Three large Canadian institutional investors have linked with developer GWL Realty Advisors on the speculative build of a new 33-storey office tower, but the play looks like a safe bet in Canada’s second-tightest office market.
Ground was officially broken October 11 on Vancouver Centre II, a 371,000-square-foot Class AAA tower at 753 Seymour Street at the intersection of West Georgia Street. The new high rise is the next phase of the Vancouver Centre complex, which includes Scotia Tower and the Vancouver Centre Mall, which will both be linked to the Vancouver Centre II by an expansive lobby.
GWL Realty Advisors is developing the tower on behalf of the project owners: The Healthcare of Ontario Pension Plan, the Great-West Life Real Estate Fund, and London Life Real Estate Fund.
Construction will continue on a speculative basis, confirmed GWL president Paul Finkbeiner. “With its premier location and exceptional design, we expect that Vancouver Centre II will attract considerable market interest,” he said.
According to a recent survey by Avison Young, the vacancy rate for premium Class AAA office space in downtown Vancouver is 5%, the second lowest in Canada, behind Toronto. Vancouver, however, has Canada’s highest average rents for premium office space.
In a September scenario of a multinational tenant attempting to lease such space in downtown Vancouver, Avison Young found there was nothing available on a direct lease and only 75,000 square feet in sublease space.
“Strong deal velocity, including a number of new downtown leases signed in the first half of 2017 signal a further decline in vacancy,” cautioned Avison Young principal Glen Gardner, who specializes in downtown office leasing.
Gardner said the Vancouver Centre 11 is the first of from three to five new office towers expected to start downtown over the 12 months, in what he called “the next wave.” All told, the new towers could deliver up to 1.2 million square feet between 2019 and 2021.
Expected to complete in mid-2021, and designed by Musson Cattell Mackey Partnership, Vancouver Centre II will be built to LEED (Leadership in Energy and Environmental Design) Platinum standard and will be certified WELL, which refers to the health of the building for its occupants.