GVRD OFFICE REPORT SECOND QUARTER HIGHLIGHTS
GVRD’s office vacancy rate is down to 5.05% Non-Residential Building Permits are up 1.5%
MARKET INDICATORS: SECOND QUARTER 2007 VACANCY
MARKET OVERVIEW
ECONOMIC OVERVIEW
•
•
While suburban office rental rates have remained
2007
The consumer price index of BC increased 1.7% from
relatively flat and consistent, the Downtown Core and other
May 2006 to May 2007. Canadian interest rates are likely to
popular business regions, such as the Broadway Corridor,
climb higher in an effort to curb inflation (the prime business
are experiencing a space crunch and significant demand
rate sits around 6.2%, while both 1 and 5 year mortgage
for new office space. With the City of Vancouver’s “Living
rates continue to climb to 7.05% and 7.24% respectively).
First” Policy (encouraging Downtown Core residential
An increase in rates will impact affordability and may
development) enacted over 15 years ago, the addition
impact demand for commercial properties. Furthermore,
of new office space to the market has been neglected.
buyers may become more security conscious and look
Demand has continued to surge upwards, lease and sale
for safer investments. If the Bank of Canada decides to
rates have followed suit, and supply continues to struggle to
raise interest rates, Greater Vancouver may see more
keep pace. As a result, vacancy rates have been dropping
commercial properties up for sale in the immediate future.
all over the Lower Mainland. In a new report issued early
•
July 2007, the City of Vancouver declared a plan for the
and though the strength of the dollar is great, Canada
Downtown Core involving policies to discourage office to
is not a standalone economy. While the USA’s housing
residential conversions, expantion of commercial districts,
market continues to flounder, British Columbia’s forestry
as well as allowing higher FSR (floor space ratio) for office
and manufacturing industries are feeling the impact. BC’s
buildings in several key areas.
economy, however, is based on several industries and
•
typically while one is lagging, the others are booming, thus
Q2 2007 saw overall vacancy fall nearly a full percent
from 6.00% to 5.05%, while new supply increased minimally
The Canadian dollar is currently reaching 30 year highs,
leading to consistent growth in the long run.
to 43,366,607 Square Feet (sq.ft.). In addition, absorption climbed to 359,364 sq.ft., up 231,480 sq.ft. from last quarter’s 127,884 sq.ft.
GREATER VANCOUVER VACANCY RATES BY CLASS
20%
NEW SUPPLY
All Classes
18%
Class A
Class B
Class C
16% 14%
ABSORPTION
12% 10% 8% 6% 4% 2%
07
YTD
Q 1
06 Q 1
05 Q 1
04 Q 1
03 Q 1
02 Q 1
01 Q 1
00
0%
Q 1
* quarterly comparison
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GVRD OFFICE REPORT •
SECOND QUARTER HIGHLIGHTS
MUNICIPALITY VACANCY CHANGES
BC’s economy grew by 1.3% over Q2, nearly double the rate of Q1,
and is expected to keep growing and expand by 3.1% by year-end (less
25%
Q1 2007
than last year’s 3.3%). Construction and steady job growth continue to remain strong in the region (job growth at 1.6% and unemployment
Q2 2007
20%
dropping below 4.2%). Further evidence of BC’s booming economy can be seen through new business incorporations hitting 13 year highs, as well as the provincial bankruptcy rate, which currently sits at a record low of
15%
118 per quarter, down nearly 40% from last year. •
Non-residential building permits were up 1.5% in Q2. In Q1 2007, BC
10%
builders were granted $2.96 billion worth of permits, an increase of nearly 16% over the same period of 2006. $1.03 billion (35%) of those permits
5%
were issued for commercial buildings. r W
es tm in
st e
Su rre y
R
ich m
on d
nc ou ve r
N
N
ew
or th
Va
Bu rn ab y
Co rri do r
or e C n
also seen an inflow of nearly 40,000 immigrants over the past year, the
Br oa dw ay
nt ow
(Q1 ’07) to 4,408,400 by year end. The Greater Vancouver Area has
ow
a rate of 1.3% over the past year. It is projected to grow from 4,338,100
0%
D
In terms of population, BC has seen a steady increase, growing at
Va nc ou ve r
•
majority of which settled in Vancouver’s suburbs and outlying areas.
neighbourhoods of Chinatown, Downtown Eastside and Gastown.
GVRD municipalities currently experiencing the largest population
Construction involves a complete street redesign including rows of trees,
growth include Port Moody, Surrey, and Mission (measured over the past
recreational path on both sides of the road, and integrated public art.
5 years).
