Avison Young Canada: Commercial Real Estate Company - Metro …Young... · 2018-02-02 · the statistics at year-end 2017 in the Vancou-ver-Broadway, Burnaby, Downtown and Surrey

Partnership. Performance. avisonyoung.com

Prolific downtown and suburban office leasing activity heightens regional supply constraints

Demand for office space in Metro Vancouver continued to climb through 2017 with vacan-

cy tumbling to 8% at year-end 2017 – the lowest regional vacancy recorded since year-end 2013 and a decline from the 9.7% registered at year-end 2016. Vacancy in all but three submarkets was sub-10% at year-end 2017 with two of those three submarkets – Surrey and New Westmin-ster – forecasted to also drop below 10% in 2018. Regional annual absorption of 1.22 million square feet (msf ) in 2017 was the second-most annual absorption recorded since 2005, surpassed only by the 1.33 msf of annual absorption recorded in Metro Vancouver in 2015. All submarkets except one – the North Shore – registered positive annu-al absorption in 2017 and were led by Vancou-ver-Broadway, Burnaby, Downtown and Surrey.

Much of the leasing activity that manifested in the statistics at year-end 2017 in the Vancou-ver-Broadway, Burnaby, Downtown and Surrey submarkets was actually completed in 2016 and early 2017 and is what led to the substantial drop in vacancy and increase in absorption as tenants occupied their spaces six to 12 months

2017 Year-End Office Market Report

Metro Vancouver, BC

later. Much of the delay was simply attributable to fixturing periods as deal velocity through 2017 remained robust and will likely lead to a similar but slightly smaller decline in vacancy in 2018, particularly Downtown, as the number of options grows fewer. With no new Downtown office space scheduled for completion until the end of 2019, vacancy is expected to tighten considerably by the end of 2018. Vacancy in New Westminster is also expected to drop significantly in 2018 as the long vacant Anvil Centre is finally occupied by a wide range of tenants, including Douglas College, which signed the largest suburban lease deal in Metro Vancouver in the back half of 2017. Vacancy on the North Shore is also expected to decline as tenants such as COWI occupy the new CentreView development in 2018, which was added to inventory as largely vacant at year-end 2017. With almost two-thirds of new office development in Vancouver-Broadway set for delivery out to 2020 already preleased, vacancy is expected to tighten further. In virtually all Metro Vancouver submarkets, vacancy will remain stable

metro Vancouver vacancy & absorption trends

continued on back page

Rental RatesVacancy (supply)Absorption (demand)Vacancy rate December 31, 2017 8%Vacancy rate June 30, 2017 9.1%

-400,000

2017

2016

2015

2014

2013

2018F

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

Absorption Rate (sf)

Vacancy Absorption

0 400,000

800,000

1,200,000

1,600,000

Vacancy Rate

8%

7.3%

856,868

1,334,604

1,223,656

437,640

-158,905

92,870

9.7%

9.4%

10%

7.8%

12-month projection based on 10-year average absorption and known net absorption in new inventory

METRO VANCOUVER OFFICE VACANCY SUMMARY (YEAR-END 2017)

DISTRICT INVENTORY (SF)

HEAD LEASE VACANCY (SF)

SUBLEASE VACANCY (SF)

TOTAL VACANCY (SF)

VACANCY RATE (%)

12-MONTH ABSORPTION (SF)

Downtown 22,943,145 1,520,204 101,438 1,621,642 7.1% 200,811

Yaletown 2,047,372 83,092 3,039 86,131 4.2% 52,735

Vancouver-Broadway 6,583,900 370,169 20,700 390,869 5.9% 425,059

Burnaby 9,256,790 574,981 255,199 830,180 9% 323,759

Richmond 4,215,800 298,387 114,397 412,784 9.8% 37,554

Surrey 2,906,607 293,385 0 293,385 10.1% 177,793

New Westminster 1,688,572 278,418 2,358 280,776 16.6% 6,678

North Shore 1,450,898 187,864 0 187,864 12.9% -733

TOTAL 51,093,084 3,606,500 497,131 4,103,631 8% 1,223,656

Partnership. Performance2

Vacancy trendsDowntown vacancy remained stable at 7.1% at year-end 2017, almost unchanged from 7.2% a year earlier; however, vacancy rose by 30 bps from 6.8% at mid-year 2017 due primarily to the addition of 252,000 sf of vacant office space at The Exchange in the fourth quarter. While approximately 85,000 sf of the office space has been preleased in the Exchange, the tenants – National Bank, Hyperwallet Systems, Smythe LLP and Sovereign Insurance – will not occupy until mid-to-late 2018 at the earliest. This addition to inventory – the last new office tower of the previous construction cycle, which had delivered several new office buildings in 2015/16 – pushed class AAA vacancy to 8.2% at

market also generated activity but had a negligible effect on net absorption, positive or negative. With few vacant and available large blocks of contiguous space Downtown, alternative options for larger tenants are diminishing.

absorption trendsAnnual absorption of 200,811 sf in 2017 marked the third straight year of positive annual absorption recorded in the down-town core. The vast majority of absorption in 2017 was recorded in class A buildings, which offset negative absorption in class B and C properties. Absorption in class AAA premises was limited by a lack of supply in 2017. After peaking in 2015 at 1.1 msf (the most annual absorption recorded Downtown since Avison Young started tracking the market in 1996), absorption has remained positive but declined in each subsequent year. This most recent three-year run of positive absorption (2015-2017) totalled 1.69 msf, which was less than both of the previous three-year runs of positive annual absorption the market has experienced since 1996: 2004-2006 (2.02 msf ) and 2005-2007 (1.71 msf ).

GWL Realty Advisors

will deliver VAncouver

CEntre II in 2021.

