Office Market Discussion

[raggedy13]

Not exactly news, as I recall a similar story was published something like a month ago, but I figured we could use an office-space-specific thread anyways.

The real news is that the CB Richard Ellis' market report for the 3rd quarter 2007 has finally been posted on their site...
http://www.cbre.ca/EN/Our+Offices/British+Columbia/Vancouver/Market+Reports.htm

Office Squeeze

Vancouver Sun
Published: Tuesday, October 23, 2007

The downtown Vancouver office market now has a three-per- cent vacancy rate, which is both a record low for this market and is the lowest vacancy rate nationwide (surpassing downtown Calgary), according to CB Richard Ellis' Greater Vancouver office report for the third quarter. The Broadway Corridor market is even tighter.

Q3 vacancy rates:

Downtown 3%

Broadway Corridor 2.6%

Burnaby 8.1%

Richmond 13.7%

North Shore 5.0%

Surrey 22.4%

New Westminster 20.0%

© The Vancouver Sun 2007

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Highlights from CB Richard Ellis...

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[excel]

Very interesting graphs and charts, thanks a lot.

[Canadian Mind]

why do I get the feeling this 660 000 extra square feet of office space that is in the works wont even make a dent in the vacancy rates?

[cornholio]

^It will make a big dent as it is a 4% increase to overall office space, add to that all the other smaller office developments that are part of mixed use projects or in the works and downtown Vancouver is probably set till 2015 or so, imo.

[jlousa]

I agree, office space goes in cycles, we are due for an increase in vacancy rates even w/o any new construction, look how long this boom has been going and not that much of a real change has occured in the vacancy rates. There has been and is still alot of office space in the pipeline. I reckon the above is correct, with what is currently onstream we could be set for 10 more years, 15 might be pushing it though.

[raggedy13]

With only those two upcoming projects, assuming the current vacancy rate remains steady (i.e. they were completed today) and that the new 660,000s.f. is empty upon completion, the downtown vacancy rate would be at 5.88% which is still a healthy rate and capable of absorbing more, especially if current trends continue over the next couple years. If we added another 1,000,000s.f. on top of the 660,000s.f. and it were built right now and it were all empty, we'd be at 9.94% vacancy.

[Canadian Mind]

so the city could easily absorb this amount and then some within the next 2-3 years then?

[raggedy13]

^Assuming current trends continue for a few years I don't see why not, but I'm no expert.

[Architype]

OFFICE VACANCY RATE DROPPING IN DOWNTOWN VANCOUVER

Downtown office vacancy expected to shrink

Commercial realtor forecasts further drop to 2.1 per cent in 2008

Derrick Penner, Vancouver Sun
Published: Thursday, December 06, 2007

Already at historic lows, Vancouver's downtown office vacancy should shrink further to 2.1 per cent in 2008, the lowest central-core vacancy rate in the country, according to commercial realtor Cushman Cushman & Wakefield LePage's 2008 forecast.

Rents are also expected to rise 10 to 15 per cent for so-called commodity space in Class A buildings, which, combined with low vacancy should continue to fuel the trend of businesses relocating outside of downtown.

"The suburbs is really the outlet for a lot of these tenants," Jeffrey Rank, Cushman & Wakefield's managing director in Vancouver said in an interview.

I think with employee bases moving eastward and occupancy costs doing what they're doing downtown, tenants will see it becoming more and more of an option to be considered in '08."

The Cushman & Wakefield forecast calls for vacancy in Vancouver's suburban markets to remain stable at 10.5 per cent over 2008. However, with downtown's vacancy shrinking, the combined Metro Vancouver vacancy is expected to drop to 5.1 per cent by the end of 2008.

Things are already pretty tight as far as office space in Downtown Vancouver goes, with a vacancy rate of 3.2%, but look what's coming next year, according to Cushman & Wakefield LePage.

Downtown office vacancy rates, forecast for Q4 2008

Vancouver: 2.1% (now at 3.2%)

Calgary: 3.6% (now at 1.9%)

Toronto: 3.8% (now at 4.9%)

Ottawa: 3.4% (now at 3.2%)

Montreal: 7.6% (now at 8.0%)

Source: Cushman & Wakefield LePage


Complete Article here:
http://www.canada.com/vancouversun/news/business/story.html?id=3189c4a8-61eb-4354-b46b-54ecd11524c7

[raggedy13]

There hasn't been much in the media on this topic as of late but I thought this article posted by officedweller seemed relevant...


Taller, denser, more economical

Michael Goldberg, Special to the Sun
Published: Wednesday, February 06, 2008

Anxiety about too many apartments and not enough offices in downtown Vancouver continues to dominate discussions about development here.

It began well before I left for Singapore in the fall of 2004 with attacks on the emerging "resort city," and continue with bans and controls on residential development downtown.

The usually knowledgeable and perceptive Miro Cernetig, urban affairs columnist of The Vancouver Sun, noted in a recent article on property assessments:

"In its rush to create downtown neighbourhoods, the city of Vancouver's planners transformed far too many commercial spaces into residential properties. Businesses looking for affordable and available office space need to go to the suburbs, too."

However, the issue until very recently has been the lack of office demand, not too much housing, as evidenced by the higher value of downtown land in residential use as compared with office use.

Instead of acknowledging this market reality, a surprisingly heterogeneous group of strident voices has called for controls on core residential development, surprising because the group spanned the Vancouver Board of Trade, the planning community and the media.

Shortages of office land are recent, with vacancy rates falling to near record lows only in the past year. "Real shortages" of office land are the result not of residential development but of Vancouver land and development policies.

There is indeed an insufficient supply of downtown land and building capacity for office space. There is also a set of supply-limiting city of Vancouver policies on office development that is creating the shortage, not excessive residential development.

Developers consistently confront an array of policy challenges in office development that have made such development uneconomical until very recently. Even today with record low office vacancies, new office development downtown is barely economical.

The planning process has discouraged office development in diverse ways, including slow and often arduous permit approvals, restrictive and essentially suburban office densities, similarly restrictive suburban building height allowances, view corridor rules that further restrict height and density, and low densities around SkyTrain stations that further limit potential supplies of accessible and valuable office space.

Finally, with relatively few head offices, and with even fewer large head office space users, the Vancouver office market is typified by small floor plates to accommodate the lack of large office users. Thus, developers traditionally have to build speculative office buildings to meet our small-scale and fragmented demand. This makes office development risky and costly.

Developers need to reduce risks to make office development viable. Increasing uncertainty posed by the planning process discourages office development independent of the state of housing construction. A policy, planning and permitting environment that recognizes and softens these market realities would help improve the economics of downtown office development and encourage new construction.

Microsoft needed some 180,000 square feet for its new British Columbia facility, but it needed occupancy in two years. Vancouver could offer a three-year rezoning process and then two additional years for development and other permits. Microsoft chose a Richmond office park, increasing sprawl development, but available in two years.

If Vancouver indeed wants to be a healthy headquarter locale, these excessive delays will have to be eliminated.

So will the current property tax disadvantage that offices confront. Prime downtown condominiums are priced at up to $2,000 per square foot with prime AAA downtown office space worth perhaps 25 per cent of this. However, property taxes are roughly five times as much. Reducing this enormous differential would help make the economics of office space considerably more attractive. Considering a property tax holiday for unoccupied space (for the empty building space only, not for the underlying land) would also help. Reducing the huge tax differential would also reduce occupancy costs to Vancouver's typical small offices and potentially increase the demand for office space in the process.

Since the greatest disincentives to downtown office development are related to policy and process, fixing them can and should be reasonably easy.

Specifically, the planning process could offer fast and preferential approvals to Vancouver downtown office development. Densities are absurdly low, with floor space ratios (densities) at a roughly seven, compared with Calgary's FSRs in the 15-20 range downtown.

Building heights need to be raised considerably to facilitate higher densities. Instead of 400-foot limits, buildings of 600 to 700 feet should be commonplace, not exceptional, in our land-scarce downtown peninsula. (Calgary has no height limit in the downtown core.)

To accommodate higher, denser and thus more economical office buildings, the city must dramatically revise or eliminate the constraining view corridors that have shackled the development of tall and large office buildings in the core.

An easy and highly economical way to accommodate such buildings is to link them directly to existing and planned SkyTrain stations in the downtown peninsula, but also at such well-served locales as Broadway and Commercial, Broadway and Nanaimo and Broadway and Granville (in future) on the Millennium Expo lines and at Cambie and Broadway and Oakridge on the soon-to-be finished Canada Line. Failure to exploit this vastly improved accessibility wastes the opportunities for higher density and lower auto use provided by costly transit investments.

