By Peter Mitham
A spate of new office towers planned for Vancouver’s downtown highlights the success of city initiatives to create a core that’s defined by more than its residential component.
It’s been six years since the city placed a moratorium on the rezoning of office sites for residential development in the central business district extension area adjacent to the downtown core. That residential development wave had pushed prices for downtown development sites to record levels and prompted architect Bing Thom to warn that Vancouver’s downtown was in danger of becoming more a resort community than a business centre.
The clampdown stalled residential development, including projects such as Holborn Group’s plan for a mixed-use complex on the site of the Bay parkade in the 600-block of Seymour Street. Designed by Richard Henriquez of Henriquez Partners Architects, the project would include a mix of market and non-market housing, a hotel and office space – but not enough to address city staff’s concerns about the loss of commercial development capacity.
The project would have accommodated up to 900 new residents in the core, while offering just 185,400 square feet of commercial space on a lot that could accommodate more than 464,000 square feet.
During the rezoning process, the city suggested doubling the commercial density to balance the residential component, but Holborn balked and the project was mothballed.
“We’re now being very careful around any potential loss of [office] capacity,” Brent Toderian, City of Vancouver director of planning, told Business in Vancouver at the time, noting that anything less than what the site’s zoning allowed “would be a missed opportunity for commercial space.”
Today, a block south, Gregory Henriquez, Richard’s son, is drafting plans for another parkade, this one owned by Telus Corp. (TSX:T). Residential space is part of the mix on the new site, but 500,000 square feet of office space headlines a project the telecom giant hopes will showcase it and demonstrate the city’s post-Olympic confidence.
“It would set a new standard for environmental sustainability and technology,” said Telus spokesman Shawn Hall, while cautioning that plans haven’t been finalized with the probable developer, Westbank Projects Corp.
Sharing the block with the William Farrell building, a 10-storey tower Telus also occupies, the new 22-storey office tower at 520 West Georgia Street could include a 43-storey residential tower at the southeast corner of the block at Robson and Richards.
Toderian said it’s an illustration of how times have changed and how zoning changes approved in 2009 as a result of the Metro Core Jobs and Economy Land Use Plan helped stabilize conditions for commercial developers. With competition from residential developers ruled out and limits on commercial density lifted, developers now have greater freedom with respect to developing sites.
“Council effectively regulated the speculation, brought down the land-use costs to a level that reflects office [uses] as opposed to reflecting residential,” Toderian said. “And all those things together in our opinion have influenced the kind of activity we’re seeing now.”
This wasn’t the case with the Holborn project, which Toderian suggested needed residential to cover high land and construction costs and support the project’s complex mix of uses, which included 500 parking units for the Bay and 167 non-market units.
“They needed more residential in order to make the numbers work,” Toderian said. “But if the land is priced accordingly, then you can build office space, which is what we wanted to see.”
A moderation in office markets over the past three years also helped stabilize the environment, giving construction prices a chance to correct while companies reconsidered space needs. The vaunted flight to the suburbs lost steam, and companies found opportunities downtown – and are now growing there.
“We’re pleased with the strong interest we’re seeing in stand-alone office projects as well as mixed-use projects that include office,” Toderian said. “Both of which are telling us that office construction is very viable right now.”
This has helped restore momentum to the Aquilini, Bentall and Telus ventures, according to Anthio Yuen, senior research analyst at CB Richard Ellis.
“With the recession ... there hasn’t been that much demand in the suburban markets. People have really flocked back to the downtown core markets.”
Yuen added that the plans are coming forward at the right time. With vacancies in triple-A office space downtown running at 4.4% – slightly more than 191,000 square feet in real terms – and significant renewals on the horizon, tenants will be hard-pressed for fresh options without new opportunities. Requirements will likely run in the 100,000-square-foot range, Yuen said, with several smaller commitments due for renewal in 2014-15, when the towers being discussed today would complete.
“Those could be the companies that do provide the significant prelease commitments that go into the major new builds.”