It’s been 12 years since Mark Thompson’s architecture firm designed the last standalone office tower in Vancouver. Finally he’s at work on one of several new buildings that will bring dramatic changes to the city’s downtown.
The tower at 745 Thurlow Street that Mr. Thompson’s firm, Musson Cattell Mackey, is designing will be among a cluster that will add more than 1.5 million square feet of office space to market by about 2015.
This new crop of buildings – including the Bentall Kennedy tower at 745 Thurlow, and another planned as a Telus Corp. head office at Georgia and Seymour – will expand the boundaries of the downtown core and, says Mr. Thompson, kick off a cascade of movement among tenants.
“It creates the domino effect,” says Vancouver’s head of planning, Brent Toderian.
Unlike Canada’s two major office cities, Calgary and Toronto, Vancouver rarely sees new head offices or big tenants moving in. Instead, it’s renowned for its preponderance of small companies. The average office size is 3,000 to 5,000 square feet.
“We’re a branch-plant city, so what we see here is organic growth,” says Maury Dubuque, vice-president of office leasing at Colliers Vancouver.
When new office towers are built, the companies that tend to move into them are large, established firms already on the scene – the big law firms, accounting firms and mining companies.
They’re not necessarily looking for extra space. Instead, they want the status and convenience of new buildings, with their contemporary looks and open-plan layouts. They want the employee-attracting advantages of improved air-quality systems, bike lockers or proximity to shopping and entertainment.
Those advantages drove national law firm McCarthy Tétrault LLP to become the first tenant to commit to one of the new towers. They will move to 745 Thurlow, which is being built to a Leadership in Energy and Environmental Design (LEED) Gold standard and is a short block from Robson Street shopping and restaurants.
When McCarthy Tétrault leaves its offices at 777 Dunsmuir, a serviceable but unremarkable tower that sits over Holt Renfrew, the new occupant will almost certainly be another downtown company looking to move one notch up.
And so on down the line, as happened in 2007 when Teck Cominco’s move to the second phase of the Bentall V tower made room for Intrawest ULC, the Whistler resort owner.
All of that movement will allow smaller Vancouver companies to snap up spaces freed up at the bottom.
For commercial brokers, the new buildings bring excitement. “[Office tenants] haven’t had choices for a while,” says Mr. Dubuque.
The new towers also are a relief to him and to city planners.
Vancouver has gone through an unusually long fallow period. The PricewaterhouseCoopers tower designed by Musson Cattell opened in 2003, and the only other large addition to the office market was when the top half of the Bentall V tower was completed in 2007.
As a result, the city’s vacancy rate, according to a Cushman Wakefield report for the second quarter of 2011, is the lowest of any city in North or South America at less than 4 per cent for the city’s 24 million square feet. Vacancies for Triple A space are close to zero.
Many blamed the lull on the city, which had allowed some key office sites to be rezoned for condos in the early 2000s. Planner Mr. Toderian acknowledges that this move inflated land prices throughout the downtown and made office construction financially unworkable.
But that wasn’t the only reason for the slowdown.
Bob Levine, a principal at the Avison Young brokerage, notes that office developers are now run by institutional pension funds, instead of private companies. They’re far more cautious and less inclined to build office buildings on spec.
Now prices for office-zoned land have stabilized, construction costs are down and demand is steady.
Mr. Toderian and his staff said that government and quasi-government bodies are also looking for space downtown.
That means there is a good chance that other towers or big chunks of office space may still come on stream this round, says planner Kevin McNaney. Among them: a tower next to Rogers Arena by Aquilini Developments and a tower nearby on city land for the federal government.
“There was kind of a lost cycle, where people didn’t get to build even if they wanted to in the last round,” he explains.
Now, they’re making up for it.
A greener city
Vancouver’s new buildings will also set the downtown core in a greener direction.
“This is the next generation of building that’s arriving,” says Mr. Thompson.
The competition to go green heightened this week with Credit Suisse’s announcement that it is planning to build a tower that would meet the Platinum standard of Leadership in Energy and Environmental Design (LEED), the highest level ever in Vancouver for an office building. The developers are aiming to use local building materials as much as possible, and incorporate solar thermal panels and an onsite wastewater treatment and re-use system.
Tenants want the newest environmental technologies, but they also want to save money, such as with high-efficient cooling and heating systems and with sensors that turn off lights automatically when there’s plenty coming in from outside. They're willing to pay more for the office space upfront in order to save on energy costs for the life of their lease, developers and architects say.