Finally, the downtown office development process must be crafted on a solid understanding of the needs of the small-office-plate market where developers need help to reduce risks and improve profitability to make new downtown office construction attractive to developers and tenants alike.

Michael A. Goldberg is emeritus professor at the Sauder School of Business, the University of British Columbia.

© The Vancouver Sun 2008

There were plenty of good points he made aside from what I bolded. I guess I was just most intrigued by the idea of 600-700 foot towers being the norm. Some taller towers along the Broadway Corridor would be nice too. We could have a great secondary uptown skyline.

[officedweller]

Here's an old article from the Vancouver Sun quoted at the Fair Tax Coalition. Note that Council has started to address the imbalance and has raised residential taxes slightly or was that drop commercial taxes?

Vancouver Sun
Friday, February 16, 2007
Page: H1 / Front

The Hidden Cost of Condos
By: Don Cayo

How did municipal taxes get so skewed?: Every time a modest commercial block falls to a condo tower, the city budget suffers

This year's property tax bill for the old Brodie Brush Building at Cambie and Smithe will likely be twice as much as the building is worth -- not counting its underlying land.

The bill will be split among four tenants. Last year, the portion paid by the largest of them, Art Works Gallery, exceeded $60,000. That's more than three times what gallery owner Deanna Geisheimer paid in tax for the same space 10 years ago, and a lot more than her annual rent.

This year's tax bills haven't been sent out yet, but Geisheimer fears she'll be clobbered again. The plain, two-storey former factory that houses her business squats amid a forest of glitzy glass condo towers, and this year the assessed value of the land shot up 50 per cent -- a far bigger jump than ever before. It now stands at almost $10 million, or 110 times the building's value.

Other businesses have been hit as hard by what many Vancouver business people see as an unrelenting assault from city hall. Since last summer, 42 businesses have folded or fled from the five-block Yaletown Heritage Area, and half the premises they used to occupy have no new tenant.

Yaletown is particularly hard-hit because of its astronomical land values, but the sting is being felt in every neighbourhood.

Over on Burrard, not far from the bridge, Henry von Tiesenhausen of Commercial Electronics notes that, in a five-year period when the tax on his home increased 16 per cent (and when his company's sales were flat) his business taxes rose 102 per cent.
"I have to ask the question," von Tiesenhausen said in a letter to Mayor Sam Sullivan, "is it worthwhile even operating a business in the City of Vancouver?"

A growing number seem to be asking the same thing -- and answering in a way no one wants to hear. While commercial growth in the city has long trailed residential, the last two years have seen a disturbing new trend. For the first time, more businesses closed than opened.

All this says something is broken and needs to be fixed.

As I see it, it's not just one problem, but three:

First, Vancouver's success in building vibrant, high-density neighbourhoods has come with high hidden costs that nobody at city hall seems to have a handle on. The policies that drive the transformation from commerce to condos need to be rethought with an eye to how to stop losing money on every new tower.

Secondly, it is not fair that business property is assessed by one standard yet taxed according to another. This invites aberrations like the bizarre levy on the Brodie Building. The city justifies tax increases with the logic that at least the owner has an ever-more valuable asset, but this is not the case for business owners, who usually rent.

Thirdly, the total tax burden on businesses is way out of whack. They pay far more than the cost of the services they consume, while home-owners pay far less.

A soaring tax base
How does a prospering city -- one experiencing not only an explosion in land values, but also a great deal of new construction that adds hugely to its tax base -- get into such mess? It's easy to see how a soaring real estate market might make it too costly for some businesses to hang on to the sites they occupy, but why do taxes go up so much faster than market-driven prices?

After all, every time a ho-hum commercial block falls to the wrecker's ball and a condo tower rises from the rubble, the city's tax base shoots up. A building worth a few tens of thousands is typically replaced by one worth tens of millions, enlarging the base for the city to tax.

It takes some head-scratching to understand it, but this kind of development -- something that happens all the time -- actually produces a brutal hit to the city budget. It results in your tax bill and mine inching up once again, while the city's remaining business properties get clobbered.

In the last 15 years, Vancouver has added well over 40,000 new homes, mainly condos or townhouses. A great many of them were built where a business used to be. So the hits on your tax bill really add up.

Indeed, every new condo unit built in the city today will shift $1,000-$1,500 of annual costs to other taxpayers, according to the careful calculations of Paul Sullivan, a property tax specialist with Burgess Cawley Sullivan and Associates, and the technical co-chairman of the Vancouver Fair Tax Coalition.

Sullivan reckons that each new condo unit shifts 30-40 cents of extra tax to each of the city's 153,000 homeowners, and 13 times that much -- $4 or $5 -- to each of the 14,000 commercial properties. (The average commercial assessment is just under $1.2 million, or not quite 21/2 times the average home.)

To understand why, look at the taxes on the Brodie Building, and what will happen if or when it is razed to make way for condos.

The land is already assessed at $10 million. This is considered to be "its best and highest use" -- i.e., as if it were the site of a condo tower, not just a handful of modest businesses. Of course, the value of a new 100-unit condo tower would be about $39 million, or 400 times more than the $90,000 building that is there today.

Yet the city's tax take from the redeveloped property would drop by about $22,000
How can this be? After all, the value of the new building plus the land adds up to nearly $50 million, or five times more than the land and the old building.

Well, the existing site is taxed at the business rate, which is six times higher than the residential rate. If you do the math, a six times higher rate on a $10 million property produces a tax bill of $152,000, while the residential rate applied to 100 units with a combined value of $49 million works out to just $130,000.

But the $22,000 loss of tax revenue is just a small part of how redeveloping the site would hit the city budget. The big impact is on the cost side of the ledger:

A formula that estimates how much demand various properties place on the city deems that the current occupants of the Brodie Building consume $72,000 worth of city services, while the occupants of 100 condos would consume $235,000 worth. Thus, Sullivan calculates, city revenue will drop by $22,000 -- or 14.8 per cent of what it gets from the existing property -- and its costs will rise by $213,000, or 227 per cent.

Higher and higher taxes
What happens when the city takes this kind of budgetary hit?

Well, it never seems to tighten its belt. It just ratchets up its tax bills.

The way it makes up the shortfall goes a long way to explain how Vancouver's property tax system got to badly skewed.

Prior to 1983, back in the day when the B.C. government set property tax rates, the business rate in Vancouver was roughly 21/2 times the residential rate.

That was more or less what it should be. People calculate "fair" rates in various ways, but most agree that businesses should pay somewhat more, for several reasons. For one, municipal taxes give them a deduction for federal and provincial tax purposes, which means each $4 they pay actually costs them only $3. Also, consumption studies show they put more strain on city services per dollar of assessed value.

So if the city were to increase the tax load on business properties at a ratio of 2.5 to 1, commercial property owners wouldn't have much to whine about. And that's just what council did in 1984, the first year it got to set its own tax rates.

At the same time, council adopted a formula, which has changed only slightly, to divide the total tax bill 60-40 between businesses and residents.

What has happened since is that home-building has dramatically out-stripped business growth. This means that existing residents get lots of help from newcomers -- these days about 6,000 a year -- to pay their percentage of the total tax load. But there aren't many new companies to help pay the extra tax load added to the business portion.
In token recognition of this, the city has tinkered with the percentages. The split is now down to 55 per cent paid by business, and 45 by residents. But this does not compensate for the imbalanced growth in a city where residential property values have soared seven-fold over 20 years, while the value of commercial properties has merely tripled.

Today, 83.2 per cent of the assessed value of all property in the city is residential, yet businesses still pay 55 per cent of the property taxes. To generate this much revenue, the general business tax rate has to be set six times higher than residential rates, and the rate for other categories higher still. Utilities pay 12 times more than residents, and the city's 30 remaining major industries pay 10.2 times more.

The current council is the third in a row to commit itself to shifting one per cent of the total tax burden from businesses to residents each year. But there are three problems with this:

First, despite the promise, they don't do it every year.

And even when they do, the impact is minimal. Gallery owner Geisheimer wryly notes that last year, when council lived up to its promise and made the shift for the first time in three years, her tax bill still went up $7,000.

