If early sales are an indication, developer Cressey has tapped into latent demand for buying – rather than leasing – suburban office space.
On June 9, Cressey, primarily a residential builder, began marketing Diagram, the first new office tower being built in Coquitlam in seven years and the first-ever commercial strata tower in the Tri-City region.
The Class A office tower, planned a decade ago as part of Cressey’s M3 complex, where the company has completed three high-rise residential towers, was originally to offer conventional leasing.
Cressey executive vice-president Hani Lammam said the concept of selling the commercial space in the 58,000-square-foot Diagram evolved after consistent interest from the local market.
“There is pent-up demand for owning, rather than leasing, workspaces,” Lammam said he discovered.
Unlike in the industrial market, where strata now accounts for about 40 per cent of new development, selling office space has been slower to catch on.
Bosa Development sold out 15 floors of its 30-storey Waterfront Centre office tower in downtown Vancouver as strata in 2017 at $2,000 per square foot, but current office strata is mostly seen in conversion of older office buildings, much of it Burnaby.
In many of these, the target is investors who buy office or retail space and lease it out, much like in high-rise residential towers. Metro Vancouver’s office vacancy rate is the lowest in the country and leasing rates are among the highest.
Unlike residential condos, commercial strata is not regulated by B.C.’s Residential Tenancy Act, which caps rent increases and can restrict evictions.
“We did not target investors at Diagram,” Lammam said, saying it shares Coquitlam’s vision for the area.
Cressey was in early at Coquitlam Town Centre, which, under a city master plan introduced last year, is being developed into Coquitlam’s new downtown core.
A central plank in the plan is to double the commercial density to provide a strong employment base. Office districts are slated for areas next to the Lincoln and Coquitlam Central SkyTrain stations, while most of the new streets will have mandatory commercial frontages.
Diagram is evidence the plan is working.
Within a week of the marketing launch for the tower, more than 40 per cent of the office space offered was already claimed, said broker Adrian Beruschi of CBRE in Vancouver.
Diagram, being built at 2992 Glen Drive near the Coquitlam Centre core, will have up to 55 strata office units, plus three retail units on the ground floor, which will also be sold as strata.
Cressey released 38 office units in the first phase of the 58,000-square-foot building on June 9.
“We received over 25 offers, so the project is currently 44 per cent under offer, and we have yet to release the retail units,” Beruschi said on June 16.
The vast majority of the buyers are Tri-City businesses and professionals who intend to occupy the space, he said. Those presenting offers included lawyers, accountants, doctors, dentists, physiotherapists and other professions, he said.
Prices for space in Diagram start at $745 per square foot and range up to $855 per square foot for top-floor penthouse offices.
There are also full floor plates, at 6,170 square feet available, but Beruschi noted the units start at $479,000, for 643 square feet.
Lammam was “delighted but not surprised” at what appears to be a pending sell-out of Coquitlam Centre’s first office tower. The early sales success, he said, means construction could start earlier than planned.
“We are ready to go,” he said.