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Damn the torpedoes

An economic powerhouse in the centre of the Metro region, Burnaby is home to major high-tech firm such as Electronic Arts, Creo, Ballard Power Systems and Telus.

An economic powerhouse in the centre of the Metro region, Burnaby is home to major high-tech firm such as Electronic Arts, Creo, Ballard Power Systems and Telus. Heavy industry includes Chevron Corporation and Petro-Canada petroleum refineries on the shores of Burrard Inlet. Other companies such as eBay, Future Shop and Nokia have significant facilities in the city as well. Burnaby also features superb transportation, including the SkyTrain, and will be a key route for the new rapid-transit Evergreen Line.

The economic downturn that has flattened commercial real estate markets across Canada has spooked - but not slowed - the speculative action that has driven Burnaby's real estate sector for most of this decade.

Six of the seven major office projects in Metro Vancouver being built this year are in Burnaby and, according to a survey by Altus Group, Burnaby accounts for all but 200,000 square feet of the 1.2 million square feet of new offices being built across the Metro region.

However, developers across Burnaby, apparently believe the location is worth the risk.

"We never slowed down," said Sandy Cruickshank of Tonko Realty Advisors, one of the most active players in the hot Willingdon area. Tonko is continuing with its 185,000-square-foot of high-quality Phase 8 and Phase 9 of its giant Willingdon Park complex on Still Creek Drive. One of the buildings is already finished. Tonko is also completing Lake City Court 11, a mixed office and industrial park that opens this summer in the 400-acre Lake City industrial area.

Other new projects include 150,000 square feet at Discovery Place - Building 12 on Canada Way, to complete by year end. In addition, 160,000 square feet at Glenlyon Business Park will open this fall, and has been fully leased by Ritchie Bros.

Vacant space

With 9.5 million square feet of offices, Burnaby is now suffering vacancy rates of 8 per cent range, up from 5.4 per cent six months ago. Burnaby now has the greatest amount of vacant office space in suburban Metro markets, at 594,000 square feet, and that does not include nearly 50,000 square feet of vacant sublease space.

Nowhere is the change more dramatic than in the Willingdon-Canada Way corridor.

The high-tech home to the campus of the B.C. Institute of Technology, Canada Way Business Park, Discovery Park and Willingdon Park, the area has the largest massing of office space in Burnaby. When Tonko completes its latest buildings, Willingdon Park alone will account for one million square feet of new offices, most of it built close to or at LEED (leadership in energy and environmental design) standards.

Nearby, Morguard is completing the five-storey Discovery Green near Willingdon Avenue and Canada Way, with 155,248 square feet; and Appia Group will finish the 12-storey, 110,000-square-foot Commerce@CTI on the Lougheed Highway, a block from Willingdon, this fall.

But a look to the east and west in Burnaby may give even the bravest spec developers the shakes.

To the west is Lake City Centre Properties' Lake City Centre project. Built on spec and completed a year ago, the 108,000-square-foot building has only leased about 10 per cent of the space. To the east is Ivanhoe Cambridge Inc.'s $170 million Metrotower III, the first LEED platinum office building in B.C. But the project's first potential tenant, Best Buy, has walked on a proposed deal to lease half of the 400,000-square-foot tower, which is still under construction.

Burnaby, however, is also the site of the only office tower sale in Metro suburban markets since the market downturn last October. In April, Michael Gill, a principal with Avison Young, brokered the $14.25 million sale of Metrotown Place III, a fully leased, 10-storey, 57,000-square-foot building on Kingsway Avenue, across from the 1.2-million-square foot Metrotown Mall. In normal times, the sale would have been business as usual. In the period between October 2007 and April 2008, for instance, five Metro suburban office building had sold, worth $96 million.

This year, the deal is big news.

"This is the first major suburban office building sale of 2009," Gill noted, adding that it could signal that this year's investment market is stronger than most anticipated. He may be right. Since March, six office buildings have sold in the Metro region - five in downtown Vancouver - with a total value of $500 million.

Industrial

Burnaby has 27 million square feet of industrial space, ranking it among the top five industrial markets in the Metro region. It is also among the most active, with nearly one million square feet under construction, most of it on spec. The vacancy rate has risen recently to the 2.4 per cent range, however, and lease rates have softened. Average asking rents for sub-50, 00-square-foot spaces in Burnaby, which approached the $10-per-square foot net for Class A product in mid-2008, have declined to approximately $8.50 per square foot, according to Avison and Young. Larger warehouse space starts at $6.50 per square foot.

 

New hotel

Burnaby continues to attract other investments. This spring, Delta Hotels and Resorts completed its new Delta Burnaby Hotel and Conference Centre, adjacent to the 100,000-square-foot Grand Villa Casino. The hotel is a redevelopment of the old Villa hotel and totalled 200 rooms when the work was completed in June. Additional upgrades include a full redevelopment of the lobby and restaurant, along with a health club and a 12,000-square-foot, 500-seat conference centre.

 

Residential

Century 21 Canada has named the Deer Lake area of Burnaby as the sixth-hottest housing market in the Lower Mainland. A Century 21 survey found that average Deer Lake prices had increased nearly 20 per cent from March to April of this year, to $401,250.

In June, the Real Estate Board of Greater Vancouver ranked all of Burnaby as one the hottest resale housing markets, with a 109.7 per cent increase in detached sales from the same month a year earlier. The median price of a detached house in Burnaby is now $650,000, third behind only the West Side of Vancouver and the North Shore, but down from $740,000 in June of 2008.

The rental vacancy rate in Burnaby is in the 1 per cent range, according to Canada Mortgage and Housing Corporationt. Of five apartment buildings sold in the municipality so far this year, the average price-per-suite was $124,300.

– Frank O'Brien


From the Western Investor, August 2009