mr.x
August 24th, 2006, 08:56 AM
Despite two-year-long moratorium on downtown condominiums, city grapples with keeping workplaces in the city centre
PETER MITHAM
Special to The Globe and Mail
VANCOUVER -- Three years ago, plans for a 420-unit condo tower at Granville and Dunsmuir, directly across the street from the Canaccord Tower where the Vancouver Stock Exchange once did business, were an innovative means of making the most of an underused commercial property in a lacklustre office market.
But following a string of applications to rezone similar properties and even convert existing office towers, such as the iconic, cube-shaped Westcoast Energy tower, to high-end condos, Vancouver councillors said enough.
Responding to criticism that the emphasis on downtown residential development was making Vancouver more of a resort than a proper city, and that the city was jeopardizing its commercial land base, councillors declared a moratorium on residential development in the downtown core.
The moratorium, passed in May, 2004, extended from approximately Robson Street to the waterfront six blocks north, and west from Victory Square on the edge of the Downtown Eastside to Bute Street and the condo towers of Coal Harbour.
Two years later, the impact of the conversions and rezonings lingers: Downtown sites that were developed for condos have left fewer sites available for offices. The resulting scarcity has boosted the value of the remaining office sites, while the high prices paid for residential development sites has also raised the value of office sites.
"There's no new pressure from residential, due to the moratorium, but land values have been bid up . . . so we're left with the resulting pressure," said Tony Astles, senior vice-president with Bentall Real Estate Services LP.
Mr. Astles pegs the current cost of developing class-A office space at $36 to $39 a square foot, about even with top-end rents today, but a development proposed today will have to count on rents continuing to rise to cover construction costs that are unlikely to be set until 2008.
"Construction costs will be going up considerably, so then your rental rate is going to have to be matching that," he said, sidestepping an estimate to say only: "The numbers will be higher."
Given such conditions, the only current prospects for new office development in the Vancouver core are 838 West Hastings, where Jameson Development Corp. plans to build 75,000 square feet of offices as part of a mixed-use project, including a hotel and condos, and a city-owned lot across from the Queen Elizabeth Theatre that is tagged for a federal office tower.
With municipal approval times for new projects in Vancouver running upward of 240 days, and construction costs rising more than 10 to 15 per cent a year on the back of material and labour costs, Mr. Astles said developers are more likely to look to Burnaby and Richmond where smaller-scale projects allow them to bring space to market faster and at less expense.
"There's a number of designed sites that are ready for construction, and they will likely come into play in the next few years. So, the City of Vancouver could lose some of its businesses to the suburbs."
Making sure an undertow from the tide of residential development doesn't sweep Vancouver office space to the suburbs is the goal of a study that's tallying office space -- developed and undeveloped -- in the city's downtown. The study aims to determine the best balance between office and condo development in the core.
Ronda Howard, the senior planner overseeing the study, said a final plan is set to go to council next year covering the metropolitan core, an area extending from the harbour south to 16th Avenue between Burrard Street and Clark Drive.
The study's initial findings indicate that development of office space typically follows market cycles, always catching up with demand. Over the past five years, for example, a total of two million square feet of office space was built. Although some existing space was lost at the same time, as a result of conversions to condos and other factors, the net gain was still 1.3 million square feet on a total inventory in the metropolitan core of about 24.5 million square feet.
"Downtown Vancouver has added more office square feet in the last 10 years than Toronto," Ms. Howard said. "It has also had a higher per-cent growth in office space than Toronto, or Montreal."
But Chris Clibbon, senior research analyst with CB Richard Ellis in Vancouver, argues that the lack of a major office project ready to go presents a major problem for Vancouver, which had an average downtown vacancy rate in the second quarter of 6.5 per cent.
Just 350,000 square feet are slated to come to market by 2010. More than 235,000 square feet of the new space will be in the second phase of the Bentall 5 tower, which was largely leased prior to construction.
But for the past three years, an average of 150,000 to 200,000 square feet of office space each quarter has been taken up by leases.
"When you're talking about 150,000 to 200,000 square feet of absorption a quarter, 350,000 square feet of new supply in four years is not enough to satisfy demand," Mr. Clibbon said.
Calgary, which is next to Vancouver in terms of downtown residential growth in Western Canada and is posting an average core office vacancy rate of 0.6 per cent, isn't facing the same crunch.
Indeed, Calgary is having difficulty reining in office development, according to Brent Toderian, that city's manager for centre city planning and design who is set to become head planner for Vancouver. "We have issues of large-scale office users bleeding out of the office core, going into the high-density residential neighbourhoods around them."
To better manage the balance, Calgary is currently reviewing its centre city development plan, which hasn't had a comprehensive makeover since 1966.
Noting the planning reviews under way in both Vancouver and Calgary, Vancouver planning director Larry Beasley (who is retiring and handing the reins to Mr. Toderian on Sept. 14) said Vancouver offers a model of how blending residential and commercial uses can create an urban core that remains vibrant even when office workers go home.
Other cities "see the balance in Vancouver and they want that," he said.
Part of the key is having homes relatively close to jobs -- in this case, downtown office towers -- a scenario that requires strong urban design principles that address both the location as well as the form of new developments. The study of land uses in the metropolitan core will help to further strengthen existing policies.
Mr. Toderian said the Vancouver model is influencing Calgary's review of its own city centre area plan, but that doesn't mean Calgary will become a clone of Vancouver. Rather, the principles will help Calgary address its own challenges in the interest of ensuring a healthy market for both office and residential development well into the future.
