Despite Vancouver’s international reputation as one of the nicest places on earth to set up shop, many of the companies that fill office space downtown are born and bred on the West Coast.
“Vancouver is a virtually closed market,” said Tony Astles, executive vice-president, B.C., at Bentall Kennedy. “In terms of the percentage of tenants or square footage available, there’s almost a non-existent amount of new tenants that come in from outside Vancouver.”
There are a number of reasons for that, said Astles, notably the city’s pricey labour and lease rates.
On top of that, Vancouver is not known as a head-office city.
In fact, major corporations are more apt to set up satellite offices in the Terminal City than move their headquarters here.
But that doesn’t mean property managers and brokerage firms are investing all their time and money marketing to potential tenants far and wide.
Rather, the city’s existing tenant base is so fluid that vacancy rates remain tight.
That means property managers and brokerage firms have very simple marketing plans:
•list available space online; and
•keep in touch with existing clients’ growth prospects.
“If you have good head-lease space today and a broker who’s active with it, you’re going to find someone for it,” explained Glenn Gardner, a corporate real estate adviser with Avison Young in Vancouver.
According to Avison Young’s mid-year 2011 Metro Vancouver office market report, the downtown core will face “constrained” office supply until mid-2014 when new towers come on the market.
At mid-year, the downtown vacancy rate remained at 5%.
Unoccupied AAA office space downtown tightened further in the first six months of 2011 to 1.3%.
Gardner said a healthy downtown vacancy rate would be about 10%, adding that the current situation is tough on both tenants and landlords.
“If you’re a tenant and you want to expand, it’s difficult to do that. … The reverse of that is if you’re a landlord and you have a tenant you want to keep and you can’t find space for them, then they have to go find space somewhere else,” he said.
The situation is so constrained that Gardner suggests companies in search of more than 5,000 square feet of space need to start looking 10 months in advance.
All this might lead tenants to believe that property managers and brokerage firms don’t work very hard at marketing their properties.
But Gardner said that’s simply not the case.
“At the end of the day, unless there’s a tenant in your building that needs your space, you have to market it.”
Astles agreed.
In addition to advertising properties to tenants and brokers, Bentall, which is B.C.’s largest commercial property manager, also makes sure its office space is pleasing to the eye.
“The marketing of the property actually flows right into the space itself … its state of readiness is critical to our marketing initiatives,” said Astles.
From details about how a building operates to its sustainability initiatives, the quality of its elevators and the finish on door handles, Bentall makes sure its clients have every piece of information they need.
“We go to extraordinary lengths to make certain our product has a great experience when you arrive at it,” said Astles. “It’s kind of related to the residential notion of ‘staging.’”
Gardner added that office space located close to rapid-transit nodes is also easier to market to clients.
But when all is said and done, real estate firm Newmark Knight Frank Devencore said its Vancouver clients care about one selling feature more than any other ń price.
“As much as the green movement is making headlines, cost is the number 1 driver for these guys,” said John Wu, an associate vice-president with Devencore.
Because vacancy rates downtown are so low, companies only move if they have to.
That means Devencore not only helps companies locate new office space, but also outlines how a space can help a business cut costs.
“You can’t control revenue but you can control costs.” •
