Tech sector demand keeps Vancouver office market clicking

Vancouver versus Calgary

Real estate is often a tale of two cities, especially when it comes to industrial. What keeps companies in Vancouver, anyway, when space is so much more abundant, and cheaper, in Calgary?

The answer lies in the city’s international port, which makes it a gateway to the world, while Calgary serves as a distribution hub for Western Canada.

With a location in the same time zone as technology clusters in Seattle and San Francisco, technology firms account for 42.7% of demand for office space in Vancouver. But a report from Colliers International claims that Calgary could be a contender for tech stardom as investors and workers seek alternatives to the oilpatch.

With more than 17,000 layoffs across Alberta last year, tech companies have “heaps of highly qualified, creative individuals” from which to secure staff, the report says.

Kudos to Cowtown for grabbing the bull by the horns, but Vancouver still rides herd when it comes to tech, thanks to its proximity to Seattle and Los Angeles, and the long-term decline of traditional industries.

“Calgary offers many of the things tech companies look for in a location; it’s just historically been difficult to compete with oil and gas firms for things like talent and office space,” said Justin Mayerchak, vice-president with Colliers’ occupier services group in Calgary.

North Van demand

While the tech sector is fuelling the Metro Vancouver office market, North Vancouver is the tightest of all office markets in the region. Vacancies in the region are at their lowest since 2010, thanks to demand from traditional users – that is, local owner-operators.

Colliers reports that office vacancies slipped from 4.7% to 4.5% in the second quarter, leaving the present quarter with little selection. Absorption declined from 24,085 square feet to 4,053 square feet in the second quarter, and no new space will join the existing inventory until Onni Group completes its project at 1308 Lonsdale Avenue in fall 2017.

Prices pump townhomes

Fraser Valley brokerage Frontline Real Estate Services Ltd. reports that rising prices for detached homes have made larger townhomes a desirable alternative kind of housing south of the Fraser.

Townhomes have enjoyed attention as a means of providing family housing and facilitating densification without overwhelming neighbourhood streetscapes, but in areas such as South Surrey and Langley they’ve become the upscale home for priced-out buyers.

“There are all these people who could have paid $1.1 million for a single-family home, but now can’t buy one so now they’re looking for a big townhouse,” explained Mike Harrison, who handles land and investment sales for Frontline.

Harrison said the buyers are willing to pay top dollar for larger townhouses, because even an $850,000 residence is $250,000 cheaper than many detached homes.

The result is that the spread in pricing between small townhomes (less than 1,200 square feet) and larger units (2,400 square feet and greater) has narrowed. While smaller units used to cost as much as $75 a square foot more than a larger unit, both are now selling for something in the range of $300 per square foot.

Since buyers of larger units are as a group distinct from those seeking smaller units, Harrison doesn’t anticipate a similar escalation in the pricing of smaller units. They’ll remain the preserve of buyers who are seeking premises larger than an apartment or are downsizing from larger units.

“The bigger ones are an alternative to a single-family [home], not often an alternative to a smaller townhouse,” Harrison said. “It’s a different buyer group.”