Downtown vacancy temporarily stable due to delivery of vacant space Downtown

tenant BUILDING SF

Amazon 402 Dunsmuir Street 147,000

Spaces 939 Granville Street 67,000

WeWork Bentall 2 54,000

Legal Services Society 510 Burrard Street 50,000

Facebook Waterfront Centre 45,000

Peoples Trust (renewal/expansion) 888 Dunsmuir Street 35,600

BCBC (renewal) Oceanic Plaza 28,400

Splunk (sublease) 555 Robson Street 27,360

Kasian (renewal) 1500 West Georgia Street 26,000

Oracle Canada (renewal) Bentall 1 24,800

Canada Drives (renewal/expansion) Bentall 2 19,800

Flight Centre 980 Howe Street 18,200

Real Estate Council of BC (renewal/expansion)

Pender Place II 17,400

Great-West Life Assurance Co. Bentall 4 16,800

Pretium Resources Bentall 4 16,800

Aurora Cannabis 510 Seymour Street 16,800

Wesbild Holdings Royal Centre 14,700

Miller Titerle + Co. 638 Smithe Street 14,700

iQ Office Suites Royal Centre 14,200

xMatters 510 Burrard Street 14,600

Indochino (sublease) 720 Robson Street 14,000

Kabam 1075 West Georgia Street 13,800

Fluor Canada (renewal) 1075 West Georgia Street 13,800

Safeway 1050 West Pender Street 11,000

BBA Engineering 1050 West Pender Street 11,000

Preszler Law Firm 1075 West Georgia Street 10,800

VanWest College (renewal) 1016 Nelson Street 10,800

Innergex Renewable Energy 1185 West Georgia Street 10,500

recent lease deals - YEAR-END 2017 (>10,000 sf)

Vacancy with Space Availability Factor (SAF) and Absorption

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2014 2015 2016 2017 2018F0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Vaca

ncy

Rate

/ SA

F

Vacancy Absorption SAF* Space Availability Factor

6.8%

9.3%

7.2%7.1%

3.4%

2.8%

3.8%

2.2%

-304,835

-270,560

1,101,041

387,909

200,811 6%

2.8%

222,873

Abso

rpti

on R

ate

5.7%

3.4%

12-month projection based on 5-year average absorption and known net absorption in new inventory, and 10-year average SAF.

year-end 2017 from 4.7% a year earlier. Class A vacancy continues to tighten, dropping to 6.7% at year-end 2017 from 9.8% 12 months ago. Class B vacancy also declined, slipping to 6% from 6.4%. Class C vacancy actually increased to 8.3% from 6.1% in that 12-month period. Strong leasing velocity had placed the Downtown market on a trend towards lower vacancy in 2017, but a statistical pause due to the delivery of the mixed-use Exchange building (the office portion of which still remains approximately 63% available) has temporarily delayed that trend from manifesting in the data. Sublease vacancy remained insignificant in the Downtown market in 2017, dropping to just 6.3% (101,438 sf ) of total vacancy from 7.8% (128,232 sf ) a year earlier. There were almost no significant sublease deals (greater than 10,000 sf ) completed Downtown in 2017. New and expanding occupants continue to redefine the tenant mix in Downtown Vancouver with continued demand from technology and co-working companies driving much of the activity. A lot of movement from existing tenants in the

avisonyoung.com 3

The occupancies of WeWork in Bentall 3, Kuehne + Nagel at 900 Howe Street and Sophos at 777 Dunsmuir Street all contributed towards absorption recorded in the second half of 2017. Substantial but stabilized positive absorption is expected in 2018 as tenants occupy contractually leased but physically vacant premises, including WeWork at Bentall 2, WSP Global at Robson Court, National Bank at the Exchange and the College of Reg-istered Nurses at Granville Square.

space availability factor The space availability factor, or SAF, refers to head lease or sublease space that is being marketed but is not physically vacant, and new supply that is nearing completion and available for lease. SAF decreased significantly to 2.2% at year-end 2017 from 3.8% 12 months earlier. Combined with vacant space, the amount of space being marketed for lease in the Downtown core is 9.3% (or approximately 2.12 msf ) – the lowest overall availability since year-end 2013 (9.1% or 1.9 msf ).

new constructionDowntown is on the cusp of its next devel-opment cycle with developers declaring their intentions to deliver new buildings into 2021. With no new deliveries until the back half of 2019 (much of which is already preleased or sold), the next Downtown development cycle will start in 2020 with the delivery of 710,000 sf in three new Downtown office towers as well as smaller projects in Railtown and Gastown. This cy-cle will continue in 2021 with the delivery of more than 650,000 sf of lease space in three additional Downtown towers. One of the projects, the Bosa Waterfront Centre, also offers approximately 178,000 sf of strata office space, which was 100% sold in 2017. These six towers will likely come to represent the next development cycle (2020-2021) and will total approxi-mately 1.36 msf. However, a subsequent development cycle is already taking shape

and represents a wave of fewer, but much larger buildings. These three projects are likely to be delivered in 2022/2023 and will total approximately 1.56 msf of new office space. More than 2.9 msf of new space is anticipated to be delivered by 2023.

market forecastUpward pressure on rates occurred through 2017 as landlords benefited from the downward trend in vacancy and avail-ability. With SAF at its lowest point since 2013, non-existent sublease space and minimal near-term inventory scheduled for delivery in the next 18 months, rental rate increases and supply constraints are likely to intensify. Expect a return to imbal-anced market fundamentals for the next 12

More than 2.1 msf scheduled for completion by 2021 Downtownto 18 months. Vacancy may drop by up to 150 bps with Downtown vacancy likely to land below 6% by year-end. It appears statistically that the market is at the front-end of the next downtown development cycle and numerous developers have or are positioning themselves. Strata office in the Downtown market is likely to play an increased role moving forward due to the success of Bosa Waterfront Centre achieving sales in excess of $2,000 psf. The Downtown tenant mix continues to be reshaped by new and expanding ten-ancies with co-working spaces emerging as a new force in the market. Despite the temporary stabilization of vacancy at year-end 2017, the market will be supply constrained as it enters the next develop-ment cycle in 2018.

