White elephants weigh on Metro office market

Empty new office towers show energy efficiency, location don’t guarantee occupancy

The 31-storey Exchange tower in downtown Vancouver: LEED Platinum standards, star architect designer – and 90% of office space still on the market | Credit Suisse/SwissReal Group

Despite being owned by experienced developers and built to state-of-the-art environmental standards, close to transit in what is arguably Canada’s top commercial real estate market, several new Metro Vancouver office towers remain nearly or completely vacant.

The highest-profile example is the 32-storey Exchange tower, scheduled to be completed next year after a $240 million speculative play by Credit Suisse/SwissReal Group.

Designed by Swiss star architect Harry Gugger, known for Beijing’s Bird’s Nest stadium and London’s Tate Modern gallery, the Exchange is one of the first, and Canada’s second-tallest, LEED (Leadership in Energy and Environmental Design) Platinum office tower.

Yet it remains 90% empty, with only a single tenant who has pre-leased 36,750 square feet of space on the top three floors. Normally an office building at the Exchange’s stage of construction would be 60% pre-leased.

A few blocks away, all 48,050 square feet of office space in the podium section of the LEED-standard Telus Garden on Robson Street is also vacant.

Elsewhere in downtown Vancouver, the Century Group’s five-storey Ormidale Block on West Hastings is scheduled to open this year and still has no tenants signed up, according to Avison Young.

The seven-storey Renfrew Centre near a SkyTrain station in Vancouver’s Broadway corridor opened last week. It has no tenants signed for its 161,000 square feet of office space, leasing agent Cushman & Wakefield has confirmed. The tower was built on speculation by AIMCo Realty, the real estate arm of Alberta’s largest public pension fund.

Appia Developments’ Solo District office tower near Burnaby’s Brentwood SkyTrain station area is scheduled to be completed this July with 230,000 square feet of office. It’s 80% vacant, though leasing agents expect to announce a “significant” 80,000-square-foot tenant “shortly.”

The 14-storey Anvil office tower, built on speculation in 2014 by the City of New Westminster and sold to an investment group led by Kingswood Capital Corp., also appears to hit all the leasing hot buttons: it’s next to a SkyTrain station, built to high environmental standards and has been awarded for its energy-saving fenestration design. Yet, two years after completion, it remains vacant, with at least two floors being converted into strata office space. Cushman & Wakefield has said there are “conditional agreements” to lease about 55,000 square feet in the 137,000-square-foot tower.

Metro Vancouver’s office vacancy rate has topped 10%, according to Avison Young, its highest level in a decade, but the lowest of all major cities west of Toronto.