Office Market Discussion

[Genauso]

If anyone wants to look up CRE availability and prices on a map, http://spacelist.ca has been great

[Prometheus]

From Business In Vancouver:

Vacancies are rising, but so is uncertainty over new demand

By Peter Mitham
Nov. 25, 2014

Vacancies in downtown Vancouver office towers are at their highest in nine years, and rising.

Anxious not to lose tenants, landlords are signing tenants for shorter periods and offering significant concessions to keep them around for the duration.

Meanwhile, with the fate of liquefied natural gas prospects hanging in the balance, many are starting to wonder: where will demand come from?

While a major tenant is in the offing to fill out 745 Thurlow Street, and another prospect is rumoured to be close to signing a deal for two floors of the Exchange – SwissReal Group’s project at 475 Howe Street, which broke ground this spring with nary a pre-lease commitment – most of the activity has been driven by companies already present in the market.

“There’s really only one new tenant coming into the market, and that’s Amazon,” said John Freyvogel, a senior vice-president with Colliers International, during a panel discussion at the Vancouver Real Estate Leasing Conference last month.

With downtown vacancies hitting 9.6% in the third quarter, and the first of the new downtown towers set to come on stream by the end of the year, Freyvogel expects vacancies to top 10% in 2015 – a level not seen since early 2005.

The official Colliers forecast is for A-class vacancies to reach 14% by 2018.

Rising vacancies and questions regarding future demand aren’t limited to top-tier buildings.

The completion of new space typically prompts a reclassification of older space. With A-class buildings in downtown Vancouver averaging 25 years old, the pending wave of completions will put pressure on B-class space as tenants vacate older A-class space.

“There aren’t a lot of tenants to backfill the hole,” Bart Corbett, senior vice-president with Cushman & Wakefield Ltd., pointed out. “It’s really been a resource-based market and it’s very soft right now.”

Full story here: http://www.biv.com/article/2014/11/v...ver-new-deman/

[LeftCoaster]

That article is a little gloomier than is needed. Sure vacancy will likely hit double digits some time in 2017, but Amazon certainly isn't the only growth the city has seen.

Microsoft expanded greatly in their move to 725 Granville, Sony Imageworks is almost all net new to the city, as is Double Negative. Then there are the home grown groups like Hootsuite, Global Relay etc... who continue to gobble up space at an impressive pace. I see technology continuing its strong growth in the city, with energy/engineering picking up when things start to get really open in 2017.

The market is transitioning to a tenant's market, from a landlord market, but I don't see that lasting too long.

[Alpine]

I don't know what to think anymore. These are the thoughts running through my head about Vancouver's economy.

"There's going to be a brain drain of young people from Vancouver. Look at the lack of cultural infrastructure! Montreal has an organic nightlife and party scene, while Vancouver has a 9PM bedtime."

"Montreal's more fun, but the -40 winters and the weeks of 35+ degree heat and humidity are not fun."

"They're not fun, sure, but money is made in Montreal. Money is spent or hidden in Vancouver. Just because Calgary oilmen, Chinese tycoons and Okanagan retirees are spending cash at Holt Renfrew, luxury car dealerships and clubs, doesn't mean there's a lot of economic activity."

"Vancouver has a pretty strong economy--two major universities, a port, government jobs..."

"Toronto, Montreal and Calgary have head offices and manufacturing. Ottawa has government jobs. Vancouver has corrupt Chinese and Saudi officials parking their money in empty homes and condos--with the added bonus of a PR card and western-educated kids. We're a resort town, a hedge town. Plus, we built so many condos, that we have very little space for office towers or cultural infrastructure. Our office space is the most expensive in Canada. Montreal has the Canadian Grand Prix, and we lost the Molson Indy and countless cultural venues because residents think living Downtown means it should be as quiet as Point Grey."

"Again, Vancouver being no fun city doesn't stop young people from wanting to live here. Also, office vacancies are slowly increasing, thanks to decline in mining and the forthcoming LNG boom."

"What if Petronas pulls out because of the taxes? Plus, the price of oil is under $70--we'll get less for our LNG because of this."

"Well, it's not just a resource town. Vancouver is a tech hub! Amazon and Microsoft are coming."

"Vancouver is only a tech hub until Congress increases the H-1B visa cap."

"That's a non-issue. The GOP took the Senate in the midterms, so expect gridlock over immigration to continue. Plenty of time for the big 4 to establish roots here. Besides, we have a healthy startup scene and they don't need much space. Gastown is booming!"

"A Thinking Ape and Mobify do not compare to SF or Seattle's startup scene. We don't even have direct flights to Boston or Atlanta! We need real, tangible venture capital, not dirty cash from overseas."

"Digital design, VFX and film are still strong."

"BC film was not saved, because we voted for Christy. Once the loonie gets closer to par, those tax credits in Ontario and Quebec will destroy what's left of VFX and digital media as well."

Etc. Will Vancouver's office boom be realized? Will we go the way of Norway and Peter Lougheed, storing away LNG revenues for a rainy day, or will we listen to the cry of Suncor and Husky, and give away the resource riches to corporations? Will we become a tech/VFX/digital design cluster, or will we be done in by US immigration reform and tax credits? And what if the loonie gets stronger, or oil keeps dropping? Tune in next week...

