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Posted Feb 7, 2008, 6:50 AM
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Registered User
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Join Date: Jul 2001
Location: Vancouver
Posts: 41,386
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From the Sun:
Quote:
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
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