CLASS INVENTORYHEAD LEASE

VACANCY (SF)SUBLEASE

VACANCY (SF)TOTAL

VACANCY (SF)TOTAL

VACANCY (%)12-MONTH

ABSORPTION (SF)SAF (SF) SAF (%)

NET RENTAL RATE RANGE (PSF)

GROSS OCCUPANCY COST (PSF)

AAA 4,980,576 373,163 35,289 408,452 8.2% 64,276 82,291 1.7% $30 - $50 $50 - $75

A 8,103,253 496,722 49,145 545,867 6.7% 316,124 205,719 2.5% $25 - $45 $43 - $69

B 6,714,398 394,017 10,886 404,903 6% -114,312 159,974 2.4% $22 - $35 $38 - $56

C 3,144,918 256,302 6,118 262,420 8.3% -65,277 52,159 1.7% $18 - $28 $31 - $46

Total 22,943,145 1,520,204 101,438 1,621,642 7.1% 200,811 500,143 2.2% - -

DEVELOPER BUILDING SF PRELEASE SF PRELEASE % COMPLETION

Reliance Properties/ Jim Pattison Developments

The Offices at Burrard Place,1281 Hornby Street (mixed use) 99,000 (office podium) Strata 67% sold Q3 2019

Rendition Developments Bench, 353 Railway Street (I-4 zoning) 35,000 0 0% Q3 2019

Bosa Properties/ Arpeg Holdings

The Cardero, 1575 West Georgia Street & 620 Cardero Street (mixed use) 44,948 (office) Lease/Strata Lease/Strata Q4 2019

Oxford Properties 402 Dunsmuir Street 147,000 147,000 100% Q4 2019

Reliance Properties/ Jim Pattison Developments

The Offices at Burrard Place, 1280 Burrard Street (mixed use) 146,375 (office tower) 0 0% Q1 2020

Westbank/Allied REIT 400 West Georgia Street and 725 & 731 Homer Street 353,000 0 0% Q2 2020

Low Tide Properties 155 Water Street 75,000 (office) 0 0% Q3 2020

Omicron/ Rendition Developments Maker Exchange, 488 Railway Street (I-4 zoning) 152,000 0 0% Q3 2020

PCI / Greystone 601 West Hastings Street 210,000 0 0% Q4 2020

Uptown Property Group 625 West Hastings Street 120,000 0 0% Q1 2021

GWL Realty Advisors Vancouver Centre II, 753 Seymour Street 368,115 0 0% Q2 2021

Bosa Developments Bosa Waterfront Centre, 320 Granville Street 355,000 (50% for lease) Lease/Strata* 0% Q2 2021

Bentall Kennedy 1090 West Pender Street 530,000 - - Planning

Oxford Properties 1133 Melville Street 530,000 (office) - - Planning

QuadReal Property Group The Post on Georgia,349 West Georgia Street (mixed-use) 500,000 (office) - - Planning

Asia Standard Americas 1468 Robson Street 29,115 (office) - - Planning

FDG Properties 117-131 Water Street 68,576 (office) - - Proposed

Terrma GP I Inc. Eight 55 on Granville, 855 Granville Street (mixed use) 29,785 (office) - - Proposed

Aquilini Development and Construction

Aquilini Centre East, 777 Pat Quinn Way TBD - - Proposed

Westbank 720 Beatty Street TBD - - Proposed

Cadillac Fairview Waterfront Tower, 555 West Cordova Street TBD - - Proposed

Annual absorption

lowest since 2014

*The building contains 50% lease space and 50% strata space. The strata space is 100% sold. No preleasing had been completed by year-end 2017.


downtown development timeline

proposed downtown/railtown developments

q1 2020

The Offices at Burrard Place 1280 Burrard Street

Q2 2020

AN ICONIC OffICe TOWeR

The Offices aT Burrard Place

are a funcTiOnal sculPTure

and The cOrnersTOne Of

a full ciTy BlOck Of new

develOPmenT.

One of the last buildings designed by

Vancouver’s world-renowned architect, Bing

Thom, this structure will define the southern

entrance to downtown Vancouver and will

anchor the largest mixed-use development in

the most rapidly growing commercial / residential

community on the downtown peninsula.

Connected to the sixty-storey luxury residential

tower, The Offices at Burrard Place will

animate one of the most prominent corners

of one of Vancouver’s most notable streets.

Complementing the curving glass of the exterior,

the office interiors will be among the finest in

the city. And in addition, an incredible array of

world class amenities will provide commercial

occupants with a workplace lifestyle unmatched

in Vancouver.

The Offices at Burrard Place represent a new

standard for business that will attract and retain

the best talent and employers in Vancouver.

Q3 2019 Q4 2019

The offices at Burrard Place1281 Hornby Street

402 Dunsmuir Street 400 West Georgia Street

Maker exchange, 488 Railway Street Developed by omicron & Rendition Developments

Storeys / Office area 7 / 152,000 sf

bench, 353 railway Street Developed by rendition developments

Storeys / Office area 6 / 35,000

117-131 Water Street Developed by FDG Properties


1090 West Pender Street Developed by Bentall Kennedy


Aquilini Centre East, 777 Pat Quinn way Developed by Aquilini Development & construction

Floors / Office area TBD

Developer Reliance Properties/Jim Pattison Developments

Bosa Properties/Arpeg Holdings

Oxford PropertiesReliance Properties/

Jim Pattison DevelopmentsWestbank/Allied REIT

Storeys 7-storey podium (3 floors) 3 floors in mixed-use building5 9 13 24

office sf 99,000 (strata) 45,346 (lease/strata) 147,000 146,375 (office tower) 353,000

tenants Sold (phase 1 - 66,000 sf) 3,000 sf - Arpeg Holdings 147,000 sf - Amazon No tenants at this time No tenants at this time

Not released (phase 2 - 33,000 sf)

Occupancy 67% 7% 100% 0% 0%

Developers of this 152,000-sf, seven-storey mixed-use building featuring ‘creative manufacturing’ uses and office uses applied for a de-velopment permit in Septem-ber 2017. The City’s director of planning approved the project’s development permit application on December 17, 2017, subject to a number of conditions. The permit will be issued once all the conditions have been satisfied. Project marketing materials indicate building construction is scheduled to be complete by Q3 2020.

The developer had originally applied for a development permit in 2015 for this six-storey, 35,000-sf mixed-use building, which features ‘creative manufacturing’ uses and office uses under the site’s I-4 zoning. The project’s development permit has been approved and con-struction is anticipated to break ground in the first half of 2018 and complete in the second half of 2019.

A seven-storey, mixed-use commercial/residential building has been proposed on this site that would retain three existing heritage buildings. The development permit application was “conditional” so it may be permitted, but it requires the decision of the director of planning. The building features 68,576 sf of office space on floors 2, 3 and 4. As of December 31, 2017, the development permit appli-cation with the City was no longer online. Further details were unavailable.

