave the fold. At 13, he was put to work pushing brooms on construction sites and later worked summers at Northland-owned restaurants such as Denny’s and Moxies. After graduating from the University of British Columbia with a degree in economics, Gaglardi joined Northland’s construction division, working on restaurant, hotel and condo developments. At 24, he left to join a smaller firm specializing in industrial and commercial construction, and founded Orion a few years later. “It’d be really easy to be complacent and have a very comfortable job, but I have a different vision for my life,” he says.
Indeed, there’s nothing comfortable about the double-digit cost increases common in the construction industry today, and there’s not much Orion can do about it, except for one thing. Early last year, Gaglardi started offering clients the option to pre-purchase materials—insulation, pipe, steel studs, drywall and so on—before costs rise further, and storing them until needed. So when Gaglardi got that call about the price of glass increasing, Orion ordered a couple million dollars’ worth. Allowing clients to hedge their bets on inflation has worked out so far, he says. “We purchase exactly what’s needed for the project. There’s very little waste.”
The lack of available land is also prompting Orion to change its approach. Residential developers have long known to build up when space is at a premium, and industrial developers are starting to do the same, fabricating multistorey warehouses with long truck ramps to the second floor. It’s a relatively new concept in Canada (it’s more common in Asia), and Orion has one multistorey project in the application process. Putting one warehouse on top of another is naturally more difficult. The structure must be extremely strong to deal with the added weight and, around Vancouver, it has to be able to withstand earthquakes, too.
Orion’s pipeline is full at the moment, Gaglardi says, and the company is taking steps to diversify. Orion recently broke ground on its first development in the B.C. Interior and is looking at expanding to Alberta. It also launched what it calls a tenant improvement division to construct office space within its buildings. “Every time we build a base structure, we want to be in there building offices for the users,” Gaglardi says.
So, while inflation may be clouding the future, Gaglardi still has a few options left to ensure Orion’s growth record continues.
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