Office Market Discussion

[WarrenC12]

Originally Posted by Changing City

Here are the WeWork leases I could identify from Commercial Realtor's information

2017 Bentall 3 77,000
2018 333 Seymour 75,600
2018 Bentall II 54,000
2018 Marine Gateway 51,870
2019 Main Alley (M1) 2015 Main, 43,180
2019 1045 Howe, 56,000
2019 Station Square 58,820

Future commitments
B6, (1090 W Pender) 170,000
The Amazing Brentwood (tower 3) 77,000

That's quite the list over the past few years. Aren't they committed to more around that Main St/Hootsuite redevelopment that's underway?

Any idea how active & busy those locations are now with WeWork subleases or however they structure things?

[rofina]

Originally Posted by WarrenC12

That's quite the list over the past few years. Aren't they committed to more around that Main St/Hootsuite redevelopment that's underway?

Any idea how active & busy those locations are now with WeWork subleases or however they structure things?

I keep on reading that Vancouver has been a top performing market for WeWork. So I assume all is well on the occupancy front.

I know quite a few local business that lease from WeWork. They use it as an option for satellite office without expanding their existing permanent digs.

Construction costs are preposterous even for tenant improvements, the flexibility and quality of space that WeWork offers is actually quite attractive.

[SpongeG]

Metro Vancouver’s office vacancy rate to tighten further to record lows: report

Market is at a “critical juncture” with demand from global technology firms making it increasingly “a victim of its own success,” says Avison Young
By Joannah Connolly, Glacier Media Real Estate | February 12, 2020


The Deloitte Summit building at 400 West Georgia Street, by developer Westbank, is 84 per cent preleased as of end 2019, said Avison Young | Image courtesy Westbank

Metro Vancouver’s already scorching-hot office market is likely to see even further tightening of vacancy rates to new record lows over the next year, according to a February 11 report by Avison Young.

Downtown office vacancy was historically low in 2019, falling to 2.6 per cent at year-end 2019 from 2.9 per cent a year earlier, reported the commercial real estate brokerage. This is likely to fall even further in 2020 to a new record low, according to the report, which will result in “upward pressure” on already high office rents.

Across the Metro Vancouver region, which has a total of 51.8 million square feet of office space, the overall vacancy rate at year-end 2019 fell to 4.4 per cent from 5.1 per cent a year earlier and 8 per cent two years previously. In mid-year 2019, it reached a record low of 4.3 per cent, but Avison Young predicted the rate would “drop significantly lower in 2020.”

Excluding Vancouver proper, suburban office vacancy slipped to 6.2 per cent at year-end 2019 (from 7.3 per cent a year earlier), which Avison Young described as the tightest suburban vacancy on record since the company started tracking it in 1997.

...

https://biv.com/article/2020/02/metro-va...gqN0JjRAPwkVC0Cird2jlCabpnLSttIyQe4cSRuw

[logan5]

For chrissakes, no height limit for office towers!

[scryer]

Originally Posted by logan5

For chrissakes, no height limit for office towers!

Mmmmhmm….

[fredinno]

Originally Posted by logan5

For chrissakes, no height limit for office towers!

Then you may as well be killing the viewcones.

[scryer]

Originally Posted by fredinno

Then you may as well be killing the viewcones.

Melikes that idea too.

Office shortage, home shortage, Nimbys, land shortage; yeah, I can do without the view cones to meet the demands of the region. Just me though.

[rofina]

Originally Posted by scryer

Melikes that idea too.

Office shortage, home shortage, Nimbys, land shortage; yeah, I can do without the view cones to meet the demands of the region. Just me though.

I do find this city funny sometimes.

- Industrial land shortage
- Office space shortage
- Decade long housing crisis/shortage

But somehow there is a never ending list of people saying things are pretty all right and we should maintain status quo, or even look at stricter building guidelines.

At what point would things not be all right? I don't get where the lines get drawn any more.