[theKB]

Originally Posted by Genauso

If anyone wants to look up CRE availability and prices on a map, http://spacelist.ca has been great

This... that's where I found my last two CRU's.

[Prometheus]

Another article from Business In Vancouver:

LNG is here’ – but leasing payoff is yet to come

Gas boom is just a distant echo as far as local brokerages are concerned

Just about every economic forecast these days identifies liquefied natural gas (LNG) as the key variable in B.C.’s future.

The government’s official pledge is for three processing plants to be operating by 2020, a hope that underlies projections of new jobs and a host of economic benefits. Kelowna-based BigSteelBox Structures Ltd. and other companies are preparing to meet the demand for temporary worker housing, while highrise developers anticipate rising demand for city homes from newly affluent workers.

Meanwhile, hopes are high that when final decisions regarding projects start being made later this year, the office market will start to recover from its worst run since 2009.

A surge in new office construction has led many to wonder if LNG companies will take the space, and recent announcements from Petronas, the Malaysian partner in the international consortium behind Pacific NorthWest LNG, have added further uncertainty.

But speakers participating in a panel discussion commercial real estate association NAIOP hosted earlier this year indicated that whatever companies ultimately decide, LNG activity has already meant big business for B.C.’s real estate markets.

According to KPMG Canada, more than $1 billion has been spent in B.C. on due diligence for the 14 projects proposed to date.

“LNG is here,” Fazil Mihlar, assistant deputy minister, oil and strategic initiatives, with the B.C. Ministry of Natural Gas Development, told NAIOP. “They have set up offices here in downtown, they are investing in buying land, they are doing the geotechnical work, the environmental assessment work, the engineering work.”

But if LNG-related leasing is occurring, local brokerages aren’t seeing it.

“So far there has been a minimal impact on the downtown office leasing market,” Norm Taylor, executive vice-president and managing director in Vancouver with CBRE Ltd., told Business in Vancouver following the NAIOP discussion. “Our office leasing brokers are anxiously waiting to see if it grows into something more significant.”

The total amount of leasing activity attributable to the sector stands at between 50,000 and 100,000 square feet, estimated Glenn Gardner, a principal specializing in office leasing with Avison Young in Vancouver.

Most of that activity is for what Gardner calls service offices, usually no more than a floor; some companies have even contented themselves with packaged offices.

“No one is really making a full commitment until they know they’re going to make a full commitment on the actual LNG plants themselves,” Gardner said.

And even then, when projects go ahead, he expects it to be mostly companies new to the market that establish a significant presence in Vancouver.

“The larger oil and gas companies that are already based out of Calgary will probably continue to have their large presence in Calgary,” he said.

Mary Hemmingsen, a partner with KPMG Canada, told NAIOP that the ability to secure skilled labour – locally or from overseas – will factor into companies’ decisions to invest in and open offices in B.C.

“They’re still considerable steps away from making the final investment decision,” she said.

http://www.biv.com/article/2014/12/l...yoff-yet-come/

[officedweller]

From BisNow:

Among the first of the new offices to open in 2015 is MNP Tower... The building is 76% leased, with occupants including MNP (72k SF), Atimi Software (40k SF), and CBRE itself taking 24k SF. Other buildings, like 745 Thurlow (89%), 725 Granville (91%) and Telus Garden (98%), also are substantially pre-leased. There's strong demand for new buildings in a flight to quality, given the bulk of the existing downtown inventory is 40-plus years old. Norm notes that rental rates for existing inventory reached their peak as the office projects got under construction. “Now it’s a question of what’ll happen to rates once all the new supply hits in 2015.”

https://www.bisnow.com/archives/news...-nifty-new-hq/

[quobobo]

This Vancouver Sun article was both interesting and amusing (mostly the latter):

Vancouver office tower boom hurts suburban growth, mayors say

Burnaby Mayor Derek Corrigan said it’s irresponsible that Vancouver is aggressively building office space when other cities are trying to develop their town centres so their residents can work closer to home.

http://www.vancouversun.com/business...552/story.html

[Sheba]

Originally Posted by quobobo

This Vancouver Sun article was both interesting and amusing (mostly the latter)

The move runs contrary to the region’s growth strategy, he said, which is intended to spread out residential and office towers around transit stops to encourage more livability and fewer commutes into downtown.

For all the pouting and foot stomping (and there's a lot), they do have a point. There's complaints about traffic into downtown Van and trying to limit it. Then why try to build all the office space there instead of in more of a garden city mode, which seems to have been the plan (well at least for the rest of the region).

Other than downtown Van, there will be successful office space at Metrotown and possibly Brentwood (don't know the area well enough to say for sure) in Burnaby and eventually at Central City in Surrey. Beyond that there will be bands of industrial land and a lot of bedroom communities. How is that going to help travelling in the region?

[WarrenC12]

I got news for Corrigan: we don't live in a Soviet planned economy.

