Office Market Discussion

[whatnext]

Originally Posted by TwoFace

How long before developers start considering repurposing these, as Anthem did with the Cube.

I hope not. Vancouver already dodged that bullet once when condos were starting to infiltrate the CBD and the council of the day had to restrict them.

[Changing City]

Originally Posted by whatnext

I hope not. Vancouver already dodged that bullet once when condos were starting to infiltrate the CBD and the council of the day had to restrict them.

Conversion isn't necessarily a cheap alternative. It triggers seismic upgrades, if they're necessary (not required on the Qube / Wescoast Energy project, but generally true). The water/sewer service cores needed for larger floorplate conversions aren't always straightforward either.

If the office market ends up with significant vacancies, especially outside the CBD (Water St, Yaletown etc) it's easy to see a return to the type of residential conversions that were built in the 1990s and 2000s coming back. Older offices on the Downtown fringes (like the one replaced for the Kengo Kuma tower) will be more likely to redevelop.

Within the CBD we can already see hotel projects returning, including office to hotel conversions in both old and new buildings, so those could become more common. Conversion of more recent office buildings, esp[ecially with larger floorplates, is very unlikely, unless and until it's obvious that demand for office space has disappeared, permanently. That's certainly not the case here so far.

[TwoFace]

Originally Posted by Changing City

Conversion isn't necessarily a cheap alternative. It triggers seismic upgrades, if they're necessary (not required on the Qube / Wescoast Energy project, but generally true). The water/sewer service cores needed for larger floorplate conversions aren't always straightforward either.

If the office market ends up with significant vacancies, especially outside the CBD (Water St, Yaletown etc) it's easy to see a return to the type of residential conversions that were built in the 1990s and 2000s coming back. Older offices on the Downtown fringes (like the one replaced for the Kengo Kuma tower) will be more likely to redevelop.

Within the CBD we can already see hotel projects returning, including office to hotel conversions in both old and new buildings, so those could become more common. Conversion of more recent office buildings, esp[ecially with larger floorplates, is very unlikely, unless and until it's obvious that demand for office space has disappeared, permanently. That's certainly not the case here so far.

Yes, interesting times

[officedweller]

Originally Posted by Changing City

Conversion isn't necessarily a cheap alternative. It triggers seismic upgrades, if they're necessary (not required on the Qube / Wescoast Energy project, but generally true).

Just a note that The Qube did require seismic upgrading.
A friend of mine worked on it.

Here's the Glotman Simpson webpage on the project:
https://glotmansimpson.com/project/the-qube/

Part of the transformation of the building, originally built in 1968, required that it be seismically upgraded to meet current building code seismic load resistance requirements. However, its status as a historical landmark building meant that its unique exterior appearance could not be changed in any way. Specifically, the shape of the core at the bottom of the building had to be preserved. In addition, the client did not want to change the column-free open floor space that the original design created. As the floor plates were already not large, this presented a challenge. Most traditional methods of seismic upgrading involve adding walls or columns. The solution also had to be time efficient, with installation done concurrently with other trades work.

Glotman•Simpson, in cooperation with Fyfe, a carbon fibre producer from San Diego, offered the solution to this challenge, using externally bonded composite carbon fibre reinforcing to seismically upgrade the building.

https://glotmansimpson.com/project/the-qube/

[Changing City]

Originally Posted by officedweller

Just a note that The Qube did require seismic upgrading.
A friend of mine worked on it.

Here's the Glotman Simpson webpage on the project:
https://glotmansimpson.com/project/the-qube/

https://glotmansimpson.com/project/the-qube/

Amazing: thanks. So even the most advanced engineering of the day for earthquake proofing needed an upgrade! No wonder buildings from that era are getting redeveloped, rather than converted.

The conversion to residential of that building prompted a policy change. Because it was in a residential zone, it only needed a change of use, and that was processed without anyone on Council knowing about it. After that conversions over a certain size have to be approved by Council.

[whatnext]

From today's Sun:

Surprising post-pandemic shift hits downtown Vancouver as office vacancies rise to 12.3%
'You might think the downtown office market is falling, but the reality is that it's healthy,' said Glenn Gardner, principal at Avison Young
Author of the article: Joanne Lee-Young
Published Jun 28, 2023

A day after a report that two of Canada’s largest pension funds were putting up for sale two downtown Vancouver office towers — including one occupied solely by Amazon.com Inc. — a commercial real estate firm said the vacancy rate for downtown Vancouver office space had risen to 12.3 per cent in the last quarter.

On Wednesday Avison Young said three-quarters of the total increase in downtown Vancouver vacant office space in the last quarter came from tenants choosing not to renew primary leases rather than from an increase in the subleasing market.

Most observers in Vancouver were sanguine with their analysis of the situation.

Relative to other downtown office markets, such as in Calgary, Toronto and the U.S., Vancouver is more liquid for sellers, said Ross Moore, a managing broker at real estate company Cresa.

This could explain the choice of the pension funds to sell the Vancouver properties, he said.....

https://vancouversun.com/business/real-e...shift-downtown-vancouver-office-vacancie

[jollyburger]

ACL dumped floors 12-15 at 980 Howe?

https://www.cushmanwakefield.com/en/cana...c/vancouver/980-howe-street/s120514825-l

Original move in announcement:

https://www.bctechnology.com/news/2016/3...ve-New-Building-Downtown-at-980-Howe.cfm

They sold the company in 2021

https://biv.com/article/2021/02/diligent-corp-acquiring-vancouver-software-firm-galvanize-us1b-deal

And seems like Flight Centre dumped floor 7

https://www.loopnet.ca/Listing/980-Howe-St-Vancouver-BC/27178908/

[Changing City]

Originally Posted by jollyburger

ACL dumped floors 12-15 at 980 Howe?

https://www.cushmanwakefield.com/en/cana...c/vancouver/980-howe-street/s120514825-l

Original move in announcement:

https://www.bctechnology.com/news/2016/3...ve-New-Building-Downtown-at-980-Howe.cfm

It looks like floors 12 and 15 are available, so ACL presumably have retained 13 and 14.