[Galaxy]

Wait for it I can see the headline already in my rearview mirror "Burnaby to build western Canada's tallest pure office tower!"

or wait even better

"Burnaby has the top 8 tallest towers in the region!"

Meanwhile in Vancouver "City council rejects another proposal because of intrusion into view cones"...

I am total with you guys with regard to getting rid of the view cones but with the current climate in this city, I don't think these dreams are possible though.

[misher]

Originally Posted by Galaxy

Wait for it I can see the headline already in my rearview mirror "Burnaby to build western Canada's tallest pure office tower!"

or wait even better

"Burnaby has the top 8 tallest towers in the region!"

Meanwhile in Vancouver "City council rejects another proposal because of intrusion into view cones"...

I am total with you guys with regard to getting rid of the view cones but with the current climate in this city, I don't think these dreams are possible though.

Even in areas not covered by the cones we don't get buildings this tall. I get why people target the viewcones but honest its bad in places they don't cover already so I don't think eliminating them will do much.

[Changing City]

There's a thread for the viewcone policy discussion. Even without a viewcone (or shadowing public spaces) policy, there would still be a shortfall right now, and a low vacancy rate. Developers build the space they're reasonably confident of leasing. The market looked like demand was going up, so several office projects started up over a very short period, so we're now seeing more office space under construction Downtown than ever before. And in Mount Pleasant too. Although not in any suburban centre, where almost nothing is under construction. It's just that demand has been even greater than expected, and US tech firms in particular are piling into Vancouver. If it becomes a pattern (rather than a short-term response to US immigration policy) other projects will get built - they're already lining up. Ironically, if they were really tall, they'd take longer to build.

[GenWhy?]

Originally Posted by misher

Even in areas not covered by the cones we don't get buildings this tall. I get why people target the viewcones but honest its bad in places they don't cover already so I don't think eliminating them will do much.

That's the reality.

[GenWhy?]

Originally Posted by Changing City

There's a thread for the viewcone policy discussion. Even without a viewcone (or shadowing public spaces) policy, there would still be a shortfall right now, and a low vacancy rate. Developers build the space they're reasonably confident of leasing. The market looked like demand was going up, so several office projects started up over a very short period, so we're now seeing more office space under construction Downtown than ever before. And in Mount Pleasant too. Although not in any suburban centre, where almost nothing is under construction. It's just that demand has been even greater than expected, and US tech firms in particular are piling into Vancouver. If it becomes a pattern (rather than a short-term response to US immigration policy) other projects will get built - they're already lining up. Ironically, if they were really tall, they'd take longer to build.

Thank you.

[rofina]

Originally Posted by Changing City

There's a thread for the viewcone policy discussion. Even without a viewcone (or shadowing public spaces) policy, there would still be a shortfall right now, and a low vacancy rate. Developers build the space they're reasonably confident of leasing. The market looked like demand was going up, so several office projects started up over a very short period, so we're now seeing more office space under construction Downtown than ever before. And in Mount Pleasant too. Although not in any suburban centre, where almost nothing is under construction. It's just that demand has been even greater than expected, and US tech firms in particular are piling into Vancouver. If it becomes a pattern (rather than a short-term response to US immigration policy) other projects will get built - they're already lining up. Ironically, if they were really tall, they'd take longer to build.

In any other North American market if vacancies were this low you would have plenty of towers being put up on spec. There is many reasons why this is not the case in Vancouver, none of them particularly good.

[misher]

Originally Posted by rofina

In any other North American market if vacancies were this low you would have plenty of towers being put up on spec. There is many reasons why this is not the case in Vancouver, none of them particularly good.

Highest costs to build in Canada and longest approval process.

I suspect we will see a LOT of commercial being built down Broadway once the corridor plan is completed. 2nd biggest job centre in Vancouver and office towers are a lot less controversial than luxury condos but likely more profitable than rental condos. I suggest mixed rental/commercial buildings at every city meeting because why shouldn't you be able to live in the same building you work. Plus condos want to be at the highest levels for the view while offices want the lower levels for cheap lease rates. Offices want a daytime concierge for clients and condos want a nighttime concierge for security. Offices want daytime visitor parking for clients, condos want visitor parking for night time visitors. Both would use a coffee shop on the ground floor.

