Vancouver developers build, hoping they will come

[NorthernDancer]

http://www.vancouversun.com/business..._lsa=0749-7ee7

VANCOUVER — A wave of new office towers set to open in coming months in downtown Vancouver has local real estate experts and landlords wondering whether or not the local market can grow into the space or attract enough new business to prevent the city’s office vacancy rate from skyrocketing.

By this time next year, the dust will have settled on what has been one of Vancouver’s most frenzied episodes of downtown office construction, with more than 2.2 million square feet of new office space coming online across several building projects. Local experts are predicting a vacancy rate of roughly 10 to 12 per cent by the end of this year. The average vacancy rate over the last 10 years in Vancouver’s core has been about 4.6 per cent.

Panelist Tony Astles, executive vice-president at Bentall Kennedy, Canada, said the historic trends of office occupancy in Vancouver and the current building boom suggest that Vancouver already has too much office space.

He called Vancouver a young city that is transitioning from a specialty in commodities to high-tech. “Forty-two per cent of the tenants [here] today are high-tech oriented,” Gehriger said. “It’s more than oil, gas and resource companies together.”

[miketoronto]

Lets hope, because downtown Vancouver has much too many condo buildings, and not enough workplaces.
Many more office buildings will be needed to rebalance the downtown and stop it from turning into a bedroom suburb of Vancouver's suburbs.

Downtown Vancouver is really falling behind in the downtown employment levels, compared to other Canadian cities. I know at one point, Calgary was poised to surpass downtown Vancouver in employment levels.

[Jasonhouse]

^Just wondering.... Whose research is this conclusion based on? Got a link?

[miketoronto]

Originally Posted by Jasonhouse

^Just wondering.... Whose research is this conclusion based on? Got a link?

Go read the employment level stats the different cities post every year or two.

It has long been a planning issue that downtown Vancouver has been building nothing but condos.

[dc_denizen]

I would be shocked if downtown Vancouver had more office space than Calgary, given the oil and gas jobs there.

[NorthernDancer]

Downtown Vancouver has about 25-26 million square feet of office space. Downtown Calgary has 40 million+ square feet.

[jigglysquishy]

Assuming 250 sq. ft. per office worker that's only 100,000 workers in downtown Vancouver. Less than 5% of the population of the GVA commutes downtown.

Seems pretty low.

[mhays]

Figure more like 200 sf these days.

Calgary has a huge percentage of its regional office employment in its downtown. That's unusual, and not a fair comparison.

Brokerage office space stats are often not useful to compare cities. The ratio above sounds reasonable but it's not counting everything, and might be for different scales of geography.

The 4.6% sounds remarkably low, and 10-12% isn't bad, at least assuming US market standards. It'll probably help businesses grow...at 4.6% office space tends to be very expensive and it's hard to accommodate large expansions.

With new train service, maybe there's more ability to handle commuters. Historically Downtown's office population was limited (de facto) by the lack of freeways despite the pretty good bus service. That's also been a big driver of the residential boom.

[ssiguy]

Vancouver has put itself into a precarious position.

For the last half century downtown Vancouver has had one downtown development policy.........high density residential. It has had some wonderful results but it, as the saying goes, became too much of a good thing.

Nearly every sq foot of downtown was zone as residential if needed and even City Hall as well as the business community became increasingly concerned when even smaller office buildings were being renovated into condos. Vancouver finally put a stop to it but the damage has long since been done.

Due to the lack of available land the businesses will have to venture out of the city in order to get land and will result in further reverse commuting patterns which are harder to serve.

Vancouver policy of residential or nothing has left the downtown with little in way of business development or civic space.

[someone123]

Originally Posted by jigglysquishy

Assuming 250 sq. ft. per office worker that's only 100,000 workers in downtown Vancouver. Less than 5% of the population of the GVA commutes downtown.

Seems pretty low.

You're not really talking about "downtown", you're talking about the 1970's-era central business district, probably limited to the eastern side of the peninsula. There are also a lot of people working in adjacent areas and along the Broadway corridor, which is partly served by rapid transit. The big employment centre that people commute to from around the region is a less clearly-defined area that covers most of the peninsula east to someplace around Main Street, south to around 12th, and then west to Burrard or so. I think it's good that employment in Vancouver is spread somewhat in this area and mixed with lots of residential development. The clusters of office towers might be good for generating impressive statistics but they do not make for pleasant or efficient neighbourhoods.

I'm not sure if there is a market for these new buildings or not, but I find arguments centred around vacancy rates are often dubious, particularly when they come from landlords of older buildings. Developers of new buildings try to attract tenants from existing buildings and they don't care of the older buildings are backfilled. From the perspective of the health of the downtown, it's good to get new buildings and for older buildings to move downmarket. Owners of older buildings like to cast this as a negative phenomenon because it is bad for the returns they can get from their ageing, poorer quality buildings, but it isn't necessarily.

[Jasonhouse]

Originally Posted by miketoronto

Go read the employment level stats the different cities post every year or two.

It has long been a planning issue that downtown Vancouver has been building nothing but condos.

No one's really explaining why it's a bad thing, they're just saying it's a bad thing. Is there proof of this, or is it more of a lifestyle choice/belief thing?

[dc_denizen]

not sure that offices would be the highest and best use of the downtown penninsula, given the scenic beauty of the area. Wouldn't the office districts be better located farther east?

[James Bond Agent 007]

Originally Posted by Jasonhouse

No one's really explaining why it's a bad thing, they're just saying it's a bad thing. Is there proof of this, or is it more of a lifestyle choice/belief thing?