And finally, Sullivan makes the case that the city is shooting at the wrong target. A 1996 study by KPMG found that businesses paid $2.07 for every $1 of city services they consumed, while residents paid just 57 cents. That means business paid 3.7 times more for services than residents paid.

KPMG assumed -- a bit arbitrarily, I think -- that a 3-to-1 ratio would be fair. To get there, it proposed the one-per-cent-a-year shift in tax burden that was adopted by subsequent councils and has been acted on sporadically.

Data published by the city shows slow movement toward the goal of a 3-to-1 ratio, until it finally was reached last year. The trouble is, Sullivan says, the assumption on which the data is based turns out to be far too low.

In 1996 when KPMG did its study, residents were consuming 71 per cent of city services and businesses 29 per cent. Today, after a decade of sharply imbalanced growth, there are more residents and fewer businesses. The result is that residents now consume 76 per cent of services and businesses just 24 per cent.

So, do the math and you find that businesses are now paying 4.7 times more than residents for the services they use. That's a 27-per-cent heavier load than in 1996, when council acknowledged the system was unfair.

Makes taxes realistic
What should be done now?

Two measures are needed:

The first is to tie the tax split -- the portion paid by businesses versus the portion paid by residents -- to actual consumption.

The Fair Tax Coalition proposes that an outside party be hired to do consumption studies every two or three years, and that city tax bills be based on the findings. Thus, as the mix of residents and businesses continues to change, so would the tax split.

Businesses would still, no doubt, pay a much bigger share of the bill than their actual consumption would dictate. But the proportionate load carried by each business would remain constant, probably near the ratio of three-to-one proposed by KPMG a decade ago, and it would not creep upward to the unsustainable level it has reached today.
While this would ensure a fairer burden for the business community as a whole, it wouldn't protect businesses like the Art Works Gallery from the vicious swings that happen when their location is coveted as prime residential land.

Basing each business's taxes on the rent it pays, not on land value, would correct that. This would not mean that businesses, as a whole, would pay either more or less total tax. It would simply even the load so similar businesses would pay similar amounts, and it would protect against sudden wild swings. Yet it would also keep market forces in play and allow neighbourhood business districts to evolve organically. Upscale neighbourhoods would inevitably command higher rents, and thus the more desirable business locations would continue to pay more -- as they should.

The province has already agreed to enact legislation this spring to base taxes for port-based businesses on their rent. It would be easy to extend the practice to all of Vancouver, and possibly to other cities if they face the same kinds of inequities.

Given the way lawyers and politicians work, however, this will take time. So city council should take two interim steps without delay:
First, it should get its spending under control. In inflation-adjusted dollars, the city's tax take has shot up 57 per cent in the last 10 years. Even adjusted for population growth, the per-person tax take is up 21 per cent.

Council should cap this year's business tax increases and keep it capped until a long-term, equitable solution is in place.

The council of the day approved such a tax cap back in the early 1990s, when it recognized the alternative was to see many firms die. The dismal vacancy figures in Yaletown today, the fact that the city has fewer businesses this year than last, and the urgent concerns voiced by business owners in every neighbourhood proclaim loud and clear that this grim prospect is at least as real today.

dcayo@png.canwest.com

The Hidden Cost of Condos
The two-storey Brodie Brush Building at 225 Smithe in downtown Vancouver generates $152,350 in annual tax revenues for the City of Vancouver, but uses just $71,695 in municipal services. If one were to imagine (as we have below) that it was replaced with a glitzy Yaletown residential tower, the city would lose $1,000 to $1,500 on every condo unit built.

The numbers as they are Assessed land value: $9.75 million
Assessed building value: $90,000
2006 taxes paid: $152,350
Consumption of city services: $71,695
Net benefit to city: $80,655

The numbers if condos are built
Assessed land value: $9.75 million
Estimated building value: $39 million
Total taxes at residential rate: $129,760
Estimated consumption of city services: $234,670
Net cost to city: ($104,910)

[raggedy13]

^And here's a related article in today's Vancouver Sun...

Mayor sees tax shift as 'doing the right thing'
Sullivan in favour of supporting move to trim business taxes while putting more burden on homeowners

Frances Bula, Vancouver Sun
Published: Monday, March 10, 2008

Vancouver Mayor Sam Sullivan says he will support shifting taxes from business to homeowners again this year even though it knows it will be unpopular at election time in November.

"But it's important to do the right thing. We know there is a lack of fairness in the tax system."

He will support a one-per-cent shift of business taxes, which translates to a two-per-cent increase for homeowners on top of the four-per-cent increase they are already likely to be facing once the budget is finalized.

Vision Vancouver Coun. Raymond Louie said his party will not be supporting the shift because the city's own fair-tax commission never came up with any solid evidence that a tax shift would have a positive impact for business.

As well, it will put even more of a burden on homeowners, who will have seen city taxes increase by 21 per cent over three years if the tax shift goes through.

Businesses have lobbied the city for years about their taxes, saying they pay a disproportionate amount compared to businesses in other cities across Canada. While other cities see their businesses pay three or four times the rate that homeowners do, in Vancouver it's been closer to five or six times.

There have been some shifts over the past several years to try to change that. A new business lobby called the Fair Tax Coalition was successful in getting the city to shift more in the past two years, as well as prompting the city to create a fair-tax commission.

Commissioner Stanley Hamilton did recommend five years of one-per-cent shifts a year. But, Louie says, Hamilton acknowledged there was no solid evidence that businesses were leaving the city because of high taxes.

fbula@png.canwest.com


© The Vancouver Sun 2008

[zivan56]

I don't see why business are complaining. Everything a corporation earns goes towards the business. If a company goes bankrupt, they just open a new one and start over. If a person goes bankrupt, they are on the street, can't afford basic necessities for life, and much more. I would argue that businesses need to pay at least 70% of the tax burden, as their failure simply opens the way for more efficient and better run businesses to take their place.

[officedweller]

I don't see why business are complaining. Everything a corporation earns goes towards the business. If a company goes bankrupt, they just open a new one and start over.

Well, that's the view the Province has taken with the Cambie corridor.
They problem is when the costs get to the point where you can't afford to / don't want to open another - at least within the City of Vancouver (i.e. office park in Burnaby or Richmond).

[raggedy13]

Originally posted by Hed Kandi:

Downtown office vacancy rate lowest since 1981
With top rents higher than last year, many firms are scouting space in suburbs
Derrick Penner

Sun

Tuesday, April, 08, 2008

Vancouver's downtown office vacancy rate fell to its lowest level in a generation during the first quarter of 2008.

Colliers International estimates downtown office vacancy at two per cent, the lowest since 1981 when vacancy hit 1.8 per cent. Across Metro Vancouver, Colliers estimated vacancy at 4.2 per cent, compared with the all-time low two per cent, which was again in 1981.

Downtown, Colliers said some top Class AAA rents have topped $50 per square foot per year on lease renewals, noticeably higher than a year ago, research analyst Shawna Rogowski said.

However, Jeff Rank, managing director of Cushman & Wakefield LePage, said leasing activity in the tight downtown market has slowed, and landlords "haven't been able to [increase] their [rents]."

One of the reasons Rank thinks leasing activity has slowed is because companies are holding back on decisions about their real-estate needs unless their leases expire, or they are expanding.

"There are still some in that category," Rank said.

Computer gaming firms were among the tenants taking up any space they could. Electronic Arts leased 22,000 square feet of additional space at 1110 Hamilton Street and Next Level Games took on 24,550 square feet in the Raffles building at 811 Cambie Street, the Colliers report noted.

Rogowski added that many companies "rushed to do lease renewals and expansion deals" while vacancy rates falling over the past couple of years.

"Now that they've done that, [leasing activity] is a bit quieter with not a lot of space to lease."

Rogowski said many firms are scouting out Metro Vancouver's suburban markets, where new office buildings are being built.

Rank said most of the companies leasing the new suburban office space being built in Burnaby, Richmond and even the Fraser Valley are firms oriented to those markets rather than companies priced out of downtown.

Metro Vancouver's suburban markets, where new office buildings are being built, are where rents are rising.

Rank said Burnaby's top rents have reached around $30 per square foot per year in new buildings. In Richmond, new buildings are fetching up to about $25 per square foot.

"New inventory is definitely moving the market up," he added.

Colliers said the suburbs continue to attract attention because while rents are going up, gross rents can still be half of those charged downtown.
© The Vancouver Sun 2008

I'm getting a little impatient with the lack of downtown office proposals thus far. Glad to see video game companies expanding though. Perhaps several years down the road some of them will get large enough and be spread around enough that they'll need to consolidate their space into one shiny new building??