Projected completion is Fall 2008. •
MARKET ACTIVITY •
construction. Businesses along the construction corridor continue to
Bentall Capital has applied for a building permit from the City of
Vancouver in order to develop a brand new 22-storey office tower at the corner of Thurlow Street and Alberni Street, potentially providing over 400,000 sq.ft. of new office supply to the Downtown market. •
The Canada Line, formerly known as the RAV Line, continues
The $5 million Carrall Street Greenway is under construction and,
when complete, will link the False Creek Seawall and Burrard Inlet completing a seawall loop around Downtown, and connecting the
struggle with business interruption stemming from traffic disruption, noise, vibration, dust, excavation, and other construction activity. The Project is on schedule, and is still aiming to complete November 30th, 2009. •
The former Storyeum site, located at 142 Water Street in Gastown,
has seen considerable interest from users, ranging anywhere from fitness clubs to cabarets, since it closed its doors last October. The City of Vancouver has launched a Request For Proposals, but a decision on a new tenant is not expected until Autumn 2007. Major Office Sales
Address
Municipality
Price
Size (sq.ft.)
Price Per Square Foot
Royal Bank Building, 628 6th Street
New Westminster
$17,250,000
69,510
$248.17
Queen’s Court, 625 Agnes Street
New Westminster
$14,515,000
84,429
$171.91
Hycroft Center, 3195 Granville Street
Vancouver
$12,775,000
33,652
$379.62
Birks Building, 698-686 Hastings Street
Vancouver
$22,900,000
92,767
$246.86
First Capital Place, 690 Quayside Drive
New Westminster
$13,200,000
59,880
$220.44
Major Office Lease Transactions
ROYAL BANK BUILDING 628 SIXTH STREET, NEW WESTMINSTER $17,250,000 - SOLD
Address
Municipality
Tenant
595 Burrard Street
Vancouver
Lake Service
Size (sq.ft.) 55,000
3600 Lysander Lane
Richmond
Catalyst Paper Corp.
31,970
1075 West Georgia Street
Vancouver
Guild, Yule & Company
19,945
Bentall IV, 1055 Dunsmuir Street
Vancouver
Absolute Software Corp.
16,721
Park Place, 666 Burrard Street
Vancouver
Goldcorp. Inc.
16,590
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GVRD OFFICE REPORT Q2 2007 Greater Vancouver Market
SECOND QUARTER HIGHLIGHTS
Number of Buildings
Total Office Area (sq.ft.)
Total Occupied Area (sq.ft.)
Total Vacant Area (sq.ft.)
Total Vacancy (%)
434
40,694,585
38,638,689
2,055,896
5.05
217
24,982,332
24,347,698
643,643
2.54
171
22,082,124
21,497,390
584,734
2.65
Vancouver District All Classes Downtown Class A
50
12,463,761
12,236,184
227,577
2.65
Class B
66
6,536,460
6,346,039
190,421
1.83
Class C
55
3,081,903
2,915,167
166,736
5.41
46
2,900,208
2,850,308
49,900
1.72
Class A
27
2,097,287
2,074,734
22,553
1.07
Class B
14
628,030
600,683
27,347
4.35
Broadway Corridor
Class C Surrey
174,891
174,891
0
0.00
2,318,653
1,997,246
321,407
13.86
Class A
12
1,817,505
1,530,914
286,591
15.77
Class B
5
255,356
237,657
17,705
6.93
Class C
8
245,792
228,681
17,111
6.96
74
4,484,514
3,986,165
498,349
11.11
Class A
47
3,093,367
2,696,745
396,622
12.82
Class B
24
1,195,100
1,098,004
97,096
8.12
Richmond
Class C North Vancouver
3
196,047
191,416
4,631
2.36
22
1,268,652
1,174,649
94,003
7.41
Class A
6
430,640
405,553
25,087
5.83
Class B
13
725,547
663,030
62,517
8.62
Class C
3
112,465
106,066
6,399
5.70
14
725,135
583,126
142,009
19.58
Class A
4
197,899
189,152
8,747
4.42
Class B
10
527,236
393,974
133,262
25.28
New Westminster
Class C Burnaby
•
5 25
0
0
0
0
0.0
82
6,915,299
6,549,805
365,494
5.29
Class A
46
4,653,516
4,467,003
176,513
4.00
Class B
28
1,913,881
1,737,423
176,458
9.22
Class C
8
347,902
345,379
2,523
0.73
GREATER VANCOUVER HISTORICAL ABSORPTION
The potential Whitecaps Waterfront Stadium development is currently
under review regarding the remedy of several key issues including: provision
655,904 sq.ft.
700,000
of an adequate street network, reconfiguration of resolution of impacts 600,000
on the livability of residential areas south of the rail lands, and resolution of
503,255 sq.ft.
impacts on future port lands. The process is expected to complete early July
195,191 sq.ft. 200,000
127,884 sq.ft.
Deutsche Bank has been hired to examine the costs and benefits of selling
06 Q 4
06 Q 3
06 Q 2
06 Q 1
05
0
Q 3
excess of $1 billion.
05
buildings located all across Canada will soon come to market, worth in
51,046 sq.ft.
100,000
Q 4
and leasing back the buildings. Speculators believe that a handful of Federal
07
buildings in Vancouver, including the Sinclair Center and 401 Burrard Street.
