When word started swirling in Vancouver that the Bosa Waterfront Centre office tower had sold in less than a week at prices topping $2,000 per square foot, the news was greeted with incredulity.
“I simply don’t believe it,” said Ozzie Jurock, a noted Vancouver real estate consultant and investor.
Turns out the original rumours were a bit off, but the facts remain mind-boggling, as confirmed by Bosa Development executive vice-president Richard Weir.
Even Bosa executive were among the doubters when the Class AAA tower was being planned.
“If anyone would have presented this [performance] in the original pro forma, we would have thought they were crazy,” one Bosa executive confided to Western Investor.
The original plan, in fact, had been to lease the tower out, but then the marketing agency, Magnum Projects, began receiving queries about purchasing strata space.
Bosa confirmed that half of the 355,000 square foot, 30-storey tower at 320 Granville sold out, with Bosa retaining the remaining the top15 floors for future office leasing. The majority sold in three days, though a few remaining spaces took a couple of extra days to finalize.
Office sizes ranged from 598 square feet to full floors.
Bosa dismissed rumours that most of the space was sold to foreign buyers.
After pulling purchaser data, the company confirmed that 95 per cent were local purchasers.
One West Vancouver investor bought an entire floor, 9,000 square feet. Bosa has confirmed that the office space sold for an average of “just over $2,000 per square foot.” The tower will complete in 2021,
The sky-high prices have stunned Vancouver’s commercial market.
“These prices are record-breaking, even record-shattering,” said Aaron
Ulinder, a senior partner in CBRE commercial real estate. The previous record was $1,300 per square foot but the average strata office space in Vancouver since 2016 has sold for around $700 per square foot.
As is common in office strata, the owner is responsible for finishing the concrete shell of the space, which can cost up to $180 per square foot for Class AAA offices. It is believed the sales success of Bosa Waterfront Centre will have other office developers re-writing their pro-forma.
Weir said the Waterfront Centre simply represents unique market value.
"When you have an AAA office building at a prime location directly across from the transit hub for Metro Vancouver, waterfront views, world-class architecture and amenities – the project and demand for it are truly unique in the market. You literally will not find another site like it,” he said
Vancouver’s downtown office vacancy has dropped to 5 per cent, thelowest it has been since 2013 and half what it was at the start of 2016, according to CBRE.
In the third quarter, Vancouver had 1.6 million square feet of office space under construction.However, with the recent announcement that construction has begun on two towers speculatively without pre-leases in place, the starting gun has been fired on the city’s next development cycle. It is expected that five new office towers will be announced soon.
“While relief for tenants is on the horizon in terms of these new buildings, in the short term, businesses seeking office space in Vancouver will see an upwards pressure on rents,” said Norm Taylor, executive vice-president of CBRE.
In a CBRE report, Taylor noted that Vancouver’s industrial sector is also posting record-level rental rates, the largest increase in 30 years.
This year, industrial rental rates have risen by 12 per cent in the city from to $9.99 per square foot, prompted by a severe lack of supply.
But even with this limited supply, CBRE has noted record-setting absorption, the commercial real estate industry’s measure of tenant demand.
“Usually, in a market with so little available space, you would expect to see a slowdown in leasing activity as tenants increasingly opt to renew and stay put as finding space becomes harder. So, it’s been a surprise to see that absorption is keeping pace in such a supply-constrained market,” said Taylor, who called the leasing rate increase “staggering.”
“We now have the highest industrial lease rates in Canada, prompted by the tight supply. It's indicative of what we predict will happen in the office market. But with Vancouver’s economy continuing to fire on all cylinders and next year’s GDP growth forecasted to lead the nation at 2.4 per cent, we will continue to attract top companies looking to locate [here],” Taylor said.