[jlousa]

There will acutally be a glut of office space within the next 5years. You heard it here first.:tup:

Absorbation rate for office space has been ~420K sqft/yr. We are building much more then that even though there hasn't been a signature office tower built in a long time. Beleive it or not we are in line for a downturn in which case the absorbation rate will become a negative number.

[Hed Kandi]

There will acutally be a glut of office space within the next 5years. You heard it here first.:tup:

Absorbation rate for office space has been ~420K sqft/yr. We are building much more then that even though there hasn't been a signature office tower built in a long time. Beleive it or not we are in line for a downturn in which case the absorbation rate will become a negative number.


Any idea when the 745 Thurlow tower will start?

[jlousa]

Hasn't been set as far as I know, I would imagine they'd start early 09, a few months after GM place tower.

[thinkingbig]

well there has been rumors of office building boom nothing happened yet so far anyone have any updates

[LeftCoaster]

Where did you hear those rumours? Expect a slow trickle of moderate sized (25-30 story) new projects over the next few years... no boom I can see coming.

[raggedy13]

A bit of an update...

According to Avison Young (http://www.avisonyoung.com/library/pdf/Van_Research/Office_Market_Report_Year_End_2008.pdf):

Vancouver (as of Dec. 31/08)...

Downtown (Class A): 1.4%
Downtown (all classes): 2.5%
Metro (all classes): 5.4%

[sacrifice333]

I guess those figures don't include available sublets?

[djh]

^How do those numbers compare to the previous month, and to the same month a year previous? That's the only way we can determine the trend.

[jlousa]

NOTICE OF PUBLIC HEARING
Dear Sir and/or Madam:
RE: Proposed Amendments to the Downtown Official Development Plan (DODP) and HA-3 District Schedule On Tuesday, April 21, 2009 commencing at 7:30 p.m., in the COUNCIL CHAMBER, THIRD FLOOR, CITY HALL, 453 WEST 12TH AVENUE, the Council of the City of Vancouver will hold a PUBLIC HEARING, pursuant to the provisions of the Vancouver Charter, to consider the above-noted and other amendments to the Zoning and Development By-law. This public hearing has been deferred from its original date of Tuesday, February 17, 2009.
If approved, the rezoning would amend the Downtown Official Development Plan (DODP)by increasing the maximum permitted density for non-residential uses in Areas A, B, C1 and F by 2.0 FSR; by removing residential as a permitted use in areas C1 and F; by requiring a minimum of 2.0 FSR for non-residential uses in areas C3 and H; and by revising the names of various
areas within the Downtown Official Development Plan to correspond to the proposed amendments. Furthermore, the HA-3 (Yaletown Historic Area) District Schedule would be amended to increase the maximum permitted density for non-residential uses to a maximum of 5.0 FSR and require 1.5 FSR of non-residential in all new developments. Map 1 (Areas affected by the zoning changes) below outlines where the proposed zoning changes would
apply. In addition to the proposed zoning changes, two policies have been proposed. The first is a DODP Rezoning Policy that will provide guidance for commercial intensification of the CBD and CBD Shoulder (DODP areas A, B, C1, C3, F & H). The second is an Office Conversion Policy to be used for the evaluation of inquiries and applications for conversion of siginificant,
existing office space to residential use in areas of the Downtown where zoning provides the opportunity for both residential and commercial. This policy would apply to Yaletown (HA-3), Gastown (HA-2) and mixed use areas of the downtown (DODP areas C2, C3, G & H). Map 2 (Areas affected by the proposed policies) below indicates where the proposed policies would
apply. At the PUBLIC HEARING, you or any persons who deem themselves affected by the proposed by-law amendment shall be given an opportunity to state their opinion or concerns to City Council. If you wish to speak, please register individually by telephone before 5 p.m., April Page 2 of 4
21, 2009, by calling Tarja Tuominen in the City Clerk's Department at 604-873-7191. You may register in person at the door between 7:00 p.m. and 7:30 p.m. before the Hearing.
The draft by-law may be inspected in the Planning Department, Third Floor, East Wing of City Hall, or in the office of the City Clerk, Third Floor of City Hall, 453 West 12th Avenue, from 8:30 a.m. to 4:30 p.m., Monday to Friday, on and after April 9, 2009. The staff report is available at: http://vancouver.ca/ctyclerk/cclerk/documents/p1.pdf
If you have contracted to sell or lease all or part of your property to any person, firm, or corporation, we strongly urge you to deliver this courtesy notification letter, as soon as possible, to the prospective buyer or tenant.
If you have any questions or would like to discuss the draft by-law with City Planning staff, please call Ian MacPhee at 604.829.4228.

Yours truly,
Ian MacPhee
Planning Assistant
Central Area Planning

[jlousa]

In case anyone is wondering there is now over 1Million sqft of office space available in the city. That's the same as three office towers.
Found the following link a very good read, I'm sure a few members will be surprised by the data in it. ;)

http://vancouver.ca/commsvcs/planning/corejobs/pdf/research/mythfact.pdf

[EdinVan]

In case anyone is wondering there is now over 1Million sqft of office space available in the city. That's the same as three office towers.
Found the following link a very good read, I'm sure a few members will be surprised by the data in it. ;)

http://vancouver.ca/commsvcs/planning/corejobs/pdf/research/mythfact.pdf

Interesting facts, if they can be verified as such. But there's a defensive tone in that document that is offputting.

[Spork]

They fail to mention that the City of Vancouver is one of the few cities in North America that doesn't have an economic development strategy (source: somebody doing contract in City Hall that I met at a banquet in this same area). And the point of 1.3% vs. 2.2% in Toronto is moot. It almost sounds like they are defending this because we aren't the major commercial centre in Canada. Change that! Don't accept the status quo!

[Vancity]

They fail to mention that the City of Vancouver is one of the few cities in North America that doesn't have an economic development strategy (source: somebody doing contract in City Hall that I met at a banquet in this same area). And the point of 1.3% vs. 2.2% in Toronto is moot. It almost sounds like they are defending this because we aren't the major commercial centre in Canada. Change that! Don't accept the status quo!

AGREED!

[SpongeG]

its always gonna be this way

[Vancity]

it doesn't have to be. change is possible, albeit, sometimes slower than we'd like, but we don't have to accept the status quo. why doesn't the COV develop an economic development strategy plan, so that we can eventually become one of the major commercial centres in north america.

[officedweller]

The Myth vs Fact tone screams "Damage Control".

WRT jobs fleeing to the suburbs - a continuing growth rate in downtown Vancouver can mask departures from the downtown.
i.e. way back, the former MacBlo left Cathedral Place for the suburbs;
last year Catalyst Paper left downtown for Richmond;
Terasen Gas' corporate office is in Surrey, only the parent holding company's office is at 1111 West Georgia;
Did someone say that Bell Canada's offices are now at Broadway Tech Park?;
EA has closed its downtown presence (Black Box);
Remember when 701 West Georgia was the IBM Tower?

[EdinVan]

Isn't Weyerhauser still at Cathedral Place?
And isn't Bell still at Bentall 5, considering the new logo on the roof?

[EdinVan]

its always gonna be this way

So long as we continue to have old, conservative, smugly complacent civil servants at City Hall.

[officedweller]

Isn't Weyerhauser still at Cathedral Place?

Thanks - checked into it on-line and the move was nixed then they were taken over by Weyerhauser:

http://wikimapia.org/7651260/Telus-Glenlyon

Telus Technology & Operations
9100 Glenlyon Parkway
Burnaby, BC
Completed in 1998, this $6 Million 2 storey, 56,000 square foot office building was to be the new head office for MacMillan Bloedel Limited (en.wikipedia.org/wiki/MacMillan_Bloedel) to reduce costs by moving out of the Vancouver downtown business core to the Burnaby suburb. Instead, MB moved from it's own building at 1075 West Georgia one block east to Cathedral Place (925 West Georgia), and Telus took occupancy of the building.

