Office Market Discussion

[madog222]

Wework is vacating their Bentall 3 space. That leaves two remaining downtown locations.

[madog222]

WeWork targets Chapter 11 exit by May 31, secures $8 billion in rent reduction https://www.reuters.com/business/wew...31-2024-04-02/

[jollyburger]

If current absorption trends continue, the market could end up at eight per cent vacancy by 2028, Gardner said. But if absorption escalates to 150 per cent of the current rate, the market could end up at five per cent vacancy.

Looking at class-AAA buildings only, vacancy could fall as low as 2.2 per cent by 2028 if the market experiences 150 per cent absorption during that time frame, Gardner added.

Trepp said current conditions are a return to health for the market. In late 2019, if tenants were seeking a space of 40,000 sq. ft. or larger downtown, they had three options, Trepp said. If they were seeking a space of 100,000 sq. ft., there was one option. "Today, if you're looking for 40,000 sq. ft., you’ve got 16 options downtown, and if you're looking for 100,000 sq. ft. or more, you’ve got six. That's a much healthier market."

Moreover, Trepp and his fellow panelists agreed Vancouver’s tenant mix is more diverse than ever with tech companies, law firms, accounting firms and even mining and natural resource companies showing a renewed eagerness for space.

"What keeps me up at night is that multiple sectors kind of go backwards," according to Chuck We, executive vice-president, Pacific Northwest/Canada office operations with Hudson Pacific Properties, the owner of Bentall Centre. While tech demand is blunted right now, any new retreat by the industry locally could spell trouble.

We said the education sector is another risk as the federal government plans to reduce the number of foreign students coming in (meanwhile, the B.C. government is cracking down on dubious post-secondary organizations operating as student visa mills).

Any substantial increase to the cost of capital would also hurt demand, We added.

"It's going to sound paradoxical, but (the main threat is) a lack of supply," Trepp said, explaining that if most demand stays focused on the top-quality offices, the current vacancy of roughly 13 per cent will start to come down.

“Now, that's roughly 2.3 million square feet,” he said. “Last year, there was 800,000 square feet of positive absorption in the class. If we had three years like that, we're out of space."

If absorption reverts to the mean, the market could experience a space crunch in five years, Trepp added.

"Nobody's building; nothing's delivering in the next five years, so I think that’s the biggest risk," he said.

However, Trepp cautioned that the last pro-forma he saw showed a new office building would need rents of at least $80 per square foot to get an economic return, given high construction costs, land values and development timelines. Rent for prime space today is roughly $55.

“We've never seen that sort of appreciation in Vancouver, and we were in a market where we had three per cent vacancy,” he said. “That's really the impediment to new construction.”

https://renx.ca/vancouvers-office-ma...than-you-think

[vanman]

Vancouver 'one of the most resilient cities' for commercial real estate

The future is bright for Vancouver’s commercial real estate market, with one expert labelling the city as “one of the most resilient markets in the world.”

That’s according to Paul Morassutti, chairman of commercial real estate firm CBRE, who addressed a room of hundreds of attendees at the Vancouver Real Estate Forum on April 3 about what he thinks is in store for the office, retail and industrial markets in the coming year.

“Up until five or six years ago, I would have said that the most resilient major market globally was probably London, and then Vancouver. Today, I wouldn't put London at the top. Vancouver, if you go back over the last 30 years, it just shows less volatility. It's always [been] its own little micro market. It has significant appeal to global capital, significant appeal to Southeast Asia and Asia,” he said in an interview with Glacier Media.

https://www.burnabynow.com/real-esta...estate-8561663

[jollyburger]

I guess there wasn't enough vacant space in their existing building.

Grant Thornton LLP leased Suites 1900 & 2000 at 753 Seymour Street for 31,000 SF

https://www.naibc.ca/wp-content/uplo...rt_Q1-2024.pdf

[jollyburger]

Thomson Reuters is dumping their offices at 969 Robson

https://www.spacelist.ca/listings/77..._robson_street

[jollyburger]

A new lease by Grant Thornton LLP at Vancouver's downtown Vancouver Centre II tower is another positive sign for class-AAA office buildings in the city's downtown core.

GWL Realty Advisors, which manages the tower known as VCII, recently announced the Canadian accounting firm has leased a 30,000-square-foot block on the 19th and 20th floors.

It is the latest indication the downtown office market is seeing a growing appetite for companies to occupy its newest and most amenitized offices.

With Grant Thornton, and other recent additions of Pan American Silver (30,175 square feet) and Transca Real Estate Development (4,286 square feet), Vancouver Centre II is now 82 per cent leased, said Robert Kavanagh, senior vice-president, GWL Realty Advisors.

If the Vancouver downtown market sees 500,000 square feet of average annual absorption over the next five years, by then the vacancy in top-class buildings will fall below six per cent, Trepp said.

"That's almost a dysfunctional-low vacancy rate," he said, adding that a developer with the confidence, courage and capital could step up to launch the next office tower in the downtown core sooner than many think to provide new space by 2028 or 2029.

The challenge, however, is that rents would need to rise dramatically to keep pace with escalating construction and development costs to earn a return, Trepp said.

"Will the demand be there? I'm pretty sure it will be and then you can fill a building fairly quickly," Trepp said. "My concern is . . . will (lease) rates have appreciated enough over that time frame to justify the new construction?”

https://renx.ca/grant-thornton-new-v...-office-market