UDP supported the design in February 2014. A public hearing related to its rezon-ing application was set for February 24, 2015, and the application was approved by the City. As of December 31, 2017, the developer was continuing to work through development permit application requirements. It is anticipated that construc-tion could potentially break ground at mid-2019 and complete in the back half of 2022.

This proposed mixed-use residential/office tower will be the third and final building to form the Aq-uilini Centre development anchored by Rogers Arena. This building was originally scheduled for completion by the end of 2018, but the timing of construction has been delayed due to the forthcoming removal of the Georgia and Dunsmuir via-ducts. The east tower, as pro-posed, was to feature 69,300 sf of office space on floors 5 through 13 with residential units on the upper floors.

Q4 2019

The Cardero,1575 w. georgia street & 620 cardero street

avisonyoung.com 5

601 West Hastings Street

Q4 2020 Q2 2021Q2 2021Q1 2021Q3 2020

Vancouver Centre II, 753 Seymour Street

bosa waterfront centre, 320 granville street

155 Water Street 625 West Hastings Street

1133 Melville Street Developed by Oxford Properties

Storeys / Office area 34 / 530,000 SF

The Post on Georgia, 349 West Georgia Street Developed by QuadReal Property Group

Storeys / Office area 19 / 410,000 sf; Podium: 90,000 sf (3 floors)

Waterfront Tower, 555 West Cordova Street Developed by Cadillac Fairview

Storeys / Office area 25 / TBD

1468 robson Street Developed by Asia Standard americas

floors / Office area 3 / 29,115 sf

Eight 55 on Granville, 855 Granville Street Developed by Terrma gp I inc.


Developer Low Tide Properties PCI /Greystone Uptown Property Group GWL Realty Advisors Bosa Developments

Storeys 7 25 28 33 30

office sf 75,000 210,000 120,000 368,115 355,000

tenantsNo tenants at this time No tenants at this time No tenants at this time No tenants at this time

Approx. 50% of the building has been sold as strata office space;

no tenants at this time

Occupancy 0% 0% 0% 0% 0%

A development permit application was filed to provide interior & exterior alterations and a change of use to include 27,011 sf of retail in the basement/ground floor and 29,780 sf of office space on the 2nd and 3rd floors. The devel-opment permit application was approved by the city with conditions on January 27, 2017. A building permit was applied for in July 2017. As of December 31, 2017, exterior renovations had not yet begun nor had an update been provided.

Rezoning application was filed on July 8, 2015. The UDP did not support the initial building design as proposed, but subsequently supported a new design at a May 31, 2017 UDP review meeting. New renderings were released in June 2017. Oxford Properties re-submit-ted a revised rezoning ap-plication. Open house was held in November 2017. As of December 31, 2017, the City had not yet approved the application. Depending on approvals, construction could complete by 2022.

A public open house was held in 2016 as part of the rezoning applica-tion process, which was originally submitted to the City in June 2016. A pro-posed19-storey office tower includes 410,000 sf of office space and 90,000 sf in the podium. A revised rezoning application was filed in May 2017 that reduced overall density & building massing and slimmed tower design. As of December 31, 2017, the developer is working through the development permit application process.

The Urban Design Panel (UDP) did not support the original building design in 2015. The architect subsequently presented nine alternative concepts in a UDP workshop in June 2015, which received a “warmer reception.” A public engagement session was held in December 2015. As of December 31, 2017, the developer remains in pro-cess with the City and while the design has changed somewhat, the scale of the building remains similar at 25 storeys.

A revised development permit application was filed in February 2017. The new project design was sup-ported by the UDP in March 2017 and appeared before the development board in June 2017. While the de-velopment permit has not been issued as the applicant continues to work through the conditions of approval, demolition of the former ho-tel on site has commenced with project construction proposed to potentially start in early 2019.


Vacancy trendsOverall vacancy in Vancouver-Broadway dropped to 5.9% at year-end 2017, down from 10.7% a year earlier as a number of major tenancies took occupancy in primarily class A premises across the city. Major tenancies included BC Safety Authority and Associated Engineer-ing occupying the Renfrew Centre as well as Intel and Townline Homes moving into Marine Gateway – two new developments that were largely vacant for more than a year after they were completed. In the first full year of statistics for the newly designated Van-couver-Broadway core market, vacancy rose slightly to 3.4% at year-end 2017 from 1.7% 12 months earlier. Vacancy in the Vancouver-Broadway periphery market plummeted to 9.2% at year-end 2017 from 21.2% at year-end 2016 due to the occupancies listed above and others. Vacancy is likely to tighten further in 2018 with significant lease deals com-pleted in 2017 at 1333 West Broadway by the Provincial Health Services Authority and at 565 Great Northern Way, which is scheduled for completion in 2018 and counts Finning, Blackbird Interactive, Samsung and Spaces among its new tenants. Sublease space is virtually non-existent in the overall Vancouver-Broadway market.

absorption trends

Annual absorption of 425,059 sf in 2017 was the most absorption regis-

tered in the market since Avison Young started tracking the market in 1996. New developments, particularly in the periphery, which had been delivered vacant in 2015/16, were subsequently leased up and occupied in 2017. New developments such as Renfrew Cen-tre, Marine Gateway and phase two of Containers along with the Fifth have all been primarily occupied and resulted in absorption overwhelmingly occurring (94%) in class A premises. While 99,515 sf of annual absorption was noted in the Vancouver-Broadway core, more than 325,000 sf was registered in the periphery.

new constructionConstruction of new office space in the Vancouver-Broadway market remains very active with much of the new supply – both strata and lease – scheduled for delivery in 2018/19 already significantly preleased/sold. The ongoing transfor-mation of the former industrial node of Mount Pleasant into a tech-focused office hub continues unimpeded but de-velopers’ attention is increasingly turning towards Great Northern Way, the False Creek Flats and the northern end of the Cambie Street corridor. However, outside of these central submarkets, little new development is being contemplated in East or South Vancouver with the excep-tion of QuadReal Property Group’s proposed 1-msf expansion of Broadway Tech Centre and Porte Commercial’s much smaller The George development

at 1157 Parker Street. Two new large office developments were proposed in late 2017: Cressey Development’s 157,000-sf, 10-storey office building at 425 West 6th Avenue on the current site of Craftsman Collision; and Rize Alliance’s 13-storey, 290,000-sf office tower at 1296 Station Street at Terminal Avenue, next to the Pacific Central train station. Both are scheduled to break ground in late 2018.

market forecastUpward pressure on rental rates strength-ened through 2017 as vacancy continued to tighten and availabilities on a head lease or a sublease basis remained few and far between, particularly for large blocks of contiguous space in the core Vancouver-Broadway market. That upward pressure on rental rates is anticipated to remain in 2018 as vacancy remains tight with some potential relief coming in the small-to-mid-sized pockets of vacant space in the new developments (which are primarily preleased/sold) set for delivery in 2018. Several new projects are working through the permitting process with the City of Vancouver and will contin-ue to roll out through 2018 and beyond, but they are anticipated to prelease/sell out quickly as availabilities are anticipated to remain limited and vacancy low.

