More Metro businesses take to subleasing to trim costs
Wednesday, November 26, 2008
More Metro Vancouver businesses are suddenly looking to sublet some of their office space as a way of cutting costs in tough economic times, recent reports from prominent commercial realtors indicate.
Resort company Intrawest is putting two of the floors that it holds in Waterfront Centre at 200 Burrard Street up for sublease.
And companies ranging from Rocket Gaming and Intrynsic Software to Weyerhaeuser Canada Inc. and Lundin Mining are giving up some of their offices for others to use on a short-term basis.
Shawna Rogowski, director of research at Colliers International, said in an interview that many tenants are taking a cautious view given the uncertain state of the economy.
She said these are companies that perhaps held extra office space with a view to expanding, but are now looking at consolidating and cutting costs, or even downsizing.
"Companies are really pinching every penny that they can," she said.
On Tuesday, Rogowski put out an interim report acknowledging the rapid increase in the number of companies putting space up to rent.
Available sublease space rose to nearly 600,000 square feet, with some 150,000 square feet of put on the market in October alone, and another 135,000 square feet added in the first half of November, Rogowski said.
In its last quarterly report, Colliers counted 139,291 square feet of vacant sublease space across Metro Vancouver, with 63,442 square feet of that in downtown Vancouver.
By the end of October, that had grown to 578,213 square feet of sublease space across Metro, with 274,396 downtown.
That is a mere blip in Metro Vancouver's 52-million-square-foot office market (by Colliers's count), but it is a telling trend, said Nicholas Westlake, senior analyst with CB Richard Ellis Ltd.
"The thing that's significant is the number and rate at which they're coming up," Westlake said.
The firms that are rationalizing their space, are "better positioning themselves for the long haul," he said.
On the upside, Westlake said the new circumstances open up some breathing room for tenants wanting to locate downtown. Subleased spaces will also carry the rents of their primary tenants, which will be lower than current rents, helping to moderate recent spikes in downtown rents.
However, demand for that new sublease space "is a tough measure to calculate," said Norm Taylor, an associate vice-president at Colliers.
Taylor said many companies are touring the new space, but are wary of making deals in the current climate, especially if they have to appeal to a board of directors or the sentiments of shareholders.
"If they need to hire a moving truck that wasn't budgeted for in this year's capital, they're just not going ahead with it," Taylor said.