Scaling back
Metro Vancouver’s recent purchase of Metrotower III for its new premises highlights a few persistent trends as the region’s office market moves deeper into 2016.
On the one hand, space requirements are decreasing, thanks to new floor plate configurations.
Metro Vancouver will occupy about 220,000 square feet starting in early 2017, downsizing from 230,000 square feet in its two existing properties. It will lease the tower’s remaining space to other tenants; Stantec Consulting Ltd. and Hemmera Envirochem Ltd. currently occupy 95,000 square feet.
The move will leave Metro Vancouver’s existing premises at 4330 Kingsway and 5945 Kathleen vacant, but Don Bradley, media relations manager for Metro Vancouver, expects the two properties will be sold.
While there is “considerable interest” in the remaining space at Metrotower, the district hopes to make a clean break, preferring not to be a landlord to tenants backfilling its old digs.
The eventual occupant of the space vacated by Metro Vancouver will likely bear out another trend in the local office market: that of tenants making do with older, more affordable space and remaking it for their own purposes in partnership with lease-hungry landlords.
The story is one familiar to downtown landlords, but Burnaby is also an increasingly competitive market for older space.
Late in 2016, Appia Group will complete the sole new office tower in Burnaby, the 12-storey Solo District Office (230,000 square feet), ensuring that demand for space – by default, older, B-class space – will remain tight. Colliers International’s most recent market review indicates that “increasingly aggressive rates and inducements” are the norm even in a market where vacancies are averaging 11.1%.
While Metro Vancouver’s move should put a dent in the existing 32.5% vacancy rate for triple-A space, it will also add fresh supply to the B-class market, with its rate of just 7%.
Ivanhoé Cambridge, which reaped $205 million from its sale of Metrotower III, will continue to manage the property for its new owner.
Ramping up
With word that Seattle-based Tableau Software is seeking 50,000 square feet of downtown office space in Vancouver, the question arises: where to go?
Downtown triple-A vacancies stood at 14.4% at the end of 2015, according to Colliers International, but with much of the space brought to market last year occupied, tenants that want to move into new, top-tier space have few new options other than 475 Howe Street.
It’s the next major downtown tower to complete, with occupancy slated for spring 2017.
Coincidentally, the tech sector was Mayor Gregor Robertson’s great hope for 475 Howe Street when SwissReal Group broke ground on the 370,000-square-foot project in February 2014.
The tower has signed just one tenant to date, National Bank, which took 45,000 square feet. That’s becoming typical in a market where tenants are increasingly demanding space of 15,000 square feet and more.
Serracan Investments Ltd. is slated to complete an additional 70,000 square feet at 510 Seymour Street in 2017, but the next major wave of completions will come in 2018. More than half a million square feet will complete at Morguard’s redevelopment of 601 West Hastings Street as well as Burrard Place, a joint venture of Reliance Properties Ltd. and the Jim Pattison Group.
In progress
A timeline doesn’t exist for the appointment of a new general manager, planning and development services, for Vancouver, city staff say.
Brian Jackson’s resignation and departure from the office last fall created the city’s most prominent piece of vacant and underused administrative real estate, and the city, which pledged to embark on an international search for Jackson’s successor, has nothing to say about its quest.
A similar situation exists with respect to the office of city manager, creating two key gaps in management of the city.
City staff said an update would occur when the positions were filled. •
