Transit-oriented vacancies
When panellists gathered to discuss office space at the September 2013 breakfast meeting of commercial real estate association NAIOP, Jones Lang LaSalle (JLL) had just issued its Rapid Transit Index. On-transit vacancies had risen to 8.4% from 7.7% six months earlier, but lease rates were strong, outpacing those of space off transit.
Westport Innovations had just signed with PCI Group for 135,000 square feet at Marine Gateway, and JLL detailed 28 transit-oriented projects proposed or under construction.
All of which gave Bentall Kennedy vice-president Jeff Rank cause for pause.
“[JLL’s] report certainly speaks to the idea that you have to be on rapid transit if you’re going to get any meaningful tenant that’s going to move out into a suburban market,” he said at the time, noting that mandating transit-oriented space didn’t always make market sense. “I think we’re a little ahead of ourselves in some of those suburban markets at this point.”
Three years and two reports later, the latest numbers from JLL peg on-transit office vacancies at 13.6%. While asking rates have strengthened $0.21 over the period to $23.18 a square foot, they’re under pressure. Westport has returned 40,280 square feet to the market at Marine Gateway, while Anvil Centre has proven such a drag on the New Westminster market (where on-transit vacancies top 22.1%) that JLL says any future project will need significant pre-leasing before breaking ground.
“There’s a bit of a transition right now with all the new developments being brought online – Renfrew Centre, Anvil Centre – … those buildings are all on transit but sitting vacant,” said Mark Chambers, executive vice-president with JLL in Vancouver.
While the surge in construction means more space to lease near transit stations, it hasn’t reduced lease rates. That in turn means developers are likely to continue building adjacent to stations.
“The development that we’re seeing is all taking place on the transit lines, and that’s where the developers, landlords are focused,” Chambers said. “There are few to none that are developing off transit.”
Strata listings
The marketing of strata-titled properties is on the upswing with changes to the B.C. Strata Property Act at the end of July aimed at facilitating the winding up of building corporations.
Strata corporations no longer need the unanimous support of owners to wind up operations and liquidate assets, including their real estate. The approval of just 80% of members is enough to start the process, which must still navigate a series of hurdles en route to court approval.
Recent weeks have seen negotiations proceed for 1055 Harwood Street, a 66-year-old building in the West End, and the listing of 2777 Oak Street, built in 1973, and 1045 Burnaby Street, constructed in 1975.
Avison Young principal Rob Greer, part of the team handling the Burnaby Street listing, said a majority of strata members support the property’s sale and he doesn’t expect the minority who don’t to raise significant objections.
“We’re not expecting any issues,” Greer said. “In some cases they can receive two and a half to three times their assessed value if they join forces and sell to a developer. It’s kind of a nice exit for a lot of people who’ve owned these older condos and older buildings for quite some time.”
Older properties on sites with excess density are prime candidates for sale and redevelopment. Zoning allows a 300-foot tower on the Burnaby Street site, currently home to 36 units on four levels. While a quarter of future units need to be social housing, that still leaves plenty of room to boost the number of market units.
“It’s still very early days, but it’s a trend that’s going to pick up some steam,” Greer said, pointing to the potential for similar listings across Metro Vancouver. “My guess would be you’re going to see an additional five to 10 of these before the year’s over.”
