News of the demise of office towers and downtown business districts has been a popular theme during the months of the pandemic, as millions of office staff around the world work from home. But office builders and brokers in Vancouver are betting that such a decline is not going to happen.
Approvals and applications for new towers have continued since March, with two downtown office towers approved in May and two new applications received for office buildings for the Broadway corridor. That comes even as several other tower developers have continued unchecked with construction on their downtown projects.
Two of the city’s big tech office occupants – Amazon.com Inc. and Shopify Inc. – have told The Globe and Mail they’re not reducing their current space commitments.
And a recent CBRE report predicts that Vancouver’s vacancy rate will possibly increase to only 7 per cent – still considered a little less than what is needed for a balanced market – by 2024. That’s factoring in the 3.9 million square feet now under construction downtown.
“Given the incredibly strong overall Vancouver office fundamentals entering the global health crisis, we do not believe there will be major trauma to the office market,” says the report. “By any historical measure, and in comparison to most markets around the globe, Vancouver remains fundamentally one of the strongest office markets anywhere.”
Sub-leasing – where a company that is already committed to a fixed-term lease tries to rent that out to others as it reduces size and costs – tripled from 37 at the end of December to 90 by June. But those represent smaller companies with relatively small amounts of space, said Tony Quattrin, vice-chairman of capital markets at CBRE.
The CBRE report predicted there might be some short-term reduction in demand for space, as some employees are allowed to continue to work at home and some companies don’t recover from the economic impacts of the pandemic.
But that would be offset by a need for more space per employee to maintain distancing and the city’s continuing strong pull for businesses and high-skilled new immigrants.
Surveys in the U.S. and Canada have indicated that most people do not want to work from home, when various factors are weighed, like the loss of connection with fellow employees, the requirement to carve out working space from what can be already tight living quarters, the lack of boundaries between home and work, and the trend that those working at home are less likely to be promoted.
“One of the reasons working at home now works is we’re all at home together,” Mr. Quattrin said.
That’s not going to continue once businesses move to a more hybrid model, with some working at home allowed, he predicted.
There have been prominent announcements by tech companies such as Ottawa-based e-commerce company Shopify, along with Google, Facebook and Twitter, that have said offices will no longer be central to their businesses and employees will be allowed to work from home after the pandemic ends.
But, in Vancouver, Shopify is planning to take up the 70,000 square feet of space it leased at Four Bentall Centre on Dunsmuir Street in January.
“We are excited about growing our presence in Vancouver and our new space at Bentall Centre, which will be reimagined as one of our new Shopify hubs,” the company said through an e-mail exchange with The Globe last week, attributing the comment to Lynsey Thornton, vice-president of user experience at Shopify.
A spokesman for Amazon confirmed the large bloc of space it has committed to in Vancouver, primarily in the redevelopment of the city’s historic former main post office, will be needed for the 3,000 employees it said it would be hiring two years ago, when it announced its plans for the building. The company is not looking for additional space, contrary to some rumours circulating in the city.
One notable office-project delay because of the pandemic is the Cadillac Fairview proposal for the plaza next to Waterfront Station. The company informed the city just last week that it would be putting its current proposal, which has been a subject of debate for the past two years in Vancouver, on hold for the moment.
But others are going ahead.
Chris Anderson, the CEO at Value Property Group, said the company is proceeding with its March application for a new 12-floor office building at Broadway and Ontario because they believe the market will be back to something approaching normal by the time they are ready to build in 2022.
“I would be a bit nervous if I had to excavate today,” said Mr. Anderson. “But we think it’s a tremendous location, close to Main, the new subway station that will be right there, and Mount Pleasant that’s full of tech. There hasn’t been any new office space built on Broadway for years so we’ll continue with the process.”
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