Metro Vancouver Poised for Office Capacity Boom
Downtown Vancouver and outlying suburbs are on the cusp of a nation-leading jump in commercial real estate capacity, but market experts are only mildly concerned about the risk of a glut that would drive down prices.
In the downtown alone, developers are moving ahead with six major office and towers, leaving veteran industry observers to wonder if the Metro region’s economy is robust enough to expand into all of that extra space in the near term — especially when suburban and outlying areas of the Lower Mainland are building even faster, according to a Tuesday real estate forum at the Vancouver Convention Centre.
The developments are expected to provide some relief for the tightest office real estate market in the country.
Statistics provided by Altus InSite president Sandy McNair indicate that Vancouver’s total existing office space inventory is growing by 7.4 per cent compared to 5.3 per cent in Calgary, 3.7 per cent in Toronto and 3.0 per cent in Montreal.
“This is the dangerous point in the cycle where everyone needs to have their eyes wide, wide open,” McNair said. “We’ve got a lot of stuff coming into the market. There’s a million-six (1.6 million square feet of office and residential space) downtown, there’s another million-two in the suburbs and then another 700,000 square feet out in the periphery market — all committed and under construction.”
Projects coming onto the downtown market include the $750-million Telus Gardens office-residential tower at 777 Richards Street and the $150-million Oxford Properties — Canada Pension Plan tower at 1021 Hastings Street.
“Backing up just behind them is even more property in pre-leasing mode,” McNair said. “There’s another million-five ... downtown, then there’s 700,000 in the suburbs and another 500,000 in periphery.”
In Surrey, city council just approved a $150-million tower for City Centre that includes five floors of office space, as well as 144 hotel rooms and 353 condos. Tsawwassen-based Century Group is developing that project.
McNair said one of the key drivers is pension funds, which are pressing to invest their money in long-term revenue-generating investments.
There’s always a risk of a “disaster” if too many developers enter into the market at the same time, he said. But he added that he doubts the market will get too far ahead of itself.
“In spite of the fact that we’ve got an unprecedented number of projects and an unprecedented amount of space coming into the Vancouver market, touch wood, we won’t end up with too many more buildings coming onto the market.”
Blair Quinn, senior vice-president of CBRE Ltd., said Vancouver lost a lot of big-name tenants when the global economy melted down in 2008, with companies such Nokia and Microsoft shutting their local outlets.
“Fast-forward to today and you’re seeing Microsoft expanding again in the core on their gaming side, we just did a brand new R&D centre for Samsung in Burnaby for 25,000 square feet, we inked a deal with Facebook ... last week as well,” Quinn said.
In addition, local high-tech companies including Hootsuite and Westport Innovations are expanding, he said.
David Bowden, CEO of Colliers International, said the company is “not worried at all” about the new capacity being absorbed.
“In fact, we think there’s going to be more demand for office buildings.”
The biggest challenge for business won’t be office space, according to Bowden. Rather, he said, it will be attracting talented workers to sustain economic growth in a region where residential housing is relatively expensive.