Vacancy plunges as new developments occupiedVancouver-Broadway

tenant BUILDING SF

Provincial Health Services Authority 1333 West Broadway 83,540

Spaces 565 Great Northern Way 38,770

Thunderbird Entertainment 123-141 West 7th Avenue 35,240

Finning International 565 Great Northern Way 28,690

Blackbird Interactive 565 Great Northern Way 28,690

City of Vancouver 555 & 575 West 8th Avenue 28,000

Umedia 204 West 6th Avenue 21,230

Samsung 565 Great Northern Way 20,200

GFC Enterprises (renewal) 1367 West Broadway 11,700

Inception Pharma 887 Great Northern Way 11,400

Engine Digital 34 West 8th Avenue 10,130

Jumpstart Games 112 East 6th Avenue 9,130

Eastside Games 555 West 12th Avenue 8,100

Method Studios 120 West 3rd Avenue 7,680

Arius Tech 33 West 8th Avenue 7,000

Brandlive 120 West 3rd Avenue 5,450

recent lease deals - YEAR-END 2017

Annual absorption of 425,059 sf most recorded since 1996

Vacancy and Absorption (overall)

Abso

rpti

on R

ate

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Vaca

ncy

Rate

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

20142013 2015 2016 2017 2018F

Vacancy Absorption

4.6% 4.5%

10.7%

5.1%

5.9%

6.6%

410,466

-

-38,637

15,187

-16,768

425,059

118,883


avisonyoung.com 7

New construction primarily focused in Mount Pleasant Vancouver-broadway

CLASS INVENTORYHEAD LEASE VACANCY

(SF)SUBLEASE VACANCY

(SF)TOTAL

VACANCY (SF)TOTAL VACANCY (%)




A 4,178,162 239,467 14,358 253,825 6.1% 400,597 $22 - $32 $39 - $50

B 1,870,230 72,587 0 72,587 3.9% 31,501 $18 - $23 $31 - $38

C 535,508 58,115 6,342 64,457 12.0% -7,039 $15 - $19 $2 8 - $33

Total 6,583,900 370,169 20,700 390,869 5.9% 425,059 - -



VACANCY (SF)TOTAL

VACANCY (SF)TOTAL

VACANCY (%)12- MONTH

ABSORPTION (SF)NET RENTAL RATE

RANGE (PSF)GROSS OCCUPANCY

COST (PSF)

A 2,181,299 212,364 13,323 225,687 10.3% 295,057 $22 - $32 $40 - $50

B 625,797 36,725 0 36,725 5.9% 19,085 $18 - $23 $31- $38

C 65,498 1,263 0 1,263 1.9% 11,402 $15 - $19 $28 - $33

Total 2,872,594 250,352 13,323 263,675 9.2% 325,544 - -



VACANCY (SF)TOTAL

VACANCY (SF)TOTAL

VACANCY (%)12-MONTH



COST (PSF)

A 1,996,863 27,103 1,035 28,138 1.4% 105,540 $25 - $32 $42 - $50

B 1,244,433 35,862 0 35,862 2.9% 12,416 $18 - $25 $31 - $41

C 470,010 56,852 6,342 63,194 13.4% -18,441 $15 - $19 $28 - $33

Total 3,711,306 119,817 7,377 127,194 3.4% 99,515 - -

OVERALL

PERIPHERY

CORE

DEVELOPER BUILDING SF PRELEASE % COMPLETION

PC Urban Properties The Lightworks Building, 22 East 5th Avenue 46,740 (office/light industrial) 100% Q1 2018

Rize Alliance The Independent at Main, 275 East 10th Avenue 17,000 (office) 0% Q1 2018

BlueSky Properties Broadway Commercial, 988 West Broadway 94,120 100% Q2 2018

Rendition Developments / MDC Property Services 204 West 6th Avenue 28,430 (office/light industrial) 76% Q2 2018

PCI Group /Low Tide Properties 565 Great Northern Way 161,000 73% Q2 2018

Chard Development 34 | W7, 34 West 7th Avenue 54,347 (office/light industrial) Strata: 87.5% sold Q3 2018

Porte Commercial The George, 1157 Parker Street 34,308 (office/light industrial) 0% Q4 2018

PC Urban Properties Nickel, 285 West 5th Avenue 71,000 (office/light industrial) 65% Q1 2019

Rendition Developments The Beltline Off Broadway, 224 West 8th Avenue 32,898 (office/light industrial Strata Q3 2019

Champion Development Group 151 West 5th Avenue 54,770 (office/light industrial) 0% Q1 2020

Cressey Development 425 West 6th Avenue 156,983 (office) 0% Planning

QuadReal Property Group Broadway Tech Centre, 3030 East Broadway (five buildings) 962,300 0% Planning

Onni Group Voxel, 399 East 1st Avenue 86,531 0% Planning

Reliance Properties/ Porte Communities 339 East 1st Avenue 133,594 0% Planning

Rize Alliance 1296 Station Street 290,000 0% Planning

CRS Group of Companies 2395 Cambie Street 39,270 (office) 0% Planning

Pacific Crown Management Ltd. 510 West Broadway 43,425 (office) 0% Planning

Wesgroup Properties 110 West 5th Avenue 45,290 (office/light industrial) 0% Planning

