A third of Credit Suisse’s spec-built $200 million Exchange office tower in downtown Vancouver – now nearly complete and nearly vacant – will be converted to a 202-room hotel, pending city rezoning approval.
“That could come at any time,” said Mark Chambers, executive vice-president of Jones Lang LaSalle (JLL), the commercial broker on the 369,000-square-foot tower, which was built on the site of the former Vancouver Stock Exchange building at 475 Howe Street.
The refurbished old Exchange building forms the base of the new tower. On behalf of the Switzerland-based developer, Iredale Group Architecture submitted a proposal to the City of Vancouver on March 7 to convert the 1929-built heritage building – floors two through 11 – from office to hotel uses.
Approximately 110,000 square feet of office space would be removed from the Class AAA office building to fit in hotel rooms and guest amenities.
The 31-storey Exchange building was the first North American office tower built on speculation by Credit Suisse (VTX:CSGN).
When it was conceived four years ago, it was also the city’s first LEED (Leadership in Energy and Environmental Design) Platinum tower, and it is still Canada’s second-largest LEED Platinum building.
As part of the city’s Metro Core Jobs and Economic Land Use plan at the time, Credit Suisse was allowed density more than twice as high as the original floor-to-space-ratio (FSR) zoning on the Howe Street site. The FSR went to 21.5 from 9.
The city plan also waived community amenity costs for new core office buildings.
The incentives helped to spur the start of six new downtown office towers with a total of approximately two million square feet of space.
The Exchange, which is scheduled to be completed this year, is the last of that wave of new office construction.
But, while most of the other new office buildings are nearly fully leased, the Exchange still has only one tenant, National Bank (TSX:NA), which has taken 45,000 square feet, including a portion of street-level retail space.
This is not what the developer expected when the building was announced in August 2013. Agents had predicted it would be fully pre-leased within three years.
Rainer Scherwey, director at Credit Suisse Real Estate Asset Management, noted that the Exchange building was a departure for the global real estate company.
“Normally, we would invest in a fully developed, leased property,” he said during the Exchange launch.
“This office tower represents the first time in North America that we are confident enough to build a major project from the ground up.”
“The Exchange missed the wave,” said commercial agent David Thistle, who acted as the broker on the National Bank lease.
Thistle added that the tower is coming late to the market and the Exchange’s premium lease rates might have slowed pre-leasing action.
Chambers, who took over as the Exchange’s lead leasing agent 18 months ago, said the hotel conversion is not a step back for Credit Suisse, and he expressed confidence that the office tower would eventually be fully occupied.
“The Exchange is part of the new wave [of downtown office towers]”, he said.
Chambers added that Credit Suisse was approached by an unnamed hotel developer and “the pro forma worked out” for the conversion.
The heritage section has lower floor heights and a number of supporting beams that don’t fit well with modern office design, he noted, but make it ideal as a hotel.
Chambers added that two office tenants are “close to going firm” on 55,000 square feet in the new tower, which will remain exclusively office space.
Pending rezoning, which requires a decision by the city’s director of planning, Chambers would not comment on the name of the hotel operator.
However, the Executive Group of Companies has bought the former Edward Chapman menswear store adjacent to the Exchange at 833 Pender Street and has submitted a development application to build a hotel on the site, which is zoned for 56,120 square feet of space.
Chambers would not comment on a possible connection between that sale and the Exchange hotel proposal. •