The trip to and from work is definitely a big source of our pollution, we need to integrate and lower the distance between home and work. Plus I'm sure a lot of you would prefer to take the elevator up to use your own washroom than the shared one. Or go home and make a sandwich for lunch and watch TV then come back.

[Changing City]

Originally Posted by rofina

In any other North American market if vacancies were this low you would have plenty of towers being put up on spec. There is many reasons why this is not the case in Vancouver, none of them particularly good.

Vancouver has a Downtown office vacancy rate of 2.3% in Q4 2019. There were 3.9m sq. ft. of space under construction Downtown, which represents 16.5% of the existing office stock, according to CBRE. Net absorption of office space Downtown was 378,606 sq. ft.

Compare to Toronto with a downtown office market nearly 4 times bigger (87 million sq. ft. of space compared to 23 million sq. ft. in Vancouver). Their vacancy rate was lower, their absorption was only double Vancouver's and they're building a smaller proportion of new office space.

Downtown Toronto has a 2.2% vacancy rate and 8.6m sq. ft. of space under construction, which represents 9.8% of Downtown office stock. In 2019 "Toronto’s overall downtown office market recorded 787,606 sq. ft. of positive absorption this year, which is below the five-year average of 1.7 million sq. ft. This decrease is the result of Toronto’s downtown vacancy reaching its practical floor and limited deliveries of new office supply."

Several of Vancouver's current buildings started on spec. 753 Seymour is still leasing up, so is 1090 W Pender (B6). The Burrard Street Bing Thom office has yet to announce any tenants. About a million square feet of space currently being built has yet to find a tenant.

[fredinno]

What would be the impact of the incoming economic recession on the industrial/office/residential market? I know a lot of places are already leased out, but corporate debt is a serious problem this time around and household debt in Canada are actually higher than the USA right now adjusted to GDP per capita, so that'd seriously cause a deflationary impact to all sectors of RE. China will also likely enter recession if it hasn't already (China can't keep delaying the inevitable with more debt forever, so if it's going to fall, it seems likely to be with everyone else).

Industrial seems safe (maybe), if nothing else bceuase of physical lack of space, though it may be less under pressure.
Maybe rental will have less pressure if residential RE goes down another 20-30%?

[misher]

Originally Posted by fredinno

What would be the impact of the incoming economic recession on the industrial/office/residential market? I know a lot of places are already leased out, but corporate debt is a serious problem this time around and household debt in Canada are actually higher than the USA right now adjusted to GDP per capita, so that'd seriously cause a deflationary impact to all sectors of RE. China will also likely enter recession if it hasn't already (China can't keep delaying the inevitable with more debt forever, so if it's going to fall, it seems likely to be with everyone else).

Industrial seems safe (maybe), if nothing else bceuase of physical lack of space, though it may be less under pressure.
Maybe rental will have less pressure if residential RE goes down another 20-30%?

Pressure on rental didn't go down in Vancouver when prices went down. Of course this was because taxes rose so the price of RE didn't really "change" as taxes just replaced the price decrease. The Foreign Buyer tax slightly increased pressure on renters as foreign bought units usually ended up being added to the rental pool.

I would say higher profit margins boosts supply creation which reduces pressure on rental if population growth stays the same. Prices do not = profit margins, margins have not growth with price increases in Vancouver.

Funnily enough, renters hate speculators when speculators are the ones creating rentals to help renters.

[TheTerminalCity]

Originally Posted by misher

Funnily enough, renters hate speculators when speculators are the ones creating rentals to help renters.

How are speculators creating rentals again?

Developers sure are building more rental, though arguably still not enough is being delivered. Where do speculators come into play?

[officedweller]

At the individual level.
Purchasers who buy for speculation will rent out.
That filled the rental market before developers got back into the rental market with government incentives.