Commercial tenants adding up high cost of waiting for civic renovation permits

Leasing agents and tenants urge Lower Mainland municipal governments to follow City of Vancouver's expedited permitting program

Civic governments across Metro Vancouver should follow the City of Vancouver's example and implement an expedited permitting process for retail and office renovations, according to leasing agents, real estate consultants and tenants at the November 1 Vancouver Real Estate Leasing Conference.

Vancouver has had its Tenant Improvement Program (TIP) for about 20 years. Surrey's commercial section manager Mehran Nazeman told Business in Vancouver that his city is "considering" implementing such a program. However, no other Metro Vancouver municipality has a program that speeds up permitting for renovations when a tenant moves to a TIP-compliant building, which the city has already inspected and knows meets city bylaws.

Andrew Laurie, senior associate of office leasing at Cushman & Wakefield Ltd., wants that to change because of the inconvenience it causes tenants who receive just a few months' notice that they can't renew their leases and urgently need space in a new building, which frequently requires renovating.

He compiled statistics that showed how much time a permit takes in various Lower Mainland municipalities for a tenant who is moving into 5,000 square feet and intends to spend $200,000 on renovations (see map).

"I sometimes get panicked phone calls from people I have not met before," he said. "They say, 'We learned we have to be out of our space in four months and be up and running in new space."

It can take several weeks to find suitable new space and another two weeks to negotiate the lease – and that's when things run smoothly. "Things rarely run that smoothly."

Renovations can take a couple of months and require a permit, which Laurie said can follow an excruciatingly long wait.

When tenants can't move out on time because they're waiting for a permit to renovate their new building, they can be charged high "overhold" rates for the right to stay in the space, he added.

Laurie said the City of Vancouver's TIP program speeds renovation permit approvals to approximately five days, compared with about 20 days for Vancouver's non-TIP buildings. City fees for such a renovation permit would cost $1,089.

In contrast, he said the same process takes:

  • between four and eight weeks in Burnaby and costs about $2,000;
  • between six and 12 weeks in Richmond and costs $2,055; and
  • approximately four weeks in Surrey and costs $1,600.

Gavin Woo, Richmond's senior manager of building approvals, disputed Laurie's assessment. He said that half of all of such applications in Richmond are done within two weeks, so the city doesn't need to consider implementing a program to expedite permit processing. But Vicki Potter, Vancouver's director of development services, told Business in Vancouver that the TIP program makes more efficient use of staff resources while helping tenants and keeping the public safe.

"We have a database of buildings that are tagged as being eligible to go through the TIP program. They get that eligibility if we have confirmation that they comply with building codes."

She added that new office buildings and residential structures that have retail components are tagged as being TIP-compliant as soon as they're occupied because the city has already done rigorous inspections.

"Sometimes it happens that buildings get 'untipped.' Often it's when an inspector is there on another matter and sees potential problems," Potter said. "They may come back and say, 'This building can't do TIP anymore.'"

Most of Vancouver's buildings are not TIP-compliant, but Potter declined to estimate what percentage of the city's buildings is eligible for expedited permitting. "We issue about 500 TIP permits each year," she said. "That's out of thousands of [non-TIP renovation] permits that we issue each year." •

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