Because, if you have a residential market that's vastly out of proportion to the commercial market, that indicates something is wrong. Or, at best, you have a highly unusual real estate market.

Imagine, for example, a city of 300K, with no other cities within 200 miles. Imagine further this city only has 100K sq ft of office space - total. And maybe another 100K sq ft of industrial and retail space, each, in total.

Would that indicate either something very wrong, and/or something very unusual? Absolutely. A city that size should have a lot more than 300K sq ft of total commercial/retail/industrial space.

I have always noticed that every time I went to Vancouver. The amount of places to live seems vastly out of proportion to the amount of places to work.

[NorthernDancer]

Originally Posted by James Bond Agent 007

I have always noticed that every time I went to Vancouver. The amount of places to live seems vastly out of proportion to the amount of places to work.

Downtown Vancouver's 25 million or so square feet of office space (about 31 million square feet if you include the Broadway corridor) is pretty good for a metro of 2.5 million people. San Diego for example has a far larger metro population, and far less downtown office space. Portland has a similar metro population, and far less downtown office space as well. Cities like Los Angeles and Miami also have far less downtown office space relative to their metro populations than Vancouver does.

Were the amount of place to live really that small compared to the amount of places to work, than Vancouver would have a very high unemployment rate, which it does not.

[dc_denizen]

From Cushman & wakefield, a list of "downtown" office space in 2011:

Midtown Manhattan - 241,245,327
Chicago - 121,144,705
Downtown Manhattan - 86,372,50
Toronto - 83,950,592
Midtown South - 65,207,961
Boston - 60,803,309
Atlanta - 49,980,62 (includes downtown, Buckhead, and Midtown)
San Francisco - 49,261,846
Montreal - 47,974,501
Philadelphia - 43,716,633
Seattle - 41,841,902
Houston - 37,875,867
Calgary - 36,838,26
Cleveland - 34,010,395 (???)
Washington D.C. - 31,981,656 (CBD only)
Dallas - 28,623,462
Minneapolis - 28,137,066
Los Angeles - 27,131,327
Denver - 26,892,845
Vancouver - 23,955,547
Portland - 21,017,841
Pittsburgh - 19,170,450
Sacramento - 18,908,819
Charlotte - 18,124,289
Phoenix - 16,640,362
Atlanta - 15,532,405
Ottawa - 15,190,998
Edmonton - 15,024,92
Miami - 14,828,024
Baltimore - 13,381,776
Cincinnati - 13,266,620
Oakland - 12,994,254
Indianapolis - 10,473,043
Milwaukee - 10,435,855
Winnipeg - 10,073,461
Columbus - 9,867,383
Louisville - 9,161,133
Austin - 8,561,401
Hartford - 7,908,010
Nashville - 7,583,613
St. Paul - 7,342,156
Orlando - 7,233,734 (CBD/Downtown/Uptown)
San Jose - 6,961,984
Tampa - 6,380,856

DC is obviously wrong as it doesn't include government space, NOMA and the east end which are contiguous with the "CBD":

The Washington, DC competitive office market is comprised of 121.4 million square feet in almost 700 properties in nine submarkets throughout the District of Columbia. The core downtown markets of the CBD and East End hold the majority of office product with 38.2 million square feet and 42.4 million square feet, respectively. Capitol Hill consists of 4.8 million square feet, while Southwest has more than 12.0 million square feet. Uptown and Georgetown, the most western and northern submarkets, have a combined 9.8 million square feet. Since 2005, two new submarkets, NOMA and Capitol Riverfront, were formed, and they currently are comprised of more than 12.0 million square feet. In total, the District of Columbia accounts for over 32% of the Washington, DC Metro Region’s competitive office real estate market.

[MonkeyRonin]

Originally Posted by dc_denizen

DC is obviously wrong as it doesn't include government space, NOMA and the east end which are contiguous with the "CBD":

I know the commonly quoted figure for downtown office space in Toronto also doesn't include the areas north of College Street, which have quite a bit of office space and are very much downtown by any other measure. I imagine other cities have similar discrepancies. Still, for the most part this gives a pretty good rough indication of the employment presence in cities' downtowns, to which end we can see that Vancouver is pretty average for a North American city of its size, though a bit low compared to the other large Canadian cities. But then, that's because it's easily the most multi-nodal of the bunch.

[dc_denizen]

^ no doubt, it's just that with downtown DC being more spread out due to the height limit, it doesn't make a lot of sense to divide the business district into arbitrary areas when the built environment is just same same on both sides of the division.

In contrast Alexandria and Arlington are small distances from downtown but nobody would consider them part of the CBD.

When it comes to office space, DC is heavily concentrated, the neighborhoods surrounding the core are almost all residential with the exception of the transit corridors. within the 64 sq miles of DC, all the office space is downtown.

[NorthernDancer]

That Vancouver number doesn't include the Broadway corridor, which is arguably part of "downtown Vancouver" now, especially with the subway to the airport that opened in 2009. Including the Broaday corridor, dt. Vancouver has over 30 million.

I'm surprised at the San Francisco number. I thought they had over 80 million square feet of dt. office space.

[fflint]

Originally Posted by NorthernDancer

I'm surprised at the San Francisco number. I thought they had over 80 million square feet of dt. office space.

According to the city's downtown plan fact sheet, San Francisco has 60 million square feet of office space in the financial district proper, and another 19 million square feet of office space in adjacent downtown districts (e.g. Civic Center, Mid-Market).

[dc_denizen]

...and plenty of space could be added if we throw in various 'corridors' in different cities. Eg, Houston.

DC on the other hand is a special case. MCI center is the CBD, farragut is the CBD.