City’s growth will depend on available office space
Only two high-end office spaces of 30,000 square feet or larger remain available for lease in downtown Vancouver, according to a new tenant profile report by commercial property firm Avison Young.
By the end of the first quarter of this year, there were 11 class-AAA buildings, certified in Leadership in Energy and Environmental Design and located near the SkyTrain that included 30,000 sq. ft. spaces, but only two such spaces remained available, the report said.
One of those spaces is a sub-lease at Park Place at 666 Burrard Street, said Avison Young principal Glenn Gardner. He said the other is at the new Exchange Tower at 475 Howe Street.
Gardner estimated there are roughly 10 companies looking for that kind of large format space in Vancouver right now.
Avison Young’s report said 29 class-B spaces remain available in the 1,500 to 2,500 sq. ft. range, and seven class-A spaces available for tenants in need of 10,000 to 15,000 sq. ft.
“The large blocks of space are going to become harder and harder to find,” Gardner told Postmedia in a recent interview. “We don’t forecast there being much, if any, new development that is going to have any vacancy until … late 2020 (at the earliest).”
But it could as late as 2021 before any new relief arrives, he said, pointing to the 33-storey, 371,000 sq. ft. Vancouver Centre II tower at 753 Seymour by GWL Realty Advisors and Healthcare of Ontario Pension Plan, as the next new office building.
“That one is for sure going to be the next one as far as new developments to be delivered into the marketplace,” Gardner said.
He said downtown Vancouver’s office vacancy rate is now five to six per cent.
“The last time we saw this was in 2008, just before we saw the economic downturn,” he said. “Vacancy got to its lowest point then that we’d actually ever seen in downtown Vancouver.”
Office demand in Vancouver has a different flavour now than 10 years ago, Gardner said.
“Today’s marketplace we see a number of large U.S.-based corporations entering our market for the very first time,” he said.
Credit Suisse/SwissReal Group’s Exchange tower arrived at the right time, he said.
“It has brought relief,” he said. “I know there are multiple different groups all vying for space in that building as we speak.”
The 32-storey, 370,000 sq. ft. Exchange Tower opened in November. About 250,000 sq. ft. of the tower was developed for office use, while the remaining heritage component of the redevelopment is being converted into a 202-room hotel by Executive Hotels and Resorts. The hotel is slated to open this summer.
The office component is now about 65 per cent leased, said Mark Chambers, an executive vice-president with JLL, the leasing agency for the building.
He said, however, that the rest of the building has been spoken for
We don’t forecast there being much, if any, new development that is going to have any vacancy until … late 2020.
on deals that have yet to complete.
“We do have paper interest in the balance of the building and could probably go beyond leasing in its entirety,” Chambers told Postmedia. “We could probably lease it almost twice.”
He agreed with Gardner in that Vancouver’s office market is becoming more global. “A lot of the companies that we’re seeing in the market right now are more international brands and companies coming from abroad,” he said.
“We’re trying to do larger transactions,” Chambers said. “What we’re working on today, and what we’re hoping to be able to announce in the coming weeks, will be larger users.”
He said JLL is also marking the downtown office vacancy rate at 6%, but he said it’s important to note that the true vacancy rate is probably closer to 3.5%, when it includes all of the space that has been leased but not yet occupied.
Gardner said more office space will be needed.
“I think it’s important for everyone to keep in mind that in order for our city to continue to grow and prosper, we have to ensure we’re encouraging developers to build new office product,” he said.