PCI Group / Low Tide Properties 901 Great Northern Way 400,000 0% Proposed

Vanlux Development 521-527 West 8th Avenue 61,650 (office) 0% Proposed

Medali Developments (West 6th) 35 & 43 West 6th Avenue 52,713 (office/light industrial) 0% Proposed

Vivagrand Development Corp. 5812-5888 Cambie Street TBD 0% Proposed

Mount Pleasant Employment Area (I-1 Zoning)While office vacancy in Mount Pleas-ant rose slightly at year-end 2017 from six months earlier, the rise was due to an increase in rentable area; other-wise, vacancy would have tightened. Much of the current leasing activity in the area is within new developments, which typically have little impact on overall vacancy in the area. The area remained in demand from office ten-ants in 2017 – particularly tech firms – but availabilities remained scarce. The area continues to transition to an office precinct, away from the neigh-bourhood’s light industrial heritage. Many vacant buildings (or soon to be vacant) have been earmarked for redevelopment as either strata office or flex office lease projects. There are very limited sublease options in the submarket with the exception of 149 West 7th Avenue. The remaining industrial space in Mount Pleasant continues to grow more challeng-ing to lease as property taxes have increased significantly in the last three years, which has spiked operating costs in lease agreements and made it difficult for industrial tenants to justify remaining in Mount Pleasant and for landlords and property owners to forego the returns possible from renovations and/or redevelopment. Office rental rates are expected to continue to rise in existing buildings and new developments as vacancy is predicted to remain very tight. Demand is forecast to remain strong with several more developments in the pipeline. Vacancy will remain tight in 2018 and beyond as it is expected that most new builds will be delivered fully leased/sold.

new projects by 2020

Currently preleased 64%New SF by 2020

511,248 sf10


Vacancy trendsVacancy dropped to 4.2% at year-end 2017 from 6.8% a year earlier. Vacancy tightened through 2017 due to a signif-icant increase in demand from tenants seeking small-to-mid-sized heritage brick-and-beam creative space close to the core. This demand resulted in the occupation of most of the large blocks of space (by Yaletown standards) that came available in 2015/16 when some volatility roiled the typically stable submarket. Some tenants had relocated to up-and-coming office nodes such as Mount Pleasant with its ‘gritty’ light industrial vibe or, in some cases, consolidated in the new office developments that were being delivered Downtown starting in 2015. However, Yaletown’s allure was quickly re-established by the end of 2016 and deal velocity picked up throughout the past year and desirable spaces have leased up quickly.

absorption trendsAnnual absorption surged to 52,735 sf in 2017, a significant reversal of fortune from the negative annual absorption of -41,953 sf registered in 2016 and the most annual absorption recorded in Yaletown since 2010. The second-half

occupancies of Stellar Creative Labs, Tuangru and Grosvenor all contributed to the surge. The relocation of McEl-hanney to class A space at 858 Beatty Street from class C office space at 780 Beatty Street had an outsized impact on absorption and vacancy and resulted in the one large block of vacant space to come available in this small submarket at year-end 2017.

space availability factor The space availability factor (SAF) refers to head lease and/or sublease space that is being marketed, but is not physically vacant. The SAF plummeted to a record low of 0.3% (5,500 sf ) at year-end 2017 from 4.9% (98,839 sf ) a year earlier. Hence, the amount of available space currently being marketed (occupied and vacant) in Yaletown is 4.5%, or approximately 58,000 sf – the lowest since mid-year 2008.

new construction

Boffo Developments’ mixed-use project, The Smithe, includes 31,000 sf of office space in a three-floor podium. Completion is set for the end of 2020.

Vacancy tight as annual absorption strongest since 2010Yaletown

tenant BUILDING SF

Westside Preparatory School 873 Beatty Street 30,000

Visier Workforce Analytics 1110 Hamilton Street 22,000

Nomadic Films 780 Beatty Street 19,880

Segment 1050 Homer Street 5,270

Tuangru 1122 Mainland Street 4,780


Vacancy and Absorption

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Vaca

ncy

Rate

/ SA

F

-50,000

-40,000

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

Abso

rpti

on R

ate (

sf)

20142013 2015 2016 2017 2018F

Vacancy Absorption SAF* Space Availability Factor

3.1% 4.1%4%

4.2% 4.7%

6.9%3.8%

4.9%

0.3%

23,92819,732

-20,091

-41,953

-9,107

52,735

6.8%

2.8%3%

12-month projection based on 10-year average absorption and 10-year average SAF

Visier Workforce Analytics leased 22,000 sf at 1110 Hamilton Street.

Class InventoryHead Lease

Vacancy (sf)Sublease

Vacancy (sf)Total Vacancy

(sf)Total Vacancy

(%)12-month

Absorption (sf)SAF (sf) SAF (%)

Net Rental Rate (psf)

Gross Occupancy Cost (psf)

A 576,938 0 3,039 3,039 0.5% 16,330 0 0.0% $32 - $40 $49- $57

B 998,357 35,980 0 35,980 3.6% 49,793 5,500 0.6% $26 - $31 $43 - $48

C 472,077 47,112 0 47,112 10% -13,388 0 0.0% $21 - $25 $35 - $42

Total 2,047,372 83,092 3,039 86,131 4.2% 52,735 5,500 0.3% - -


Boffo Developments The Smithe, 885 Cambie Street 31,000 0 0% Q3 2020

market forecastRental rates rose significantly in 2017 due to an uptick in demand for quality Yaletown office space and a very limited supply of such office space in the popular submarket. This upward pressure on rates is expected to continue in 2018 as landlords increasingly dictate terms as demand continues to outpace supply and vacancy tightens further, particularly in class A and B premises. Slight relief in terms of vacancy may come later in 2018 when Relic Entertainment, which cur-rently occupies approximately 30,000 sf at 1040 Hamilton Street, is scheduled to re-locate to its new office in Mount Pleasant. Limited quality options will be available in 2018, and when they do come to market, will lease quickly at likely higher rates than deals completed in 2017.

