Cutbacks by the provincial government have driven Victoria’s office vacancies to record levels and are adding to the glut of space in downtown Vancouver, commercial real estate agents and property managers confirm.
“The amount of vacant office space in Victoria is at an all-time high,” said Bob Law, an office specialist and broker with Colliers International in the capital city. “The increase can be directly traced to government downsizing.”
The provincial government accounts for 3.6 million square feet, or about 53% of Victoria’s office inventory, much of it in Class B buildings, but it has been reducing its footprint in recent years. An economic slowdown hasn’t helped in leasing up space the government is leaving behind.
An example, Law said, is a 26,000-square-foot space on Johnson Street that the province vacated when its lease expired last year. That space remains dark, helping to push the total vacant space in Greater Victoria to 793,000 square feet and the vacancy rate to a 16-year high.
As of the end of 2013, overall office leasing in Greater Victoria was negative by more than 23,000 square feet and the vacancy rate has risen to 9.2%, Colliers reports.
“[The province] is consolidating space. There is a lot of desk sharing,” Law said, adding, “From a taxpayer’s perspective, this is wonderful news.”
A provincial government communications officer said there was no official policy on reducing office space requirements, but the message is loud and clear in the real estate industry.
Vancouver property manager Warren Smithies, vice-president of Martello Property Services Inc., citing a contact in “upper levels” of the provincial government, said the province and its crown corporations have “recently been mandated to reduce their office footprints by as much as 35% to save taxpayer dollars and aid the government in achieving a balanced budget.”
Metro Vancouver’s office vacancy rate has increased to 8.4%, from 7.9% in the third quarter of 2013, which Colliers’ Vancouver office says is “caused by sublease spaces becoming vacant and government agencies consolidating space in downtown Vancouver.” This includes provincial and federal governments.
Implementation of the City of Vancouver Building Bylaw – which will ban doorknobs and usher in some of the toughest energy requirements in Canada – has been postponed from March 2014 until July 1 2014, according to Mark Hartman, Vancouver’s green building manager.
“Only building permits submitted after June 30 will be required to comply with the new building bylaw, which includes updates to windows, insulation, heating systems, and accessibility,” Hartman wrote this week in an email to members of the building industry.
The bylaw, which covers one- and two-family dwellings, bans the use of doorknobs in new homes and substantial renovations in favour of levered handles and also requires that all doorways be wider to accommodate wheelchairs.
Energy requirements include an upgrade to window performance, an increase in insulation levels, greater air tightness and the mandatory installation of a 240-volt electrical vehicle outlet in each carport or garage.
Hartman said the new bylaw is part of the City of Vancouver’s strategy to become the “greenest city in the world by 2020.” He didn’t explain why the bylaw deadline has been extended.
However, a building consultant on the city’s bylaw advisory committee, said the delay was due to “intense lobbying by building product manufacturers, particularly in the window and door industry.”
While many high-rise developers are rediscovering roof space for amenities, gardens and even fountains, Century Group may be the first to consider a commercial business operating from atop a tower.
The 50-storey 3 Civic Plaza, a mixed-use hotel, retail and residential project by Century Group and Surrey City Developments will feature more than 5,200 square feet of rooftop meeting rooms and conference facilities, set among gardens and water features on the tallest building between Vancouver and Calgary.
While designed by Cotter Architects as part of the hotel and condominium amenities, the space could be leased to a private operator, according to Century spokesperson David Laulainen, who said the company is examining that option.
“I can see a business offering space for weddings, bar mitzvahs, corporate meetings and other events,” Laulainen said, while keeping the rooftop gardens accessible to tower residents.
By commercializing the roof space, the amenity would not be factored into the tower’s common areas, which would keep strata fees lower for residential tenants, he added. The tower is to complete in 2017.In Vancouver, the 500,000 square-foot Telus office complex will include 10,000 square feet of patios and green space on top of a 24-storey tower at Seymour Street and West Georgia Street. The roof will include a modest commercial component: gardens will provide organic produce for local restaurants.
At 745 Thurlow in downtown Vancouver, Musson Cattell Mackey Partnership has planned two green roof spaces into the 24-storey office tower. This includes a rooftop terrace extending around the west, south and east sides of the building, accessible to tenants from the 3rd floor. As well, a roof top amenity area will include an outdoor patio and entertainment zone with a gas fire pit and barbeque.
The Broadway Tech Centre business complex in East Vancouver already has a 270,000-square-foot roof planted with trees, shrubs, perennials and grass. The roof also boasts a sports field – a first in Canada – patios and tree-lined walkways.
$200M Edmonton portfolio sold
Toronto-based Morguard Investments Ltd. has closed two separate deals in a large Edmonton acquisition. The done deals are a 377,000-square-foot downtown Class A office tower at 44 Capital Boulevard; and a five-building Class A industrial portfolio that includes Brier Business Centre, two single-tenant buildings and Crossroads A and Crossroads B, all in the city’s Northwest. Morguard closed the deals on behalf of pension fund clients. Total price: $200 million.
From: HQ Commercial, Vancouver. HQ principals Dave and Mark Goodman report the following sale, the first of a North Vancouver concrete tower in 23 years.
Deal: 88-suite Parklea Apartments, a rental building on East Keith Road, North Vancouver. Sold to Starlight Investments for a local family. Capitalization rate: 3.3 per cent. Price: $25.3 million.
