TheyWork
Bentall Centre, then the Bay: WeWork’s roll through downtown office buildings seems set to continue, with scant attention paid to Regus and other providers of shared office space. Now approaching 250,000 square feet in three buildings, WeWork is gunning to be the leading provider of co-working space and the single biggest tenant in downtown Vancouver.
“Every second downtown Vancouver office building’s in negotiation with WeWork,” quipped PCI Group partner Dan Turner at the recent Vancouver Real Estate Strategy and Leasing conference. But he added: “It’s testimony to Vancouver that they’re coming.”
Indeed, for many, WeWork represents not just lease commitments but also the arrival of a new landlord to the market. NAI Commercial touched on the dynamic in a report earlier this year, and more recently, David Haugen, leasing director for Canderel Pacific Management Inc. in Vancouver, made similar remarks.
“They’re expanding the service offering to be doing almost facilities management for these tenants ... not just their typical hot-desking operations,” he told the strategy and leasing conference.
PCI vice-president Jarvis Rouillard told commercial real estate association NAIOP that the evolution of companies providing co-working space into facilities managers gives them a more fluid role in the market. PCI sees them as tenants rather than competitors, but they’re definitely going head-to-head with larger landlords. This means landlords may start to take a leaf out of WeWork’s and Regius’ playbook and begin offering tenants similar options.
“I don’t see how they don’t look at them as a competitor,” Rouillard said. “I think at some point you’re going to see some of these [larger landlords] start to implement the same type of model in their own portfolio.”
Permitting speed
Supporting demand for flexible office terms are inflexible civic processes that take years to allow new construction not only on the residential side but also on the commercial side.
A recent disclosure that the city intentionally dragged its feet approving a redevelopment in Shaughnessy will sound familiar to commercial property owners who, according to Mark Trepp, senior vice-president with Jones Lang LaSalle in Vancouver, can wait six to eight months for tenant improvement approvals. A new tower can require three to five years.
“We’re in a market where we have very little supply, we have no supply coming down the pipeline, and I’m told – depending on which developer you talk to – it takes three to five years to get an entitlement to build an office building downtown. And that’s not including if you’ve got to go to a rezone,” he said.
The delays mean companies that want to move here can’t, even though Vancouver might be ideal for countless other reasons.
“We’ve got a number of very high-quality, large tenants that, for the first time in some cases, are looking at Vancouver,” Trepp said. “[They’re] saying, ‘Hey, I can’t wait three to five years to find out if you can build it and another three years for you to build it.’… If we don’t fix that problem somehow, and I don’t know what the answer is, we’re going to miss a tremendous opportunity to capture some of that demand.”
During his recent address to the Urban Development Institute, Premier John Horgan said the province might have to step in to encourage municipalities to pick up the pace.
“[It’s] a legitimate frustration,” Horgan said of what developers face dealing with different municipalities. “[We need] to streamline decision-making processes to make sure costs are not onerous and not pushing prices up even further.”
Horgan said developers should be able to have expectations when working with municipalities, regardless of jurisdiction.
“But that’s not all on the backs of city councils. That needs to be the responsibility of the province to make that seamless,” he said. “That may mean more resources to planning departments.” •
