The four new office towers, now under construction in Vancouver, will relieve the acute shortage of office space in the downtown core, real estate panel experts said during the September breakfast meeting of NAIOP held at the Waterfront Fairmont Hotel.
“Downtown is full right now,” said Steffan Smith, senior manager of leasing for GWL Realty Advisors Ltd., with only a 3.5 per cent vacancy rate. “We need new buildings and we have four unique offerings coming out of the ground.” These new structures should push the vacancy rates back to five or six percent and provide greater balance in the marketplace, he said.
The new offerings are:
1. Oxford’s MNP Tower (270,000 square feet) located at 1026 West Hastings by the Marine Building and competing in summer 2014 (image of MNP Tower from its website);
2. Telus Garden (450,000 square feet) comprising the whole city block at 77 7 Richards and completing June 2014;
3. Rogers Arena Towers (110,000 square feet) in mixed-use towers by the Rogers Arena with three towers completing in 2014, 2015, and 2016;
4. 745 Thurlow (400,000 square feet) located at Alberni and Thurlow and coming on stream in 2015.
The Sears redevelopment plan is expected to start in the fall with the proposal calling for 280,000 square feet on four floors with the U.S. department store Nordstrom on the lower levels, opening in 2015.
Further buildings within the city but outside the downtown core are underway or planned such as Marine Gateway, a mixed use development that will bring 240,000 square feet of office space to the market by 2015 and is located right next to the Canada Line on southwest Marine Drive just across from Richmond.
Senior vice-president Maury Dubuque, in charge of leasing for Colliers International, estimated that the impact of this capacity coming onto the market would be two-pronged. Existing buildings at the high end of the market offering premium space will see rates decline by as much as 10 percent. Older buildings, at the low end of the market, could see lease rates drop by as much as 20 per cent. (Some of these older structures could be re-purposed and would likely go into residential condo developments).
Can Vancouver handle a new wave of office towers?
The real question, Dubuque said, as the NAIOP session examined whether Vancouver needed more office space, was whether the city could handle the next wave of office towers now on the drawing board but not yet breaking ground. This next round of tower space will be impacted by the “shadow space” not absorbed by the new downtown towers coming up in 2014-2017 period. “I would be nervous if I was coming out of the ground after that,” he said.
The major office towers will continue to be built in the downtown core, the panel members agreed. “I think lifestyle, travel and corporate image are the long-term spoilers,” said Jon Stovell, president and CEO of Reliance Properties Ltd. He said there is a major trend happening not just in Vancouver but in other North American cities with suburbanites returning to new revitalized downtown cores. “They are willing to settle for smaller accommodations,” he said, in order to be closer to work and the city core amenities. Stovell said there is that human factor involved, as individuals want to group together.
Travel is having a major impact on where individuals want to live and work. Smith said a recent survey at one of the company’s properties offered to the people visiting the building found that 84 per cent came by non-vehicular travel. Stovell pointed out that since the winter 2010 Olympics when commuters left their vehicles at home, the “massive change in rapid transit has been astounding”. The trend towards “de-motorization” is also occurring in the U.S. as fewer 16-year-olds are rushing to get their driver’s license. He said a motor vehicle to many younger people is considered “an extensive burden rather than a status symbol” as it was in previous generations of younger drivers. As such, there will be more demand to live and work near rapid transit lines today.
Smaller offices in suburban areas
Smaller office buildings will still spring up in suburban areas, but they would be satellite offices accommodating the larger companies centred in the downtown core. “Those companies (professionals such as accounting and legal firms) want to be closer to their customers who don’t want to travel to the downtown area,” Dubuque said.
Just as there is a trend in North America to cluster together, that same trend will moderate those working from home, especially when they are now live close to work. “It is really not about working from home,” Stovell, but rather work following individuals from the office to the home with modern day communications tools. Individuals will still want to come into the office for meetings, meet clients, and satisfy that drive for human companionship.
Universities reflect the future of office design
The future impact will come in what the office will look like for the generation now in university. Smith said the explosion of communications equipment such as tablets has completely reshaped the office needs. . “Why are you sitting at that desk?” is the question asked as business can be done from any point in the office. “There will be more ‘we space’ rather than ‘I space’ and we will also look at uses of space,” Smith said. Companies will need less space or use the same space but place for individuals within it.
Dubuque said anyone who doubts the radical shift coming in office space design need only visit his or her local university campus. At the University of B.C., Dubuque saw business students seated in open-space lounge areas of Henry Angus building in groups of three to five as they worked on with their laptops “laughing and talking”, moving around and collaborating on projects.
“I am seeing the future,” he said as technology shrinks personal office.