Downtown strata office space is rare. Tipped in a Colliers International report earlier this year as a potential element in Canada’s key office markets, it once again came to the fore in August as an alternative to residential property for foreign investors keen to avoid the 15% property transfer tax.
With global capital seeking investment opportunities, Vancouver has long stood as a safe haven for investors. Smaller players haven’t found it easy to make inroads, however.
While small tenancies dominate the downtown office market (the average lease is 4,000 square feet), ownership is largely institutional.
Since late October, however, Burrard Place has sold half the 60,000 square feet available in its 45 strata lots. Units range from 400 square feet to 2,200 square feet, and include access to the project’s posh, 30,000-square-foot amenity centre.
The space is the first new tranche of strata offices in the core since Jameson House completed in 2011 with 58,000 square feet.
Together with 12,000 square feet Wall Financial Corp. is developing at Strathcona Village (see story on page 17), Burrard Place represents the largest addition of strata office space to the Vancouver market since Orca West Developments Ltd. completed 217,000 square feet at Broadway Central in 2014.
“There are many, many, many more people who will make a purchase at between $500,000 and $1 million, and our market always responds very well to that,” said Jon Stovell, president of Reliance Properties Ltd., which is developing Burrard Place in partnership with the Jim Pattison Group.
Purchasers to date are primarily smaller investors, with a significant number of Asian buyers. Most are Canadian residents, however, with offshore buyers accounting for just 10%.
“It’s an economic phenomenon, where you’re basically taking the real estate and breaking it down in dollar pricepoint to the point where you’re tapping into a larger market,” Stovell said. “It’s definitely attracting investors who plan to rent to small-scale entrepreneurial users who don’t need to do a lot of internal build-out.”
Owner-occupiers also make up a proportion of buyers.
Consistent with other strata office space, the occupant mix includes psychologists, physiotherapists and other professional offices. (Wesgroup found this at the Brewery District in New Westminster, while Avison Young sold the offices at the Hotel Georgia to the College of Physicians and Surgeons of BC in 2011.)
Stovell said some of the buyers at Burrard Place also purchased in the adjacent residential tower – wanting a home that’s close to work, but not necessarily in the same structure. A similar phenomenon is playing out at Strathcona Village, where Colliers vice-president Dan Jordan is marketing 18 strata office units.
The one purchaser to date is an interior designer, but demand has also come from professional firms and residents in the project’s residential portion.
“We’ve had a decent amount of interest from investors – more than I would have anticipated,” Jordan said. “We’ve actually had a lot of interest from people who bought residential units and are now looking at an investment downstairs.”
The challenge with investor-owned strata units, however, is ensuring consistent management.
Most downtown strata offerings have just a few owners, but Burrard Place will have 45 strata lots, each potentially having a separate owner. Stovell hopes to offer centralized management and leasing, unlike other multi-unit properties such as the nearby Electra or Broadway Central.
“There have probably been some lessons learned about trying to have more cohesive management,” Stovell said. “I think that discipline, and that key management, is going to be one of the differentiators between good and bad strata office projects.” •
