Amazon flows on
Technology and co-working firms lead office tenant demand in Metro Vancouver, Jones Lang LaSalle (JLL) reports, driving 47 per cent of deals in the region and 50 per cent of downtown office demand.
Amazon is among the latest space-takers, according to NAI Commercial, claiming 98,560 square feet at 475 Howe Street alongside Mastercard Technologies Canada ULC with 40,000 square feet. The deals effectively complete leasing at the Exchange, fulfilling hopes expressed for the property when Credit Suisse and SwissReal Group broke ground in January 2014.
Vancouver’s outgoing mayor, Gregor Robertson, said at the time he expected tech companies “will be very visible in this new building.” He reiterated those aspirations at the tower’s ribbon cutting a year ago, touting the “incredible growth right now in technology.”
Amazon’s growth into the Vancouver market is complemented and supported by WeWork Cos. Inc., which has expanded south from downtown with space in Mount Pleasant and at Marine Gateway on Southwest Marine Drive.
Apple has also taken a bite out of the market with a deal for 60,000 square feet at 400 West Georgia, NAI reports. Together with commitments from accounting firm Deloitte and co-working provider Spaces, 400 West Georgia – a total of 375,000 square feet – is fully pre-leased, taking one more rising property out of play in the core.
The situation is such that Avison Young says in its own overview of the downtown office market that options for tenants seeking 30,000 square feet and up – a huge tranche in a market where the average tenant is less than 10,000 square feet – have dwindled to zero. This has put upward pressure on rents.
JLL, for its part, reports that gross office rents in downtown Vancouver are US$38.89 per square foot, slightly above the North American average of US$37.16. This makes it the second most expensive office market in Canada after Toronto and ranks it 20th in North America, between Houston at 19th and Denver at 21st.
Office space may be pricey in Vancouver, but then there’s the question of property taxes, which are typically added on to what commercial tenants pay.
Bill 42, the province’s proposed Assessment Amendment Act, promises a tax break for Class 4 industrial properties slated for future residential development, but commercial properties (classes 5 and 6) are conspicuously absent from the draft legislation.
The legislation would authorize the BC Assessment Authority to value industrial properties designated for redevelopment in municipal plans according to current use rather than the proposed future use for a period of two years. The provision could be extended.
Municipal Affairs and Housing Minister Selina Robinson said “the proposed legislation aims to protect community-sustaining jobs,” but critics such as property tax specialist Paul Sullivan of appraisal firm Burgess Cawley Sullivan & Associates Ltd. in Vancouver say that completely overlooks the strips of community retail around the province that bring life to neighbourhoods. When planners raise the highest and best use of these properties, retailers face higher property taxes thanks to the lift in potential density and the higher value assigned to the property in turn.
This has prompted many long-established businesses in Vancouver and elsewhere to relocate or close outright. Both options steal gathering points from neighbourhoods. (This is in addition to the changes ushered in by shifting consumer retail habits, including a rise in online and cashless purchases.)
“It is now a provincial issue,” West End MLA Spencer Chandra Herbert told the legislature, noting that his riding faces the loss of “small, idiosyncratic, interesting businesses” that give it character. “I’m hoping, based on conversations I’ve had with the minister, that this is an issue that will be addressed.”
The legislature subsequently shot down an amendment that would have included classes 5 and 6, kicking the can down the road and merchants’ concerns to the curbside.