And isn't Bell still at Bentall 5, considering the new logo on the roof?
I recall one of the forummers mentioning that Bell is located at Broadway Tech Park and subleases the Bentall V space. Don't know if that has changed or how much space Bell retains if any (sounds like 3 floors are subleased, but Bell could retain 1 flor in Phase 1 of the tower).

http://www.avisonyoung.com/library/pdf/Van_Research/Vanc._Office_MarketReport_Mid_2008-FINALJuly23,08.pdf

Worth noting is that some of the current vacancies are actually leased,
and others have been recently occupied. These include Bell Canada’s
sublease space in Bentall V, of which Gowlings Lafleur Henderson LLC
has committed to 35,000 sf for third quarter 2008 occupancy and
Macquarie Bank has occupied 17,600 sf;

http://www.colliers-international.com/corporatemarketing/Q4-07_Colliers_Office_MarketReport.pdf

At Bentall V, Bell Canada subleased 2 of
their 3 floors (a total of 35,000 square
feet) to Gowling Lafleur Henderson LLP
this quarter, and gave the 24th floor back
to the landlord, who then secured a headlease
deal with Macquarie Bank for 17,600
square feet. With this space off the market,
Bentall can boast 0% vacancy for Bentall V.

[djh]

http://news.bbc.co.uk/1/hi/entertainment/8039769.stm
***

Pixar to open studio in Vancouver
Page last updated at 10:05 GMT, Friday, 8 May 2009 11:05 UK


Disney/Pixar is to launch an animation studio in Vancouver, Canada this autumn to handle its non-feature projects.

According to president Ed Catmull, the "small in size" operation will focus on short-form computer animation for DVD, theme parks and television exhibitions.

Work in Vancouver will concentrate on "legacy characters" like Woody and Buzz Lightyear from the Toy Story movies.

Feature films and all stereoscopic 3-D work will remain based at Pixar's main HQ in Emeryville, California.

"We have a somewhat unfulfilled demand," Pixar general manager Jim Morris told the Hollywood Reporter.

Facility

"We wanted to do various things with Toy Story to keep the characters alive. People like to see them somewhat regularly."

Pixar, whose other hits include Finding Nemo and Wall-E, currently employs around 1,000 people at its main studios.

According to Morris, the staff at the new facility is expected to be no more than a tenth of that number.

Disney/Pixar's latest animated movie, Up, will be unveiled next week at the Cannes Film Festival in France.

3D versions of Toy Story and its sequel will be distributed later this year ahead of next summer's release of Toy Story 3.

[SpongeG]

Downtown Vancouver office space hit by ‘negative absorption’


VANCOUVER — Vancouver companies in the first half of 2009 have vacated from, downsized out of or made available through sublease downtown office space equivalent to a new office tower, according to research from a major commercial broker.


This "negative absorption," as commercial realtors call it, was the result of corporate contraction in the face of recession, commercial realtor Avison Young said in its mid-year report and helped push Metro Vancouver's overall office vacancy rate up to 7.4 per cent at mid-year compared with 5.4 per cent at the end of 2008.


"This pause in leasing demand and crisis of confidence, which began in the latter half of 2008 when the global credit crunch intensified, pushed up vacancy levels in nearly every submarket during the first half of 2009," Darrell Hurst, principal with Avison Young in Vancouver, said in a news release.


Avison Young broker Matthew Craig said that downtown, office tenants left some 487,775 square feet of more office space surplus than they leased, which is "roughly equivalent to the size of a new office tower."


Downtown's office vacancy crept up to five per cent at mid-year compared with 2.5 per cent at the end of 2008.


However, Craig added that the offices left vacant were mostly smaller spaces in second-tier buildings.


"Worth noting is that that there are no notable large-sized tenant defaults to date despite the global credit turmoil," Craig said.


Vacancy rates for the largely institutionally owned top-tier buildings, Craig added, remain "at or below prevailing market rates."


Hurst said that even with businesses weathering the "current economic tailspin," Metro Vancouver's office leasing market is still one of the tightest in North America.


He said the effect of rising vacancies, particularly of subleases where tenants are willing to let out some space on a temporary basis, has been to give new tenants more choice and put downward pressure on rents.


"Competing with attractively priced sublease opportunities, some landlords are now more aggressive in securing quality tenants and maintain existing ones," Hurst said.


depenner@vancouversun.com

http://www.vancouversun.com/business/fp/Downtown+Vancouver+office+space+negative+absorption/1812858/story.html

[raggedy13]

According to CBRE, Vancouver 2Q 2009 is as follows:

Core (DT+Bway)= 26 msf = 63.7% centralized
DT Vacancy = 4.7% (4% for AAA)

Suburban = 14.8 msf = 36.3% decentralized
Suburban Vacancy = 11.3%

Metro = 40.8 msf
Metro Vacancy = 7.8%

http://www.cbre.ca/EN/Our+Offices/British+Columbia/Vancouver/Market+Reports.htm

---------------------------------------

Additionally, this is the first time in three quarters that vacant sublease space has decreased, which is good. Though CBRE expects negative absorption to continue overall for the remainder of the year. We're still looking in pretty good shape compared to a lot of American cities based on what I've seen in the City Discussions subforum.

[officedweller]

2008 BC Assessment Office Roundtable:

http://www.bcassessment.bc.ca/pdf/publications/industry_roundtables/Office%20Market%20Roundtable%20Oct%2030%202008%20changed%20due%20to%20roll%20freeze.ppt

http://www.bcassessment.bc.ca/businesses.asp

[raggedy13]

According to CBRE, Vancouver 4Q 2009 is as follows:

Core (DT+Bway)= 26 msf
DT Vacancy = 5.8% (5.4% for AAA) - down from 6.0% in 3Q 2009.

Suburban = 15 msf
Suburban Vacancy = 12.8%

Metro = 41 msf
Metro Vacancy = 9.1%

http://www.cbre.ca/EN/Our+Offices/British+Columbia/Vancouver/Market+Reports.htm

Also, vacant sublease space has decreased for the third quarter in a row.

[red-paladin]

Hopefully this means Bentall 6 is a go.

I did email about Metrotower III and they told me it was not canceled, only delayed. I guess they wanted to make sure they had enough tenants. All three towers together are going to look like a massive black block from most angles.

[raggedy13]

^This 4Q report by Avison Young says the following on "Bental 6" (745 Thurlow)...

Meanwhile, Bentall Capital is awaiting development permit approval for its 745 Thurlow site. Renderings call for a 400,000-sf office building including two to three floors of retail. The developer says the earliest construction start date for the project is January 2012.
http://www.avisonyoung.com/library/pdf/Van_Research/OMR_YE_2009_WEB.pdf

It also mentioned that 50% of the office space in Jameson House has been sold to Washington Marine Group.

[wrenegade]

Yup, all office space in Jameson House was strata. I heard it went for north of $600 a foot too. For bare concrete slab no less!

[SpongeG]

Downtown office vacancy falls in Metro Vancouver: Colliers

METRO VANCOUVER — Metro Vancouver firms leased more office space than they gave up in the second quarter at the highest rate since the second quarter of 2008, commercial realtor Colliers International has reported.

Commercial realtors refer to this as net absorption and tenants leased 239,474 square-feet more space than was turned over bringing Metro Vancouver's office vacancy rate to 7.1 per cent in the second quarter, down from 7.6 per cent in the first quarter.

Downtown Vancouver, however, was a disproportionate beneficiary of that rush to refill space with firms filling a net 176,784 square feet of space, and one firm – Sandwell Engineering's move to 855 Homer Street – accounting for half of that.

“Regardless, downtown was the clear tenant preference this quarter with a 3.8 per cent vacancy rate, the lowest it has been in the past year,” Colliers said in the report.

The vacancy rate in suburban office markets, however, has remained flat, the report said, as new office buildings are being built without pre-leasing commitments.

...

Read more: http://www.vancouversun.com/business/Downtown+office+vacancy+falls+Metro+Vancouver+Colliers/3413665/story.html#ixzz0xIGCGIHQ

[golog]

Office tower construction marks change of attitude for Vancouver’s core (http://www.theglobeandmail.com/news/national/british-columbia/office-tower-construction-marks-change-of-attitude-for-vancouvers-core/article1794603/)
FRANCES BULA

The boom times failed to lure corporate offices to downtown Vancouver – but the recession has succeeded in resurrecting corporate towers and dispelling fears of a city core transformed into a bedroom community.

Telus Corp., B.C.’s largest private company, is planning to build a major new office tower in downtown Vancouver, the first new project initiated since the early part of the decade. That $500-million development, on a prime downtown street, follows quiet moves from major companies such as Microsoft and HSBC to flee the suburbs and consolidate operations in the city.

And there are currently six other proposals to build towers that are dedicated, with one exception, to office space only.