avisonyoung.com 9

Most positive annual absorption recorded since 2000 Burnaby

tenant BUILDING SF

Arista Networks Canada 9100 Glenlyon Parkway 61,800

Themis Solutions (renewal/expansion) 4611 Canada Way 45,530

LMI Technologies (expansion) 9200 Glenlyon Parkway 34,300

Teradici (renewal) 4601 Canada Way 24,350

Flextronics Global Services Canada Inc. 4333 Still Creek Drive 9,840

CH Robinson Worldwide (renewal) 4445 Lougheed Highway 6,746


Vacancy trendsVacancy declined to 9% at year-end 2017 from 12.5% a year earlier – and is at its lowest point since mid-year 2013. Sub-lease vacancy at year-end 2017 remained elevated at 255,199 sf – the second most square footage since Avison Young started tracking the market in 1997 – after peaking at mid-year 2017. FortisBC removed the space it was offering for sublease at 4370 Still Creek Drive. Telus’ sublease space at 3777 Kingsway and HSBC’s sublease space at 3383 Gilm-ore Way were the dominant sources of sublease availability in Burnaby in 2017. However, DA Townley’s decision to vacate and sublease its former space at 4400 Dominion Street added to that total along with Cymax offering to sublease 10,000 sf at 4170 Still Creek Drive and Worley Parsons deciding to sublease 12,000 sf at 4321 Still Creek Drive. While the return of swing space used by Pacific Blue Cross at 4601 Can-ada Way and Teradici’s downsizing at 4621 Canada Way added some availabil-ities, there remain very limited options for mid-to-large-sized tenancies. There were very few significant lease deals in the back half of 2017, but a number of smaller infill availabilities were leased.

absorption trendsAnnual absorption of 323,759 sf in 2017 marked the most annual absorption recorded in Burnaby since 2000 and followed positive annual absorption of 246,115 sf in 2016. A number of significant occupancies, including Raymond James and Kinder Morgan at 3777 Kingsway, Capcom at Solo District, Flextronics at 4333 Still Creek and Metro Vancouver at Metrotower III, contributed to the ab-sorption. The expansions of Clio at 4611 Canada Way and Binnie Consulting at 4946 Canada Way also contributed to the absorption. Few tenants are vacating the Burnaby market, while many are renewing and/or expanding. A lack of availabilities and rising rental rates in the Downtown and Vancouver-Broadway markets has benefited Burnaby’s office market.

New ConstructionAnthem Properties’ mixed-use Station Square will feature 52,800 sf of office space on two floors in the project’s podium. Two floors have been sold in Cressey Developments’ eight-storey, 74,016-sf strata office project, Kings Crossing. Onni Group’s mixed-use project at 3355 North Road, which in-cludes a 14-storey office tower featuring 161,200 sf of office space as well as retail on the ground floor, is set to break ground by mid-2019.

Market ForecastRental rates remained stable in 2017 as landlords maintained high face rates while offering larger inducements that have now been reduced in the face of tightening vacancy. Sublease vacancy will likely serve as the primary source of lease availabilities in next 12-month period. Upward pressure on rental rates in 2018 is likely as vacancy decreases further and a constrained supply of new construction being delivered offers little relief in the short- to-mid term.



Abso

rpti

on R

ate

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Vacancy Absorption

20142013 2015 2016 2017 2018F

Vaca

ncy

Rate

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

12.6%

9.6%

12.9%12.5%

9%

34,390

-114,783

32,637

246,115

323,759

99,358

8.4%

Vacancy slips to lowest point since 2013



VACANCY (SF)TOTAL

VACANCY (SF)TOTAL

VACANCY (%)12-MONTH



COST (PSF)

A 6,306,081 366,833 228,286 595,119 9.4% 319,138 $18 - $28 $34 - $44

B 2,081,671 143,131 26,913 170,044 8.2% -12,652 $16 - $18 $28 - $30

C 869,038 65,017 0 65,017 7.5% 17,273 $15 - $18 $26 - $29

Total 9,256,790 574,981 255,199 830,180 9% 323,759 - -


Anthem Properties Station Square, 6060 Silver Avenue 52,800 (office) 0 0% Q3 2018

Cressey Development Group Kings Crossing, 7350 Edmonds Street 74,016 (office) Strata 30% sold Q2 2019

Onni Group 3355 North Road 161,200 (office) 0 0% Q2 2022

Kingswood Capital Discovery Place Business Park, 3555 Gilmore Way 50,000 0 0% Awaiting prelease

Belford Properties The Centre at Sun Towers, 4458 Beresford Street 70,000 (office) Strata NA Under construction

Shape Properties The Amazing Brentwood (redevelopment) 500,000 (office) 0 0% Proposed

Onni Group Gilmore Place, Gilmore Avenue & Lougheed Highway 400,000 (office - second phase) 0 0% Proposed


Vacancy trends

Vacancy slipped to 9.8% at year-end 2017 from 10.7% a year earlier – and is at its lowest point since mid-year 2002. The main reason for the decrease in vacancy was due to a number of small deals that were completed in the back half of 2017 along with some larger deals that closed in the first half of 2017, which resulted in space being occupied towards the end of 2017. Despite the decline in vacancy, large blocks of space remain available at Airport Executive Park and Crestwood Corporate Centre. The departure of Tetra Tech and Procurify from Airport Executive Park has created opportunities for other tenants.

absorption trendsAnnual absorption of 37,554 sf in 2017 marked the seventh consecutive year of positive annual absorption in Richmond’s office market. The majority of the absorp-tion recorded in 2017 was from tenants who relocated within the market in the second half of the year. While many smaller class A and B deals contributed to absorption in 2017, the expansion of Vancouver Coastal Health in 7671 Alderbridge Way was also largely respon-sible. Expansion by tenants in the market

was more responsible for the decrease in vacancy and positive absorption than new tenants to the market.

new constructionThe first new office space for lease delivered in Richmond since 2008 is scheduled for completion by the end of 2020. Yuanheng Holdings’ three phase mixed-use ViewStar development will in-clude a 12-storey, 205,141-sf office tower in its second phase. iFortune Homes’ is awaiting the issuance of its develop-ment permit for its mixed-use project, the iFortune Centre, which includes an 11-storey, 105,420-sf office tower at 6860 No. 3 Road scheduled for completion by the end of 2020. New projects from Bene (No. 3) Road Development, New

Continental Properties Inc. and Beck-with Development are expected to add another 240,000 sf of office space in the coming years.

market forecastLease rates remained relatively stable with small increases noted in buildings located near No. 3 Road and in the large office business parks as deal volume was minimal in 2017. As vacancy tightens, lease rates will continue to rise albeit slowly. Rental rates should remain largely unchanged in 2018, making Richmond one of the most cost-effective markets in Metro Vancouver. Large blocks remain available, which allows large tenants in the market to expand as well as accom-modate new large tenants to the market. The forecasted decline in vacancy in 2018 may be tempered somewhat due to a limited number of known future notable deals.