HQ agents Dave and Mark Goodman also sold the following:
Deal: 18-suite rental apartment building, concrete, on West Boulevard, Vancouver. Built in 1955. Price: $9 million.
From: NAI Commercial, Vancouver. NAI agents Don MacDonald and Gary Niesner report the following sale:
Deal: 12,000-square-foot retail/office building, Langley. Fully leased. Price: $1.98 million.
From: CBRE Limited, Calgary. CBRE associate vice-president Grant Potter reports the following sale:
Deal: 11-suite apartment building on 12,500-square-foot lot with development potential in SW Calgary. Price: $1.75 million.
From: London Pacific, Burnaby and Re/Max Bill Goold Realty, Vancouver. London Pacific broker Ben Williams and Re/Max broker Bill Goold report the following sale:
Deal: Portfolio of four rental apartment buildings, total of 49,386 square feet, Metrotown, Burnaby. Price: $20.72 million.
London Pacific broker Ben Williams sold the following:
Deal: Three-lot assembly, total of 16,353 square feet, Main Street (Little Mountain area) Vancouver. Price: $5.4 million.
From: Colliers International Inc., Fort McMurray. Colliers broker Ken Shebib reports the following sales:
Deal: 4,000-square-foot industrial building, MacKenzie Boulevard, Fort McMurray. Sold for Kuusamo Developments Ltd. Price: $1.93 million.
Deal: 2,000-square-foot industrial building, MacKenzie Boulevard,
Fort McMurray. Sold for Kuusamo Developments Ltd. Price: $1.33 million.
From: Colliers International Inc., Surrey. Colliers agents Mike Grewal, Jason Teahen and Sheldon Scott report the following sale:
Deal: 13,806-square-foot office building on 25,081-square-foot lot, King George Boulevard, Surrey. Price: $4 million.
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The owners of Mount Washington Alpine Resort have quietly put Vancouver Island’s only commercial ski hill on the market.
“It’s probably been in the process for six to eight months,” Don Sharpe, director of business operations, told CHEK News. “Our ownership group is getting a little bit older now, and looking for new opportunities and new things to do.”
Sharpe did not reveal the asking price or any offers. “It’s a private, strategic sale and who knows at this time where it will end up.”
Comox Valley real estate agent Rick Gibson, who is not involved in the sale, said the resort is managed well, and the sale is no indication of financial problems. “The current ownership group has done a phenomenal job of developing Mount Washington, but they’re done. They’re ready to do other projects,” said Gibson.
Mount Washington was incorporated in 1977. Peter Gibson is its president and Brian Stamp its secretary. Other directors listed on the provincial ownership registry are Darryl Eddy and Michael Fitch, each with Vancouver addresses, and Campbell River residents Edward Foster and George William Stuart.
Peter Gibson, originally from Courtenay, helped carve out the resort in the 1970s, by using a chainsaw to clear land. He was a friend of the son of one of the project’s developers. When the resort officially opened in fall 1979, Gibson was director of skiing, rising to president in 2001, the resort’s website says.
Owners have continued to invest in the resort. Recent upgrades include installation of child-friendly lifts on novice runs, and this season, a new lift and relocation of the tube park.
The resort has struggled with lack of snow this season, missing the lucrative Christmas season and only opening a week ago.
Members of the Tourism Mount Washington Association learned of the decision to sell in the summer.
At the group’s annual general meeting, chairman Tobin Leopkey reported: “This is a strategic sale, not a distress sale,” according to the minutes of that meeting, held Aug. 13. The report said owners have “reviewed their business plans and are . . . not scaling back, just restructuring and improving their focus.”
There is no for-sale sign on the property, nor is it mentioned on Mount Washington’s website or on the website for CBRE Canada, which is handling the sale.
Victoria- based Chris Rust, associate vice-president of CBRE, said an agreement with the owners limits what he can say publicly about it, including the selling price or the date it went on the market.
“I can tell you it’s a wonderful opportunity,” Rust said.
Downtown Calgary is the next big play for multi-family residential developers, according to Cameron McNeill, president of Mac Marketing Solutions, Vancouver’s market-leading condominium sales agent.
“It is a unique time in Calgary’s real estate history,” McNeill said. “There is a growth opportunity not only for real estate developers, but for industry service providers. There are just not enough skills and experience to satisfy the market.”
McNeill expects Calgary to account for 40% of Mac’s project marketing within three years, up from 25% today. Mac has sold 14,000 condominiums since 2001.
The condo demand in downtown Calgary is being led by young urbanites tired of the sprawling suburbs that characterize Alberta’s biggest city, McNeill said
“In Calgary, it is a very recent phenomenon that a young professional would not need a car. Only five years ago, this would have been a laughable concept. But urbanization of Calgary’s central core [now] provides a very viable way of living,” McNeill said.
A comparison of the Calgary and Vancouver condo markets reveals some stark difference, according to Mac research.
• New condominiums in Calgary are priced from 15% to 25% less than in Vancouver.
• Calgarians expect more space in their condos. The micro-condos being developed in Vancouver are not being seen in Calgary.
• The City of Calgary is “generally found to provide a friendly approval process. In Vancouver, developers expect a big negotiation with the City and are never sure what zoning they will get.”