That is due, in part, to the recession, which has resulted in vacancy rates dropping in expensive central Vancouver and rising in the lower-priced suburbs.

It seems counterintuitive, but that’s the way recessions work.

“In hard times, companies want to cut costs. But you also see that investors flee to quality,” said John Tylee, the policy director at the Vancouver Economic Development Commission, who notes that the vacancy rate in downtown Vancouver has dropped to 4 per cent from 6 per cent two years ago.

One broker, DTZ Barnicke, noted in its last newsletter that suburban vacancies have gone as high as 18 per cent in some suburbs like Richmond and Surrey.

Mr. Tylee also said the Canada Line, which gives businesses easy access to the airport, and increasing globalization have also played their part.

“The more links there are between cities in a globalized world, the more businesses want to be in the central downtown,” he said.

The results: Microsoft – whose original landing in Richmond two years ago produced howls of anguish from the Vancouver business community – quietly consolidated its operations into a Yaletown space in October.

BC Lottery Corporation is moving this December, after 24 years, from its suburban Richmond location to the Broadway Tech Centre, near the Renfrew SkyTrain station, to be closer to transit. HSBC also consolidated its back-office operations, formerly in the suburbs, to the same location this year.

Several other digital-media companies attracted to the Lower Mainland from abroad – Sony ImageWorks, Digital Domain, and Pixar – have all chosen central-city locations.

For many, this is all a sign that Vancouver is doing the right things for business and that a lively downtown has attracted them.

“The companies that are coming here, they looked at cities all over the word and it was Vancouver’s work force and talent pool that attracted them. And that talent pool wants to live in the city,” said Mayor Gregor Robertson, who has made it his political mission to try to get foreign companies to consider locating to the city and region.

So, even though downtown office rates are reaching levels of $40 a square foot, companies are choosing to locate downtown. And that is encouraging developers to build for them.

Mr. Robertson said it was also important to tweak some policies in order to attract businesses. His council changed its policy 18 months ago on how much office space could go into industrial land.

“When we adjusted that policy, that allowed us to land BCLC [the lottery corporation],” he said.

At the Vancouver Board of Trade, economist Bernie Magnan said the best policy change the city made was two years ago, when it prohibited condo development in a large area around the central business district.

“That has put a damper on speculation. Now there is some surety about where buildings can go.”

[vanman]

Thanks golog for posting.

[Hed Kandi]

Great news.

[hollywoodnorth]

great article!

[wrenegade]

Losing BCLC and Microsoft must hurt. Richmond is getting killed.

[LotusLand]

Richmond also lost Nintendo to the Broadway Tech Centre.

Fact is most people that work in an office job prefer to work near transit or in the city.

[WarrenC12]

Transit is a huge part of commuting for sure. I work in the same complex as the BCLC Richmond office. Bentall runs this complex, and they completed a brand new LEED gold building that has sat empty for at least 2 years now... it's incredible. There was additional free space around even before BCLC and the LEED gold building.

As a side note, Bentall recently sponsored a free shuttle to Bridgeport station, which is a 5 min drive from here. It's a great service, and I use it when I take the train, although it might have been too little too late for BCLC.

The article says Microsoft consolidated to Yaletown, does anybody know how many employees they have there compared to Richmond? Where is the address?

[squeezied]

So Metro Vancouver wants Surrey city centre to be the region's 2nd metropolitan core. I guess that's a pretty lofty goal now considering the high office vacancy rates of inner suburbs combined with the fact that businesses would rather be located in the inner suburbs than outer ones like Surrey.

[LotusLand]

So Metro Vancouver wants Surrey city centre to be the region's 2nd metropolitan core. I guess that's a pretty lofty goal now considering the high office vacancy rates of inner suburbs combined with the fact that businesses would rather be located in the inner suburbs than outer ones like Surrey.

I think it make sense because it's south of Fraser and that's it. Realistically the second metropolitan core is the the Broadway area and will remain so in the future me thinks.

Surrey will be more of where lower level office work will be. Your call centres and of course some provincial ones.

For the majority if all else was = most would choose to work downtown, rather than Surrey. Even Surreyites know that but they still believe that the magical powers of Dianne Watts will save them. After all under her watch Whalley has mushroomed into a true urban centre :P

[SFUVancouver]

Dianne Watts' Mayoralty certainly has captured the imaginations of a lot of people. I think that once the new City Hall project joins the fantastic new public library she will have a giant feather under her cap with regards to the Central City area. Furthermore, once the new RCMP E division HQ and adjacent outpatient hospital are complete there will be a large number of new employees in the general vicinity which will help drive demand for service sector and food and beverage businesses that help enliven a downtown. The real challenge will be to start knitting these nodes together with a pedestrian friendly public realm, plus the City really needs to start installing mid-block pedestrian controlled signals to break up the super blocks that define so much of the city, especially the downtown area.

I think that the local press in Surrey, especially the columnists, like to make hay about the growth of their city at the relative expense of Vancouver. There is a conventional wisdom that Surrey is about to overtake Vancouver since the former's population is growing so fast and there is a perception that Vancouver is stagnant.

Out of curiosity I poked around for a few minutes on Stats Canada and BC Stats to try and find out what the relative growth of Surrey was over Vancouver. From 2001 to 2006 both cities grew by tens of thousands of people and Surrey gained about 14,000 more people than Vancouver. BC Stats' population estimates from 2006 to 2009 find that Surrey will gain approximately 1000 more people than Vancouver during that span of time, though both cities are expected to post greater absolute population grains during that period than they did in the first half of the decade. Obviously those are only estimates and I turn into a giant stats nerd whenever a new census starts to approach on the horizon.

[BCPhil]

Anyone else a little conflicted about BCLC moving to Vancouver Tech Center. First off, BCLC is hardly a tech company, and the Tech stuff they do do, is done in Kamloops or outsourced to foreign companies (that don't even know how to program online casinos apparently).

Second, even though it's a self sufficient crown corporation, it's still a government legislated monopoly that, under the guise of bringing hope and riches to the poor, pilfers money from the lazy, gullible and stupid, usually exploiting people with horrible gambling addictions.

Should they really be using the money they get from the BC population to pimp out their office space? It's not really a public service, and the proceeds of its enterprise should be going to the public good (like charities) not swank central Vancouver tech parks. The Vancouver tech center is in high demand, and I don't think government businesses should be taking away space from the high end of the market at top dollar. The extra spent on office space is less that can go towards taking care of sick children (and other important issues).

[SpongeG]

Transit is a huge part of commuting for sure. I work in the same complex as the BCLC Richmond office. Bentall runs this complex, and they completed a brand new LEED gold building that has sat empty for at least 2 years now... it's incredible. There was additional free space around even before BCLC and the LEED gold building.

As a side note, Bentall recently sponsored a free shuttle to Bridgeport station, which is a 5 min drive from here. It's a great service, and I use it when I take the train, although it might have been too little too late for BCLC.

The article says Microsoft consolidated to Yaletown, does anybody know how many employees they have there compared to Richmond? Where is the address?

Microsoft is on Cambie Street near Smithe

[golog]

City of Vancouver reports on office space, jobs, and all kinds of background aspects

Metropolitan Core Jobs and Economy Land Use Plan (http://vancouver.ca/commsvcs/planning/corejobs/research.htm)

stumbled on to this today, lots of interesting details and analyses to answer just about any question you may have

in one of the reports they used space4lease.com as a source and that site redirects to http://www.altusinsite.com/ which is a great resource for CRE in Vancouver (and elsewhere)

[officedweller]

Microsoft is on Cambie Street near Smithe

The old Safeway head office building (most recently Business Objects and SAP) - across the alley from the Catholic Charities Shelter.

[Hed Kandi]

Vancouver is Canada’s Most Expensive Office Market

We all know Vancouver is an expensive place to live. Stating that would not not shock anyone. However, Vancouver is also home to Canada’s most expensive office market. That may shock a few people. This is all according to the Office Space Across the World 2012 report, released this past week by Cushman & Wakefield Commercial Real Estate (C&W). The yearly increase in Vancouver’s central business district was modest over the previous year and remain the highest in the country with an average of $33.87 /sq. ft. Toronto is $23.30/sq. ft and Montreal sits at $20.84.

Hendrik Zessel, Senior Managing Director, C&W Vancouver says that the high rents in Vancouver are the result of demand that simply outpaces supply. “The downtown market is very tight right now,” says Zessel...

http://www.vancitybuzz.com/2012/02/vancouver-is-canadas-most-expensive-office-market/

[trofirhen]

Well, we should get a couple more snazzy office buildings out of all this.

