The Vancouver office-tower boom is gearing down.
After a couple years of heady development in which almost a dozen new towers were proposed, construction on half of them is likely to be put off for the immediate future, the city’s commercial brokers say.
“With the five that are already in the mix, I’d say there will be a pause,” said Bart Corbett, the senior vice-president for office leasing at Cushman Wakefield. “Those four to five buildings have more or less tapped the tangible leases in our market.”
That doesn’t mean downtown Vancouver has become less desirable. It still commands the highest prices and has the lowest vacancy rate in the region – 3.9 per cent, compared to as high as 20 per cent in some suburban areas.
But Mr. Corbett and others say that the stagnant economy is making many clients hesitate to undertake big moves, which can cost as much as $100 a square foot just for the relocation expenses.
And Vancouver, unlike explosively growing Calgary or head-office-central Toronto, just doesn’t have that many tenants that need lots of floor space – the kind of companies that office developers need as anchors for expensive new towers.
Mr. Corbett said anyone who looks at the small group of tenants who need 80,000 square feet or more, then calculates when their current lease dates end, will realize only one large company in Vancouver is likely to move. He would not say which one.
Others are making the same assessment.
“We live in a branch-plant city, which means a small market and mostly small tenants,” said Maury Dubuque, the manager for tenant advisory services at Colliers International.
He noted that the poor global economic conditions have caused some operations to shrink or even leave Vancouver, as the Spanish renewable energy firm Acciona did last year.
And Bill Elliott, a principal at the commercial real estate firm Avison Young, said it will likely be three years before a new set of towers could nab any large clients.
He said companies are still moving to Vancouver and existing companies expanding.
Amazon is looking for a substantial chunk of space in the Vancouver market for its Canadian operations, while companies like KPMG and SNC Lavalin are growing. But that isn’t enough to anchor any of the proposed towers that haven’t broken ground yet.
Under way right now are the Telus office tower at Georgia and Seymour streets, the MNP tower by Oxford Properties next to the Marine Building, the Bentall tower at 745 Thurlow St., the conversion of the former Sears Centre to a Nordstrom department store, with four spacious floors of office above, and an Aquilini building next to Rogers Stadium that will be either partial or complete office use.
Telus and Aquilini are planning to occupy a lot of space with their own operations, and Telus has a big law firm as a second tenant. Both MNP and Bentall have major anchor tenants, but haven’t fully leased their buildings yet. And no deals have been announced for the Cadillac Fairview building that will have Nordstrom on the lower floors.
Proposed developments that are likely to be delayed include the Stock Exchange tower by Credit Suisse, a site at Howe and Nelson streets owned by Manulife, the Pattison development on Burrard Street, and a site opposite the former train station on Cordova Street, the property of Whitecaps owner Greg Kerfoot.
The recession had prompted some companies to move from the suburbs to Vancouver to be near transit, entertainment and shopping. Those are still strong attractions, brokers say.
But, for now, Vancouver’s game of musical chairs for offices has come to a halt.
“We’re not going to see four other office buildings come up on spec,” Mr. Elliott said. “They’re not going to build until they see someone committing.”