[jollyburger]

Originally Posted by Changing City

It looks like floors 12 and 15 are available, so ACL presumably have retained 13 and 14.

The brochure PDF had floor plans for all four of the floors. Diligent still seems to be hiring in Vancouver though.

[Changing City]

Interesting factoid in the Q2 Avison Young Office Market report.

980 Granville, currently under construction has two tenants lined up. Cornerstone Community College was known before, but The Passport Office will be taking 18,174 sf of space - which looks like it's a full floor. That suggests to me that they're already planning for the Sinclair Centre project.

[jollyburger]

I guess they'll both be on the upper floors hopefully.

[madog222]

By the square footage it's the 2nd floor, ground floor is retail anyway. https://www.avisonyoung.ca/properties/980-granville-street

The Sinclair Centre should be fully vacated next year to allow for destructive inspection.

[jollyburger]

Pan American took over 30,000SF at Vancouver Centre II.

https://www.naibc.ca/wp-content/uploads/2023/07/NAI_Vancouver-Office-Report_Q2-2023.pdf

Kaseya took 27,000SF at 555 Robson. Seems like it's levels 4/5 and Level 7 is still up for lease with CBRE. I guess Avigilon is still on the 3rd floor. They were first available around 2020. The subleases expire in 2028.

[jollyburger]

BOMA

Subleasing vs. Head Lease as leases begin to expire:
Vacancy rates continue ticking up across Metro Vancouver in the second quarter of 2023.

In previous quarters, sublets as a percentage of vacancy was the key theme as businesses sublet their space to try and recover some costs from underused properties. And still this quarter, Colliers has noted that Vancouver still has the highest sublease ratio in the country.

However, according to Avison Young, this quarter’s uptick in downtown Vancouver was driven by head lease vacancy, rather than sublease vacancy. In other words, expiring leases that were not renewed or sublet.

Avison Young notes that head lease vacancy accounted for 76% of the total rise in downtown vacant space this quarter. This is a sharp increase from 52% in the first quarter of this year.

For over three quarters of new downtown office vacancies, tenants waited for their lease to expire before walking away and did not sublet earlier.

So why didn’t these properties sublet their property earlier, or renew their lease?

According to Avison Young, possible reasons include spaces built out for tech-based tenants have seen limited demand on the sublease market so other tenants with similar spaces did not try to sublet, and businesses have simply waited for their leases to run out before deciding to pull back on space.

Similarly, JLL noted that the demand for “large-block, built-out sublease space” is limited with full-floor sublease spaces sitting vacant, and year to date downtown sublease absorption is negative at roughly -500,000 SF.

NAIBC also noted that rising vacancy rates are attributable to companies reevaluating spaces as their leases expire. According to NAIBC we will begin to see a shrinking sublease market as leases continue to expire. “A notable increase in unrenewed leases, or tenants right sizing continues to drive vacancy rates up.” [1]

https://www.boma.bc.ca/about-boma/news/market-report-q2-2023-vancouver-office-figures/

[jollyburger]

Preleasing on 837 Beatty. Feb 2025 occupancy

https://www.spacelist.ca/listings/bc/vancouver/837_beatty_street

[SFUVancouver]

Originally Posted by jollyburger

Pan American took over 30,000SF at Vancouver Centre II.
[...]

Pan American Silver, for those who are interested. Pan Am the airline isn't making an improbable comeback from a Vancouver home base.

[jollyburger]

Some photos inside the new Aritizia offices





SIZE: 62,000 SF
VALUE: $11,000,000

https://www.etroconstruction.com/case-studies/artizia-411-railway

[Vin]

Looks like even more businesses are dumping downtown Vancouver and moving to greener pastures elsewhere, including the suburb municipalities.

Downtown Vancouver no longer has Canada's lowest office vacancy rate for a major city centre
https://dailyhive.com/vancouver/downtown-vancouver-office-vacancy-rate-third-quarter-2023

I do remember downtown's office vacancy rate used to hit as low as 7% once, but has now hit 11.9%.

[Migrant_Coconut]

The suburbs' inability to attract an office tower higher than 25 floors says otherwise.

[Changing City]

Originally Posted by Vin

Looks like even more businesses are dumping downtown Vancouver and moving to greener pastures elsewhere, including the suburb municipalities.

I do remember downtown's office vacancy rate used to hit as low as 7% once, but has now hit 11.9%.

The suburban office vacancy rate increased more than the Downtown rate increased, so you weren't looking very hard. So far this year there are an additional 883,666 sq ft of occupied offices Downtown, while there's a net loss of 408,051 sq ft of occupied space in the suburbs.

The report said, and the Hive reported, that the increase in available space is because businesses are coming to terms with new hybrid forms of work, with many office-based employees only in the office part of the week. That means companies are offering some of their space back to the market as subleased space, or renewing in less space. So they're not closing, or moving, or downsizing their workforce, just working in a smaller space than they used to occupy.

Add to that over 2 million sq ft of new space completed so far this year, (compared to just 147,000 sq ft in Downtown Toronto, for example), not all of it occupied yet, and the vacancy rate will grow a little.

The vacancy rate for Downtown office space was over 11% during the late 1970s, then again for much of the 1980s, and again the first half of the 1990s, and over 2 years in the early 2000s.