As Vancouver’s technology sector continues to expand, the demand for office space is being forced to pivot from the core – and Class B buildings in Gastown are proving a prime destination.
The movement could be seen as a response to what Vancouver’s Gregory Henriquez of Henriquez Partners Architects calls “body heat” – the desire for like-minded urban individuals to congregate in one place. Apparently, what 25- to 34-year-old tech workers really want is to be close to other 25- to 34-year-olds.
The Vancouver Economic Commission now estimates as many as 75,000 Vancouverites work in the industry, while tech companies make up 33.8 per cent of the demand for new office space across the city.
Local startups are looking for a new style of building, a far cry, some say, from the monotonous office towers that line many downtown and even Broadway enclaves.
Rob Goehring, chief executive officer for RewardStream, an online referral marketing company, moved his team last October from the Broadway Tech Centre looking to change both the esthetics and culture of his business.
“For us, the big push was to get back downtown and get embedded within that technology community,” he says. “And in the process, we’ve completely inverted our commuting; now most of our staff can walk to work.”
Goehring says the choice was between Yaletown and Gastown, and Vancouver’s oldest neighbourhood, Gastown, won out due to cheaper leasing rates.
Downtown Vancouver’s office vacancy rate has dropped from 9.3 per cent in 2015 to 7.2 per cent last year as a slew of new buildings that opened in 2014 were absorbed – the most notable being Industrial Light & Magic Inc. snatching up 52,380 square feet at 1 Alexander Street and 21 Water Street in Gastown. The Aquilini Investment Group’s decision to occupy more than 44,000 square feet of its recently completed mixed-use development at 89 West Georgia also contributed to a decline in vacancy.
RewardStream set up shop at 440 Cambie Street, a 36,000-square-foot building originally built in 1910 that features Gastown’s distinct bricks-and-mortar style. Goehring says he felt a need to get back downtown – RewardStream had previously leased in Yaletown before moving to Broadway – to both retain top talent and expand the company’s working network.
“On Thursday and Friday of last week alone I had five coffee meetings with potential investors and partners all within two blocks of our office,” he says. “So just being able to pop out for a few blocks and do that makes a huge difference. We can also walk to all the technology events being held around the city, whereas it used to be a SkyTrain, or Car2Go or drive, which did inhibit some trips from taking place.”
Goehring also notes RewardStream is currently subleasing a portion of its space to Noomii, which gives his company room to grow if needed. Landowners across downtown Vancouver are also being forced to write much shorter lease agreements, he says, as many technology companies are highly volatile while in the startup phase.
Many promising startups and technology companies have set up in Gastown recently, including Appnovation Technologies, an open-technology service company that leased 24,380 square feet at 190 Alexander Street last year. Downtown Vancouver currently has 1.5 million square feet of head lease vacancy, which is more than all of Burnaby. Downtown Vancouver also currently has the lowest office space vacancy rate across Metro Vancouver, about two per cent below the region’s average of 9.2 per cent.
Robin Buntain, a principal with Avison Young, says the technology companies looking to set up shop are looking for a very distinct style of office space – partially out of need due to less capital, and partially out of want.
“It just offers something else,” he says as to why they’re shying away from traditional office towers and choosing areas like Yaletown and Gastown. “It’s funky, it’s unique, it’s different, it’s got that post-industrial look, and it just goes with their whole culture. They don’t show up to work in a suit and tie; they’re coming to work in jeans and casual clothes.”
The shifting corporate culture has also forced developers to rethink leasing opportunities.
Lululemon Athletica founder Chip Wilson’s family real estate company has been rapidly buying up property primarily in East Vancouver and plans to have a portfolio worth $1.5 billion within 10 years. The company, Low Tide Properties, is offering leased office space at its four-storey 112 West Hastings Street, a heritage building in Gastown. SpaceList quotes triplenet office rents there at $43.50 a square foot. This is edging close to the Class A triple net lease rate in downtown Vancouver, which ranges from $40 to $64 per square foot, according to Avison Young’s 2016 year-end office market report.
Emre Akkas, chief technologist for Globalme, a localization and translation technology company, says his company was previously close to the Provincial Court of British Columbia on Main Street. However, he moved it to Gastown (353 Water Street) last year, primarily because rent was cheaper and the look fit his business’ style better.
“They were a little too finance-slash-law-looking,” Akkas says of his company’s previous space. “Our office in Gastown is a better cultural fit for our company. It is nice to step out onto Water Street as it is a vibrant environment, especially in the summer. We are a block away from Waterfront station and major car-sharing parking lots. None of our employees drive to commute, so being accessible is important.”
Buntain says the wave of office space that came to the market around two years ago has mostly been leased with a boom of visual effects companies popping up. He notes there are no major projects expected to open until 2021, which includes the two Bentall Kennedy buildings (1090 West Pender Street and 349 West Georgia Street) that will add well over a million square feet of downtown office space to the mix. Buntain adds as demand for a new style of office space continues, the market will respond and already has.
“What we see now is the rents in Gastown and Yaletown are competing with quality product in downtown Vancouver,” he says. “The one thing that may still be a little less expensive is your property tax component.”