"What Vancouver shows is that there's a magic to doing density in a way that's highly livable. And that sustains the market over time," Mr. Toderian said.
http://www.theglobeandmail.com/servlet/story/LAC.20060815.PRVANOFFICE15/TPStory/Business
Correction: vacancy rate is 3%, not 6%
PETER MITHAM
Special to The Globe and Mail
VANCOUVER -- Three years ago, plans for a 420-unit condo tower at Granville and Dunsmuir, directly across the street from the Canaccord Tower where the Vancouver Stock Exchange once did business, were an innovative means of making the most of an underused commercial property in a lacklustre office market.
But following a string of applications to rezone similar properties and even convert existing office towers, such as the iconic, cube-shaped Westcoast Energy tower, to high-end condos, Vancouver councillors said enough.
Responding to criticism that the emphasis on downtown residential development was making Vancouver more of a resort than a proper city, and that the city was jeopardizing its commercial land base, councillors declared a moratorium on residential development in the downtown core.
The moratorium, passed in May, 2004, extended from approximately Robson Street to the waterfront six blocks north, and west from Victory Square on the edge of the Downtown Eastside to Bute Street and the condo towers of Coal Harbour.
Two years later, the impact of the conversions and rezonings lingers: Downtown sites that were developed for condos have left fewer sites available for offices. The resulting scarcity has boosted the value of the remaining office sites, while the high prices paid for residential development sites has also raised the value of office sites.
"There's no new pressure from residential, due to the moratorium, but land values have been bid up . . . so we're left with the resulting pressure," said Tony Astles, senior vice-president with Bentall Real Estate Services LP.
Mr. Astles pegs the current cost of developing class-A office space at $36 to $39 a square foot, about even with top-end rents today, but a development proposed today will have to count on rents continuing to rise to cover construction costs that are unlikely to be set until 2008.
"Construction costs will be going up considerably, so then your rental rate is going to have to be matching that," he said, sidestepping an estimate to say only: "The numbers will be higher."
Given such conditions, the only current prospects for new office development in the Vancouver core are 838 West Hastings, where Jameson Development Corp. plans to build 75,000 square feet of offices as part of a mixed-use project, including a hotel and condos, and a city-owned lot across from the Queen Elizabeth Theatre that is tagged for a federal office tower.
With municipal approval times for new projects in Vancouver running upward of 240 days, and construction costs rising more than 10 to 15 per cent a year on the back of material and labour costs, Mr. Astles said developers are more likely to look to Burnaby and Richmond where smaller-scale projects allow them to bring space to market faster and at less expense.
"There's a number of designed sites that are ready for construction, and they will likely come into play in the next few years. So, the City of Vancouver could lose some of its businesses to the suburbs."
Making sure an undertow from the tide of residential development doesn't sweep Vancouver office space to the suburbs is the goal of a study that's tallying office space -- developed and undeveloped -- in the city's downtown. The study aims to determine the best balance between office and condo development in the core.
Ronda Howard, the senior planner overseeing the study, said a final plan is set to go to council next year covering the metropolitan core, an area extending from the harbour south to 16th Avenue between Burrard Street and Clark Drive.
The study's initial findings indicate that development of office space typically follows market cycles, always catching up with demand. Over the past five years, for example, a total of two million square feet of office space was built. Although some existing space was lost at the same time, as a result of conversions to condos and other factors, the net gain was still 1.3 million square feet on a total inventory in the metropolitan core of about 24.5 million square feet.
"Downtown Vancouver has added more office square feet in the last 10 years than Toronto," Ms. Howard said. "It has also had a higher per-cent growth in office space than Toronto, or Montreal."
But Chris Clibbon, senior research analyst with CB Richard Ellis in Vancouver, argues that the lack of a major office project ready to go presents a major problem for Vancouver, which had an average downtown vacancy rate in the second quarter of 6.5 per cent.
Just 350,000 square feet are slated to come to market by 2010. More than 235,000 square feet of the new space will be in the second phase of the Bentall 5 tower, which was largely leased prior to construction.
But for the past three years, an average of 150,000 to 200,000 square feet of office space each quarter has been taken up by leases.
"When you're talking about 150,000 to 200,000 square feet of absorption a quarter, 350,000 square feet of new supply in four years is not enough to satisfy demand," Mr. Clibbon said.
Calgary, which is next to Vancouver in terms of downtown residential growth in Western Canada and is posting an average core office vacancy rate of 0.6 per cent, isn't facing the same crunch.
Indeed, Calgary is having difficulty reining in office development, according to Brent Toderian, that city's manager for centre city planning and design who is set to become head planner for Vancouver. "We have issues of large-scale office users bleeding out of the office core, going into the high-density residential neighbourhoods around them."
To better manage the balance, Calgary is currently reviewing its centre city development plan, which hasn't had a comprehensive makeover since 1966.
Noting the planning reviews under way in both Vancouver and Calgary, Vancouver planning director Larry Beasley (who is retiring and handing the reins to Mr. Toderian on Sept. 14) said Vancouver offers a model of how blending residential and commercial uses can create an urban core that remains vibrant even when office workers go home.
Other cities "see the balance in Vancouver and they want that," he said.
Part of the key is having homes relatively close to jobs -- in this case, downtown office towers -- a scenario that requires strong urban design principles that address both the location as well as the form of new developments. The study of land uses in the metropolitan core will help to further strengthen existing policies.
Mr. Toderian said the Vancouver model is influencing Calgary's review of its own city centre area plan, but that doesn't mean Calgary will become a clone of Vancouver. Rather, the principles will help Calgary address its own challenges in the interest of ensuring a healthy market for both office and residential development well into the future.
"What Vancouver shows is that there's a magic to doing density in a way that's highly livable. And that sustains the market over time," Mr. Toderian said.
http://www.theglobeandmail.com/servlet/story/LAC.20060815.PRVANOFFICE15/TPStory/Business
Correction: vacancy rate is 3%, not 6%