The resumption of construction of the Metrotower III office building in Burnaby is a sign that transit-oriented development in Metro Vancouver is back on track.
“Our suburban market has actually grown in (Metro) Vancouver much faster than our downtown market,” said Bill Elliott, a principal with Toronto-based Avison Young (Canada) Inc., a real estate services company with 30 offices across North America.
His company is handling the leasing for Metrotower III on behalf of developer Ivanhoe Cambridge, which had shut down the project in 2008 after capping off five levels of underground parking. Ivanhoe Cambridge announced in November 2011 that construction would resume in January. Since then, nearly six of the 29 storeys of the 411,000 square foot tower have been built.
As the name implies, Metrotower III is the last of three towers in a complex that will boast about one million square feet of office space when the new building is finished in 2014. The new tower, with a floor plate of 16,200 square feet, is the largest of the three and the first with Leadership in Energy and Environmental Design platinum designation.
About 250 metres from the Metrotown SkyTrain station on the original Expo Line, Metrotower III is precisely what planners envisioned when construction began on Greater Vancouver’s rapid-transit system in the early 1980s.
“The plan then was to develop a strategy of what they called town centres, recognizing that the population growth of Vancouver was going to migrate to the eastern sectors of the city simply because that’s where there was room for growth,” Elliott said.
Transit Nodes With High Development Potential
Victor Ngo, a fourth-year University of B.C. geography and urban studies student, suspected that transit nodes would have high development potential. So he performed an analysis as a project for an advanced geographic information system class to test that thesis.
“I really wanted to provide a more quantitative underpinning and visualization of why planners should revisit these areas,” said Ngo, who presented his paper at a Canadian Association of Geographers meeting in Kelowna in March.
His evaluation of six criteria, including walkability and bikeability, identified 10 areas in the City of Vancouver with the highest potential for transit-oriented development. All of them were around transit stations outside of the downtown core.
While his study focused on residential needs, in particular for lower-income people, Ngo said he also pictured mixed-use development. “So office space was definitely something I was thinking about around the stations,” Ngo said.
For example, the Canada Line’s Marine Drive station on Cambie Street near the north arm of the Fraser River showed the highest development potential within Vancouver proper.
“If you visit the area, it’s not too surprising,” Ngo said. “Since it’s by the waterfront of the Fraser River it’s historically been more industrial, and there’s a lot of residential areas around that station as well. But with the Cambie Corridor Plan that was passed recently development is already starting to occur on stations along the Cambie corridor. So there’s a lot of opportunity there for a good mix of offices, commercial, and residential towers.”
Richmond Office Vacancy 23% Away from Transit
The success of office developments is higher when they are within 500 metres of transit stations than for those further away, according to a recent analysis by the Vancouver office of CBRE Inc., the multinational real estate services giant.
“Obviously if there are any major company closures or major vacancies, sometimes quarter to quarter that might change. But for the most part we’ve seen a steady percentage spread between transit-oriented and non-transit-oriented developments,” said Anthio Yuen, a senior research analyst with CBRE in Vancouver. “For the most part, landlords and developers of office space have caught onto that and you’ve seen a lot more commercial real estate development focused on SkyTrain nodes or Canada Line nodes across Metro Vancouver.”
Nowhere is that spread greater than in Richmond, where the office vacancy rates for buildings within 500 metres of a Canada Line station was 3.35 per cent, according to CBRE’s First Quarter 2012 Metro Vancouver Office MarketView report. Outside that range, the vacancy rate was 23.6 per cent.
One reason for that, which both Yuen and Elliott cited, is most of the office space outside of Richmond’s No. 3 Road, which the Canada Line follows, is in office parks. Those spaces do not appeal to lawyers, accountants, engineers and similar professionals who serve the business community.
“The fact that the Canada Line actually goes down No. 3 Road reinforces the ability for other tenants to consider that marketplace because now they can get people into those areas through public transportation,” Elliott said.
Yuen also noted that during the recession, many U.S. branch offices, such as Microsoft’s, moved from Richmond to downtown. Richmond also has only 15 to 20 office buildings, many of them small, on its transit corridor, Yuen said. In contrast, Burnaby has a much higher variety of office space, much of it with better access to transit.
“Just the distance to the downtown core and the fact it is somewhat more of a desirable market in general, Burnaby has been the major market that has been able to capture the major engineering groups, the major tech firms as well,” Yuen said.
Not that Burnaby doesn’t have vacancy issues as well. “Some of the suburban business parks, typically the ones that are not serviced by transit do have some troubles lowering their vacancies,” Yuen said.
Vancouver Office Market Recovered From The Recession
Overall, however, the office vacancy rate in Metro Vancouver has recovered from the recession. In its most recent report, CBRE noted that the overall rate had declined for the sixth consecutive quarter to 7.6 per cent. For downtown Vancouver, the rate was 3.4 per cent, which was unchanged for the first time in eight quarters.
For AAA and A office towers, the rate was only 1.1 per cent, Yuen said. That is effectively zero.
It’s also a reason those transit hubs are attracting a lot of development interest. Aside from Metrotower III, other major projects under construction or in advanced planning include the following:
• PCI Group’s mixed-used Marine Gateway, with 240,000 square feet of offices;
• Vancouver airport’s six-building 800,000 square project on Sea Island;
• (PDF) GE Capital Real Estate’s proposed 500,000 square foot Gateway Business Park in Surrey;
• Bentall Kennedy’s 400,000 square feet in two office buildings next to the Braid Street SkyTrain station; and
• Wesgroup Properties’ Brewery District project near New Westminster’s Sapperton SkyTrain station.
Phase 1 of the latter project opened in the fall of 2011. Phase 2, which is under construction, will be the future head office of TransLink and the TransLink police.
Driving a lot of that development toward the suburbs is the geography of downtown Vancouver. It is occupies a “water-surrounded” peninsula, which restricts access, Elliott pointed out.
“Vancouver is different than a city like Calgary,” Elliott said. “Vancouver has only roughly 50 per cent of its office space in the central business district downtown. So Vancouver’s had for a number of years a very strong and emerging suburban office market.”
Evergreen Line Opens 2016 with Six Stations
For that reason, developers are keeping their eyes on where future SkyTrain stations will be built, Yuen noted. The newest addition to the SkyTrain system, the 11-kilometre Evergreen Line, is under construction and slated for service in the summer of 2016. It will connect Douglas College in Coquitlam with the Lougheed Town Centre on the Burnaby border. It will open with six stations but is designed to allow for other stations in the future.
The prospect of a transit line along the Broadway corridor to UBC would be another good opportunity for transit-oriented development, Ngo pointed out.
Elliott said there’s nothing unusual with the development that’s now happening around SkyTrain nodes in Metro Vancouver. It’s similar in many ways to what happened in Toronto decades earlier.
“In a way we have a very favourable story to tell because we put a lot of time and effort into a transit system that has recognized we need to move people around other than by cars,” Elliott said. “And part of that is forced by our beautiful geography, which is totally inefficient.”
There has also been buy-in from residents and businesses willing and eager to locate next to SkyTrain stations, he said.
“So Vancouver I think as a city has had some good foresight in planning, recognizing a need to diversify where we can locate operations of business, retail etc., and people to live,” Elliott said. “I think we’ve done a very good job of that.”