Vancouver’s office real estate sector had a brisk run of transactions before the pandemic hit.
Leasing activity then ground to a standstill as provincial health officials urged employees to work from home, and business owners shelved expansion plans.
The government allowed construction to continue, however, which led to the unusual situation in Vancouver, where new office buildings are being completed without a single pre-leased tenant.
“COVID put the brakes on an incredibly active market, and there was a pause in momentum for the leasing in the new builds,” JLL executive vice-president of office leasing Mark Chambers told BIV.
He pointed to projects at 601 West Hastings Street and at 1280 Burrard Street as being two that are nearing completion but have no tenants. It’s an unusual situation but is one that may turn out to be advantageous for developers.
“Both those projects are going to be big successes,” he said. “They are in a situation where someone could just walk in and say, ‘Look, here’s a brand new building.’ Tenants would just have to do their tenant improvements and move in, as opposed to having to wait a year and a half, or two years.”
Chambers said he expects that as more British Columbians get vaccinated, business normalizes and the Canada-U.S. border reopens, a substantial amount of pent-up demand for office space will arise.
Plenty of office space under construction
The largest office real estate project under construction is QuadReal Property Group’s mixed-use Post development rising in the block bounded by Hamilton, Dunsmuir, Homer and West Georgia streets.
Amazon.com Inc. (Nasdaq:AMZN) is taking all of the project’s approximately 1.1 million square feet of office space. The site will also have 185,000 square feet of retail space.
“If there’s ever been a larger leasing deal in B.C. than that one, I can’t think of it,” Chambers said.
Oxford Properties’ 36-storey The Stack tower at 1133 Melville Street is expected to be complete in 2022. Ernst & Young, Blakes and DLA Piper are set to be among the tenants in the 540,000-square-foot project.
Deloitte Canada plans to move its Vancouver headquarters to about 117,000 square feet of space in Westbank’s nearly complete 24-storey project at 400 West Georgia Street – a structure that is distinctive because it resembles a jumble of blocks clustered around a central core.
Apple Inc. (Nasdaq:AAPL) plans to lease space in the building for corporate use, while Boston-based Northeastern University is another tenant.
At 753 Seymour Street, GWL Realty Advisors is developing a 33-storey, 371,000-square-foot office tower dubbed Vancouver Centre Two, which Kevin Nelson, executive vice-president of CBRE’s high technology facilities group, said is 53% leased. Tenants include mobile-game maker Kabam and PI Financial, he said.
Another under-construction office tower in downtown Vancouver is Bentall Kennedy’s 534,000-square-foot project at 1090 West Pender Street, at the southeast corner of the intersection of Thurlow and West Pender streets.
Colliers International, BentallGreenOak and WeWork have committed to take space.
“It’s about 50% pre-leased, but there have been no new deals,” Nelson said. “The Vancouver Centre Two building, The Stack and 1090 West Pender Street were all off to a running start when they were pre-leasing in 2019 ... but they haven’t had any new deals in the past year because big companies have been on pause.”
Recent transactions involve large tenants
While office leasing has been sluggish in recent months, there have been some notable transactions.
Microsoft Corp. (Nasdaq:MSFT) added a large but unspecified amount of space to its site above Nordstrom Inc.’s (NYSE:JWN) store at CF Pacific Centre.
Best Buy Co. Inc. (NYSE:BBY) plans to move its Canadian headquarters to Vancouver from Burnaby, and occupy the top five floors, or around 77,500 square feet of Cressey Development Group’s 177,500-square-foot building at 425 West 6th Avenue.
Finally, fast-growing biotech AbCellera (Nasdaq:ABCL) is co-developing, with Dayhu Group and Beedie, an office and medical laboratory campus on Fourth Avenue between Columbia and Manitoba Streets, in Mount Pleasant.
Its new two-site campus is set to be 380,000 square feet. One facility will be 210,000 square feet; the other will be 170,000.
The sites are expected to be completed in 2023 and 2024.
AbCellera plans to nearly double its 250-person payroll by the end of 2021 and hire 1,000 workers within the next seven years.
Nelson said he has spoken with people who were shocked to hear that if a company needs more than 20,000 square feet, there are only five vacancies in existing buildings downtown. After that, the potential tenants would be looking at new construction.
“That part blows people’s minds because they can’t believe that the market in Vancouver didn’t crack harder,” he said. •