300,000
Q 2
Potential buyers have been submitting bids on several Federally owned
286,328 sq.ft.
07
•
359,364 sq.ft.
400,000
Q 1
complete early 2010.
407,984 sq.ft. Square Feet
in order to qualify for rezoning and, if approved, the stadium is forecast to
500,000
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GVRD OFFICE REPORT SECOND QUARTER HIGHLIGHTS
2007
New Supply - Current Major Projects Under Construction Development
Municipality
Civic Address
Developer
Completion
Total Sq.Ft.
Sq.Ft. Available
BCIT Aerospace Center
Richmond
3700 Cessna Street
BCIT
Q3 2007
90,647
90,647
Bentall V - Phase II
Vancouver
550 Burrard Street
Bentall
Q3 2007
243,121
0
Central Park
Burnaby
4555 Kingsway Avenue
Bosa Ventures
Q4 2007
62,772
62,772
Commerce Court Phase V
Richmond
13900 Wireless Way
PK Projects
Q4 2007
116,000
28,250
Westminster Center South
New Westminster
505 60th Street
Canacemal
Q1 2008
42,000
42,000
Broadway Tech Park - Phase III
Vancouver
2925 Virtual Way
Bentall
Q2 2008
115,000
76,402
PCI Building
Vancouver
525 West Broadway
PCI/Tonko
Q2 2004
85,000
0
New Supply - GVRD Current Pre-Leasing Opportunities Building Name
Municipality
Address
Completion
Typical Floor Size
Floors
Sq.Ft. Available
2009
ND
7
75,000
Jameson House
Vancouver
848 West Hastings Street
100 East Esplanade
North Vancouver
100 East Esplanade
ND
13,000
5
51,800
Discovery Place - Building 12
Burnaby
4200 Canada Way
ND
27,000
5
155,248
Production Way & Lougheed
Burnaby
3294 Production Way
ND
20,000
5
100,000
Willingdon Business Park Phase VIII
Burnaby
Willingdon Business Park Phase VIII
ND
22,500
4
90,000
Willingdon Business Park Phase IX
Burnaby
Willingdon Business Park Phase IX
ND
22,500
4
90,000
8980 Nelson Way
Burnaby
8980 Nelson Way
ND
19,200
3
57,861
Rosser Ave. & Lougheed Highway
Burnaby
Rosser Ave. & Lougheed Hwy
2008
10,000
10
108,000
4488 Halifax Street
Burnaby
4488 Halifax Street
2008
6,733
9
60,600
801 Harbourside - Phase I
North Vancouver
801 Harbourside Drive
2008
10,000
5
57,000
801 Harbourside - Phase II
North Vancouver
801 Harbourside Drive
2008
10,000
7
75,000
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Microsoft is planning to open their first Canadian Software
adjust for the rate increase, while those who
Development Center in the fall. The facility is likely to draw software
do not, will migrate to the various suburban
developers from around the globe, as it is easier to bring in foreign
markets.
workers here than in the USA. The company is exploring sites in
•
Vancouver, Burnaby, and Richmond to house their employee base of
Vancouver will force the rethinking of office
around 800 workers.
space utilization, moving away from fixed floor
LOOKING AHEAD
plans, and into the embracing of open space
•
Looking to the future, both sale and lease rates will continue to
increase. In the Downtown Core, lease rates for commodity space (low to mid-rise space in a building, constituting the majority of the market), will climb into the $50 per square foot range over the next two years. Currently, there is little evidence of many firms exiting the Downtown Area since moves are costly and inconvenient to the employee base. It is expected that businesses that need to be Downtown will remain and
FOR MORE INFORMATION, PLEASE CONTACT: MIKE MEAKIN KASIA HAJDUK DIRECTOR OF RESEARCH RESEARCH ANALYST (604) 630-3405 (604) 630-3391 KASIA.HAJDUK@JJB.COM MIKE.MEAKIN@JJB.COM
The continual space crunch in the City of
and space saving adoptions such as wireless networks. Further demand and emphasis on environmentally conscious development and alternatives is expected to continue well into the future. The biggest overall issue facing the majority of GVRD office users in the immediate future will continue to be finding space, whether for expansion or relocation purposes.
BENTALL V - PHASE II NEARLY COMPLETE
800 - 475 WEST GEORGIA STREET, VANCOUVER, B.C. V6B 4M9 PHONE: (604) 684-7117 • FAX: (604) 684-1017 VISIT OUR WEBSITE: WWW.JJB.COM/VANCOUVER
VANCOUVER • Toronto • Calgary • Edmonton • Winnipeg • Montreal • Mississauga • Nanaimo • Burlington • Halifax • Kingston • London • Markham • Niagara • Ottawa • Regina • Waterloo • Victoria All information has been obtained from sources considered to be accurate but is not guaranteed and is subject to conditions at the time of any transaction taking place. Properties are submitted subject to prior sale or lease, withdrawal or changes without notice.