Pass the lipstick
The trough between development waves gave panellists at the recent breakfast of commercial real estate association NAIOP a chance to reflect on the state of the office market in the wake of significant additions to downtown.
While new entrants to the market favour the latest space – eminently absorbed by the likes of Amazon, Microsoft and Sony Pictures Imageworks – older inventory stands at a crossroads.
The average age of top-tier office space downtown is 27 years, and with little new construction in the previous decade, amenities in most downtown buildings date are so last century.
“All the major landlords in Vancouver are paying close attention to their buildings,” Gavin Reynolds, a senior vice-president with Jones Lang LaSalle, said. “I don’t think it’s a new phenomenon, [but] as the next development cycle arrives, I think this will become a greater issue.”
Just how great an issue it becomes for some buildings will determine whether owners tear down and build from scratch – something Paula Wright, leasing director for Manulife Real Estate, said was possible as the lifespan of buildings shrinks in the face of competition – or pull out the lipstick and proceed with renovations.
“Beyond the lobby reno and the lipstick upgrade, does that make sense?” asked Matt Walker, a principal with Avison Young specializing in office properties, who trusts the market to decide the fate of older buildings.
Rents must justify the renovations, or owners will seek city approval for an alternative use.
Panel moderator Maury Dubuque, managing director for Colliers International, expects office space to split between triple-A and C-class offerings over the next two decades, with residential projects gobbling up everything else.
“It’s not something we’ve seen here, but, to your point, there’s only so much lipstick,” he told Walker.
Strata rising
Strata offices see mixed demand in Metro Vancouver, with the typical user being a small professional services firm or self-employed individual seeking their own swatch of workspace.
But when Serracan Properties Ltd. asked Colliers International to find an occupant for its nine-storey office tower at 510 Seymour, Colliers’ Dubuque fielded “an enormous number” of requests from people looking for strata office space – which made him wonder, is there a market for a strata-titled office tower?
Panellists at the recent NAIOP breakfast thought the idea had merit, both from an economic point of view as well as the cultural shift that’s happening as foreign capital flows into the market.
Jeff Lim, vice-president, leasing, with Bentall Kennedy LP, said recent experiences with companies scouting local office space suggest that demand is poised to surge.
“There’s a preference to own whatever it is than to throw rent away,” Lim said. “I don’t know if the traditional accounting firm, law firm, 4,000 square feet, wants to buy real estate, but guys coming from mainland China, for whatever purpose, [it’s] obviously strata.”
More info
TransLink took exception to a recent column’s reference to its acquisitions in the Broadway corridor for future stations. Au contraire, the transit authority said.
While it spent $9.6 million on “strategic acquisitions” of land and buildings in 2014, including 1909 West Broadway, media relations officer Chris Bryan countered that it’s “a revenue property” that “may be used in future as staging space or project office when the Broadway project proceeds.”
“This project depends upon securing funding from each level of government,” Bryan added. “Once the project approvals are in place, we will seek to acquire the necessary properties for stations.”
However, TransLink did not respond to a request for information on purchases in 2015, nor was a request to speak with Derrick Cheung, the authority’s vice-president, strategic sourcing and real estate, fulfilled. •