[LeftCoaster]

Well we are for sure getting 3.

I predict we will get 4-5 in this cycle, which should take ~5-6 years to absorb.

100%
- MNP Tower
- Bentall Development
- Telus Building

One or two of the following
- Howe Building (Manulife)
- Rogers Arena building
- Credit Suisse Building
- A previously unannounced building

Hopefully the new supply can push prices down a bit, allowing businesses to expand and continue to function downtown.

[hollywoodnorth]

Well we are for sure getting 3.

I predict we will get 4-5 in this cycle, which should take ~5-6 years to absorb.

100%
- MNP Tower
- Bentall Development
- Telus Building

One or two of the following
- Howe Building (Manulife)
- Rogers Arena building
- Credit Suisse Building
- A previously unannounced building

Hopefully the new supply can push prices down a bit, allowing businesses to expand and continue to function downtown.

rogers is a GO .... we know that for a fact. so that's 4 .. rogers is mixed so maybe only count it as .75 ;)

also Burrard Gateway will happen and that's a small tower there ... lets call it .25 ;)

I think we will get more like 5-6 in this cycle

[Prometheus]

also Burrard Gateway will happen...

Will it? We haven't heard a single thing about this project for about a half year now.

[red-paladin]

What about the Granville and Cordova tower? Didn't make the list?

[Metro-One]

Well we are for sure getting 3.

I predict we will get 4-5 in this cycle, which should take ~5-6 years to absorb.

100%
- MNP Tower
- Bentall Development
- Telus Building

One or two of the following
- Howe Building (Manulife)
- Rogers Arena building
- Credit Suisse Building
- A previously unannounced building

Hopefully the new supply can push prices down a bit, allowing businesses to expand and continue to function downtown.

Hmmmmmm, does this tie into the rumors thread????

[EastVanMark]

Vancouver is Canada’s Most Expensive Office Market



http://www.vancitybuzz.com/2012/02/vancouver-is-canadas-most-expensive-office-market/

Thanks for the article. There is absolutely ZERO reason why Vancouver should have such ridiculous rent rates. This is a prime reason why companies refuse to move here and we have so much trouble retaining the ones that are located here. These new office towers can\t be built soon enough.

[officedweller]

Hmmmmmm, does this tie into the rumors thread????

My thoughts too....

[queetz@home]

Thanks for the article. There is absolutely ZERO reason why Vancouver should have such ridiculous rent rates. This is a prime reason why companies refuse to move here and we have so much trouble retaining the ones that are located here. These new office towers can\t be built soon enough.

Unfortunately, Alberta Investment Management Corp. (AIMCo), Ivanhoe Cambridge and Matco Investments Ltd. do not own any of the lands where those proposed office buildings are, and to my knowledge, do not have any land in downtown Vancouver. They seem to be the type that have the guts to build with or without an anchor tenant, as they have successfully done with Eight Avenue Place in Calgary. We need developers like those in Vancouver so we wouldn't have the issues that you mentioned...
:P

[s211]

Unfortunately, Alberta Investment Management Corp. (AIMCo), Ivanhoe Cambridge and Matco Investments Ltd. do not own any of the lands where those proposed office buildings are, and to my knowledge, do not have any land in downtown Vancouver. They seem to be the type that have the guts to build with or without an anchor tenant, as they have successfully done with Eight Avenue Place in Calgary. We need developers like those in Vancouver so we wouldn't have the issues that you mentioned...
:P

It wasn't guts that made them build on spec. The real reason they went spec at Eight Avenue is much more terrifying. Not sure if the real reason's ever been spilled on the web. If not, I'm not sure I want to be the one to spill the beans, but let me assure you that it wasn't because of guts that they went ahead.

[Wentworth]

It wasn't guts that made them build on spec. The real reason they went spec at Eight Avenue is much more terrifying. Not sure if the real reason's ever been spilled on the web. If not, I'm not sure I want to be the one to spill the beans, but let me assure you that it wasn't because of guts that they went ahead.

It was built to house the Temple of Gozer?

[LeftCoaster]

It was also not a success, SITQ took a beating on that tower. A lot of people lost their jobs over that debacle, certainly not something we want to emulate here in Vancouver.

And Queetz, Oxford is building their project on spec so we certainly have developers who are willing to take a gamble on this market.

I see the rent curve stabilizing or dropping in about 3 years, bringing the city's competitiveness back into line. It's important to note that this is not a Vancouver problem, all cities experience a rent run up prior to office space buildout, the time lag between demand and supply is just too long in the industry to have efficient rents over time. It can be frustrating to all involved but it is the nature of real estate.

[LeftCoaster]

Hmmmmmm, does this tie into the rumors thread????

It just may...

For the record there are more than a few office towers in the works which have not yet hit the public radar. Most are doubtful for this cycle but may be brought to the city soon to be ready for the next round.

Also Oxford is quite serious about their Melville property, and will be positioning it to be ready for the next cycle. I would imagine they pushed MNP Tower sooner as Melville is currently generating a return with in place tenants whereas I doubt The University Building was doing anything positive to their bottom line.

[queetz@home]

It was also not a success, SITQ took a beating on that tower. A lot of people lost their jobs over that debacle, certainly not something we want to emulate here in Vancouver.

And Queetz, Oxford is building their project on spec so we certainly have developers who are willing to take a gamble on this market.



You've seen my posts in 1021 Hastings and know I have been cheering for Oxford. Even suggesting that Credit Suisse do the same for their yet to be built office tower. Be nice if Oxford owns and is building the other office tower projects. And who was the developer of PWC Place again? That was also built "with or without an anchor tenant", and yet they were handsomely rewarded for that... :D

It wasn't guts that made them build on spec. The real reason they went spec at Eight Avenue is much more terrifying. Not sure if the real reason's ever been spilled on the web. If not, I'm not sure I want to be the one to spill the beans, but let me assure you that it wasn't because of guts that they went ahead.

I've actually been following that particular project since 2000, and if you see an entry in Emporis about that building (or Penny Lane), it was entered by *me*....man that was such a long time ago. So I do vaguely recall something about some deadline imposed by the City of Calgary to get it built or else they have to start all over on the app.

But nevertheless, the business publications always taunt that particular project as going back to the reckelessness of the 80s, how foolish they are for building it anyway despite the impending doom of the Calgary office market at that time. They always picked on Eight Avenue Place, their favourite whipping boy, and yes, there is still some guts involved because the devs could have simply abandoned the whole process as having an empty 50 storey office building would have killed them financially. But they built it anyway, and now its full, the devs laughing themselves at the bank and for sure are taunting those know it all real estate analysts how deeply wrong they are ;)

[trofirhen]

In the various lists of towers sure to come onstream; the MNP Building, The Bentall 6 on Thurlow, and of course the Telus.

But what about the Crédit-Suisse-financed tower? I thought that was a 100% for sure. Are there still ences to climb before that oen gets the green light, are the developers holding off, or what?

[Metro-One]

It just may...

For the record there are more than a few office towers in the works which have not yet hit the public radar. Most are doubtful for this cycle but may be brought to the city soon to be ready for the next round.

Also Oxford is quite serious about their Melville property, and will be positioning it to be ready for the next cycle. I would imagine they pushed MNP Tower sooner as Melville is currently generating a return with in place tenants whereas I doubt The University Building was doing anything positive to their bottom line.

Hmm, would such a possible tower proposal be more serious than just a place holder or fantasy proposal?

[jlousa]

I'd say the Credit Suisse tower is the least likely to go ahead. That's not to say it won't, but it's certainly less likely then the others, the Burrard Gateway office tower and the Howe/Nelson tower are both much more likely to proceed, not to mention the Rogers Arena west tower.
There is so much office space being built/proposed across the region that we will see some easing of rates especially outside the core, which should make it more desirable for start ups.

[Canadian Mind]

I had almost completely forgotten about the old 600 footer rumour for Melville. How long ago was that? 2007/2008? Here's hoping that with the new rules they can go even higher. :D

[logan5]

I'm surprised and somewhat disappointed to see that nothing is being proposed for Cambie and Broadway. I would imagine that in that area it would be cheaper to develop an office tower. 1 or 2 significant towers of say 20 to 25 stories would transform the area and give it a totally different vibe.