[Coldrsx]

Originally Posted by quobobo

This Vancouver Sun article was both interesting and amusing (mostly the latter):



http://www.vancouversun.com/business...552/story.html

Ha

Clap clap clap

[quobobo]

Originally Posted by Sheba

There's complaints about traffic into downtown Van and trying to limit it. Then why try to build all the office space there

For starters, the firms and workers that want to be located downtown would be made worse off by any policy that forced them into a location that isn't their first choice. The price premium for downtown office space is pretty clear evidence that a downtown location is preferred by many (not all, of course).

Absent any major negative externalities (and I'd argue that office space downtown has a positive impact overall due to agglomeration and economies of scale), I don't see much to recommend planned regional allocation of office space.

[squeezied]

I can't believe people vote for Corrigan...

[queetz@home]

Originally Posted by quobobo

This Vancouver Sun article was both interesting and amusing (mostly the latter):



http://www.vancouversun.com/business...552/story.html

This is where I think Vancouver should have most of the office towers and tbh, the current crop is still not enough to make up for the years of neglect in office tower development in the downtown core due to the "Living First" policy.

To give credit to the most hated mayor in this forum, Burnaby has been pretty good at getting its fair share. Not super big ones but they do have some decent office buildings. While Vancouver is mostly branch offices, Burnaby has quite a few home grown companies and still continue to churn new ones here and there. No doubt the "communal" mentality of Burnaby people does help a little as people would pool their money and ideas to create jobs for themselves than to wait for some company back east or the US to give them jobs. People vote for him because despite his left wing crap idealogy, he still manage to convince businesses to stay in his city. I always believe at the municipal level, some left wing mix does help (hence why I am a Visionista when it comes to the CoV).

For Coquitlam though...

Coquitlam Mayor Richard Stewart said his city has been unsuccessful in getting one commercial tower in its new town centre, which will be the focal point of the Evergreen Line when it opens next year.

...I do fault the city of Coquitlam itself since like Vancouver's NPA, they do favour residential development over commercial for a number of years now. Note that Port Moody has managed to attract relatively sizable office development, so much so Onni even scrapped its hotel at Sutterbrook and coverted it into office only. For a teeny tiny town, its not doing bad. Despite that, Coquitlam can thank Onni for what little office component it did get, since both the Oasis and Westwood projects have some office space (and Bosa also added a few with their Evergreen condo).

I think Coquitlam, if they really really want a major office building in its town centre, should do what Surrey (indirectly through ICBC / Central City) and New West (directly with Anvil) did. They have to get an office tower built anyway, and then wait for tenants to come. Its risky, but sometimes you have to "kickstart" something to get people to come.

[logan5]

Burnaby Mayor Derek Corrigan said it’s irresponsible that Vancouver is aggressively building office space when other cities are trying to develop their town centres so their residents can work closer to home.

Corrigan really stands out amongst the different mayors in Metro Vancouver. What's far more irresponsible is allowing your city's stock of affordable housing to be bulldozed to make way for condo's that are out of reach for the people who are being displaced.

I remember an earlier article where he states that there's nothing that could be done about the towers creeping into the walk-up neighbourhoods, which is a complete lie. Corrigan could care less about building livable regions.

[quobobo]

Originally Posted by logan5

What's far more irresponsible is allowing your city's stock of affordable housing to be bulldozed to make way for condo's that are out of reach for the people who are being displaced.

I agree, because there are tons of very expensive SFH neighbourhoods in Burnaby that could have been upzoned instead.

[logan5]

As long as the Expo Line can accommodate commuters into the DT core, there isn't much of a reason to have office nodes in every town centre. The Millennium Line will provide some new capacity for the Central Broadway core, where there is the next closest thing to a downtown buzz. The Mt. Pleasant industrial area is another alternative for prospective office development so, outside of Metrotown, I don't see much office tower construction happening in the different regional centres for the foreseeable future.

[Caliplanner1]

Originally Posted by WarrenC12

I got news for Corrigan: we don't live in a Soviet planned economy.

Does that mean WarrenC12 that "we therefore tend to plan on an individual basis generally for the rich/private sector and not also collectively on behalf of the poor/via government"?????.....just asking!

[red-paladin]

I'm all for office development in Metrotown and other town centres.

However, tenants should be there because they want to be there. Not because no more office is built downtown and prices are therefore too high and vacancy too low. If you had that kind of tenant, they'd only be in Metrotown because they had to be, and they'd move to Vancouver whenever there was an opening or they could afford it. There is a lot that Metrotown can do to be more attractive to office developments and tenants, and they should focus on that instead of complaining.

Besides, the stuff about overcrowding is laughable, traffic into downtown is falling, not rising, and downtown is far from bursting at the seems. There is a lot of potential space for office and mixed use towers to go.

[EastVanMark]

As was mentioned by Vancouver councillor Reimer in an article regarding this issue, companies will not move to where the region thinks they should go. They are deciding between opening operations in Vancouver or Calgary, not Vancouver or Coquitlam. The region needs to butt out of such affairs and stop trying to dictate where commercial development growth should take place as a previous poster aptly put it like a "Soviet planned economy."