[jlousa]

It wouldn't be any cheaper, it would probably end up more expensive as land prices on a buildable sftage basis are just as high if not higher then the commercial areas of downtown, you also wouldn't see office towers with that many floors, probably ~15flrs (200ft-225ft) at the most. I would suspect any office space would actually be much shorter but bulkier in that area.

[Canadian Mind]

Why couldn't Broadway be zoned for taller structures in the future? Would make for an amazing canyon. :D

[Prometheus]

Well, there is the mayor's view to think about.

[officedweller]

and, east of Cambie it would probably "change the character of the neighbourhood".

[s211]

I've actually been following that particular project since 2000, and if you see an entry in Emporis about that building (or Penny Lane), it was entered by *me*....man that was such a long time ago. So I do vaguely recall something about some deadline imposed by the City of Calgary to get it built or else they have to start all over on the app.


The actual reason is far more scary on the "whups" scale.

[twoNeurons]

Scary in what way?

[LeftCoaster]

You've seen my posts in 1021 Hastings and know I have been cheering for Oxford. Even suggesting that Credit Suisse do the same for their yet to be built office tower. Be nice if Oxford owns and is building the other office tower projects. And who was the developer of PWC Place again? That was also built "with or without an anchor tenant", and yet they were handsomely rewarded for that... :D


It was Cadillac Fairview who developed PWC place, although don't expect them to build on spec at the moment. You bring up a few examples of successes building on spec but there are also many failures, and there is usually little incentive to develop in such manner. We all want to see it but we are talking about hundreds of millions of dollars here, people aren't going to risk that kind of capital just to appease a few urban dreamers.

They always picked on Eight Avenue Place, their favourite whipping boy, and yes, there is still some guts involved because the devs could have simply abandoned the whole process as having an empty 50 storey office building would have killed them financially. But they built it anyway, and now its full, the devs laughing themselves at the bank and for sure are taunting those know it all real estate analysts how deeply wrong they are ;)

It may be full but the project was still a DISASTER. They offered cut rates to fill up the building and lost a substantial amount of money on the project.

I was in absolutely no way a success and the developers aren't laughing at the bank, in fact most of them don't even work at SITQ any more as a result of the project.

[red-paladin]

If it was so bad, why are they building the second tower right after?

[s211]

Scary in what way?

Let's just say there was no turning back.

[LeftCoaster]

If it was so bad, why are they building the second tower right after?

Becuase they need to make some money back :)

Honestly they need to hit this second building while the rent curve is at its peak so they make up for the ugly deals they had to do a few years ago.

[officedweller]

Interesting / sad that the office towers being built in Calagary and Toronto - at 800,00 sq ft and 980,000 sq ft are twice the size of the office towers being built in Vancouver:

http://www.building.ca/news/development-boom-ramping-up-in-canadas-four-largest-office-markets/1001832827/

[Millennium2002]

As we all know, the views are precious in Vancouver. You really can't get away with that...

At the same time, in some ways I'm surprised none of the other cities in the region have actually went ahead with attracting sizable office towers vs apartments... Surrey for example could really use a few more in the city centre... even Coquitlam and Burnaby might be good contenders as well. None of these places have significant restrictions... and yet... I guess the idea of being at or very close to Downtown Vancouver is the key.

[Metro-One]

Burnaby is the only city in Metro Vancouver outside of downtown that has a decent collection of larger sized office buildings.

[LeftCoaster]

As we all know, the views are precious in Vancouver. You really can't get away with that...

At the same time, in some ways I'm surprised none of the other cities in the region have actually went ahead with attracting sizable office towers vs apartments... Surrey for example could really use a few more in the city centre... even Coquitlam and Burnaby might be good contenders as well. None of these places have significant restrictions... and yet... I guess the idea of being at or very close to Downtown Vancouver is the key.

It has nothing to do with views and everything to do with tenant types.

Calgary/Toronto have huge tenants that require large floorplates and contiguous space.

Vancouver has tons of small users who don't require larger floorplates.

[queetz@home]

It has nothing to do with views and everything to do with tenant types.

Calgary/Toronto have huge tenants that require large floorplates and contiguous space.

Vancouver has tons of small users who don't require larger floorplates.

But you have to ask...why does only Calgary and Toronto (and I guess Montreal too) are the only major cities in Canada that have huge tenants that require large floorplates and contiguous space?

True, Calgary has the energy companies, Toronto has the finance companies. But clearly the world is more than just energy and banking.

So why oh why is Vancouver so stuck with teeny tiny tenants? :sly:

[SFUVancouver]

But you have to ask...why does only Calgary and Toronto (and I guess Montreal too) are the only major cities in Canada that have huge tenants that require large floorplates and contiguous space?

True, Calgary has the energy companies, Toronto has the finance companies. But clearly the world is more than just energy and banking.


Would sort of companies do you expect would have a need for multiple floors in downtown office buildings?

[Metro-One]

But you have to ask...why does only Calgary and Toronto (and I guess Montreal too) are the only major cities in Canada that have huge tenants that require large floorplates and contiguous space?

True, Calgary has the energy companies, Toronto has the finance companies. But clearly the world is more than just energy and banking.

So why oh why is Vancouver so stuck with teeny tiny tenants? :sly:

it has a lot to do with business culture as well. For example, Vancouver is a hotbed for mining firms. I have worked with such companies off and on over the last 8 years, and the average employee there rarely goes to the office. they are either on site in Asia / South America / Europe / etc... or on the road at conferences / trade shows, or live half way across the world and only come to their Vancouver HQ once every couple months. So a full office is an extremely rare sight.

[queetz@home]

it has a lot to do with business culture as well. For example, Vancouver is a hotbed for mining firms. I have worked with such companies off and on over the last 8 years, and the average employee there rarely goes to the office. they are either on site in Asia / South America / Europe / etc... or on the road at conferences / trade shows, or live half way across the world and only come to their Vancouver HQ once every couple months. So a full office is an extremely rare sight.

But aren't those big companies in Calgary mining firms too?

Or are they categorized differently....say Calgary has the BIG mining firms while Vancouver has the little mining firms....:shrug:

[Metro-One]

But aren't those big companies in Calgary mining firms too?

Or are they categorized differently....say Calgary has the BIG mining firms while Vancouver has the little mining firms....:shrug:

Energy firms are not considered to be mining firms generally.

They are actually very different.

Mining companies are minerals (precious metals, rare earth elements, etc...)

Oil and gas are fossil fuels. Yes there is some overlap of course, by they are largely considered to be separate entities. Energy companies tend to be far larger than mining companies as well, and they require far more infrastructure (such as pipelines) and therefore far more office jobs.

the same way companies that specialize in "mining" for gravel / stones are not considered "mining" companies generally.

[queetz@home]

Would sort of companies do you expect would have a need for multiple floors in downtown office buildings?

I dunno but clearly, Conde Nast is neither an energy company or a finance company. So there are other types of businesses out there that can occupy multiple floors of downtown office buildings....

[queetz@home]

Energy firms are not considered to be mining firms generally.

They are actually very different.

Mining companies are minerals (precious metals, rare earth elements, etc...)

Oil and gas are fossil fuels. Yes there is some overlap of course, by they are largely considered to be separate entities. Energy companies tend to be far larger than mining companies as well, and they require far more infrastructure (such as pipelines) and therefore far more office jobs.

the same way companies that specialize in "mining" for gravel / stones are not considered "mining" companies generally.

So what you're saying it is a category issue.

So Vancouver attracts only a certain type of business category, in this case small mining firms that deal with rocks and such, while Calgary attracts a certain catergory of mining firms, such as those that mine fossil fuels.

So now the question is this....why can't Vancouver attract a more diverse group of companies that happen to be large as well?

[nname]

Another issue is that.. does a company actually need a location in or close to downtown? For the company I work for (software/tech), we recently moved out of an office tower in the core area to a business park due to larger space, cheaper rent, and much easier for expansion. The move also due to the fact that the office tower doesn't really want companies like us, who takes up 6-7 floors of a building and constantly ask for more. For a software company point of view, there's no benefit of being located near the core unless there's little of other choices available.

[s211]

So what you're saying it is a category issue.

So Vancouver attracts only a certain type of business category, in this case small mining firms that deal with rocks and such, while Calgary attracts a certain catergory of mining firms, such as those that mine fossil fuels.

So now the question is this....why can't Vancouver attract a more diverse group of companies that happen to be large as well?

It's pretty straightforward actually. Vancouver is largely a branch office location, not a large head office location.