Vacancy sinks below 10% for first time since 2002RichmondVacancy and Absorption


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

Vaca

ncy

Rate

-50,000

0

50,000

100,000

150,000

200,000

Abso

rpti

on (s

f)

Vacancy Absorption

15.2%

12%

10.7%9.8%

8.8%

2014 2015 2016 2017 2018F

186,883

54,082

37,55441,860

7,545

15.4%

167,121

2013

tenant BUILDING SF

Telecon (expansion) 6651 Fraserwood Place 41,870

Bootlegger 6651 Fraserwood Place 14,120

Patterson Dental Canada (expansion) 6651 Fraserwood Place 14,000

Transoft Solutions 13700 International Place 12,980

Exchequer Management Ltd. (renewal)

5811 Cooney Road 12,930

Loblaws 6651 Fraserwood Place 11,790

Mainstream Broadcasting Crestwood Corporate 5 7,610

Freelife Solutions Ltd. 13091 Vanier Place 7,750


Positive annual absorption recorded

7 years in a row

Class InventoryHead Lease

Vacancy (sf)Sublease

Vacancy (sf)Total Vacancy

(sf)Total Vacancy

(%)12-Month

Absorption (sf)Average Net Rental

Rate (psf)Gross Occupancy

Cost (psf)

A 2,895,256 242,063 94,000 336,063 11.6% 16,822 $17 - $18 $28.25 - $30

B 972,346 49,681 20,397 70,078 7.2% -3,370 $14.75 - $16 $26.50 - $28.50

C 348,198 6,643 0 6,643 1.9% 24,102 $11.85 - $14 $20.35 - $22.50

Total 4,215,800 298,387 114,397 412,784 9.8% 37,554 - -


Yuanheng Holdings ViewStar, 3031-3351 No. 3 Road, 8151 Capstan Way & 8051/8100 River Road

205,141 (office - second phase) 0 0% Q4 2020

iFortune Homes Inc. iFortune Centre, 6860 No. 3 Road 105,420 (office) 0 0% Q4 2020

Beckwith Development 9451/9491/9511/9531/9551 Bridgeport Road and 9440/9460/9480 Beckwith Road 128,600 (office) 0 0% Proposed

New Continental Properties 8320, 8340 & 8440 Bridgeport Way and 8311 & 8351 Sea Island Way 50,527 0 0% Proposed

Bene (No. 3) Development Ltd. 4700 No. 3 Road 63,479 (office) 0 0% Proposed

MYIE Development International Trade Centre at Versante, 8477 Bridgeport Road 100,000 (office) Strata NA Under

construction

Vanprop Investments Lansdowne Centre (redevelopment) TBD 0 0% Proposed

avisonyoung.com 11

Vacancy slips to lowest level since 2012 surrey


Vacancy trends

Vacancy in Surrey’s office market declined rapidly to 10.1% at year-end 2017 from 15% a year earlier – and finished the year at its lowest level since mid-2012. The significant decline came in part from the delivery and 100% occupancy of Gateway Place, which was added to inventory in the second quarter of 2017 and wholly occupied by year-end. BC’s Ministry of Children and Family Development occupied 18,500 sf in the Northmark Building at 9180 King George Boulevard, while Métis Family Services moved into 15,000 sf in Surrey Central Business Park. Both occupancies served to push vacancy lower. Sublease vacancy is non-existent in all classes, which has led tenants to secure head lease space at full cost. While deal velocity slowed in the back half of the year compared with the first six months, leasing activity remained steady. The ongoing tightening of vacancy, which has been occurring since hitting a record-high 22.1% in 2014, has led some landlords to become more bullish on rates. Development activity is expected to resume in 2018 with at least three new projects breaking ground.

absorption trends

Annual absorption of 177,793 sf in 2017 marked the second-most annual absorption recorded in Surrey since 2005 and follows on the heels of record annual absorption of 237,051 sf in 2016. Several significant occupancies in 2017, including ICBC, McQuarrie Hunter, Métis Family Services and BC’s Ministry of Children and Family Development, were largely re-sponsible for the absorption. TransLink’s decision to reoccupy space in early 2017 that it had previously offered for sublease also boosted annual absorption. While a number of small-to-mid-sized vacancies did occur in all property classes in 2017, particularly in class C buildings, they were offset by the larger class A occupancies. Office space closer to SkyTrain stations tended to attract more leasing activity.

new constructionLark Group will put the finishing touch-es on CityCentre 2 in the first quarter of 2018 and prepare for the launch of CityCentre 3, a 10-storey, 115,000-sf strata office/retail building scheduled for completion in the back half of 2020. PCI Group will launch the second phase of King George HUB at the Stations in 2018, which will include 160,000 sf of office space and is contemplated for completion in early 2021. Landview Construction’s long-awaited GTC Professional Building is anticipated to break ground in the first half of 2018 and complete by year-end 2019.

market forecastUpwards pressure on rental rates is anticipated in 2018 as vacancy contin-ues to tighten. Absorption is expected to remain positive and subsequently drive vacancy moderately lower during the next 12 months. Deal activity is forecast to remain stable and tightening vacancy in the market will likely lead landlords to start to push rental rates upwards. With no new lease supply until the end of 2019, vacancy will likely decline and rents will rise slightly in 2018.



Vacancy Absorption

17.3%

22.1%

17.5%

15%

10.1%8.5%

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

300,000

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2013 2014 2015 2016 2018F2017

Abso

rpti

on (s

f)

Vaca

ncy

Rate

14,475

36,751

237,051

177,793

45,842

-137,809



(SF)TOTAL





A 2,074,968 175,016 0 175,016 8.4% 138,579 $22 - $32 $36 - $45

B 626,010 81,358 0 81,358 13% 36,307 $15 - $20 $28 - $31

C 205,629 37,011 0 37,011 18% 2,907 $11 - $13 $25 - $27

Total 2,906,607 293,385 0 293,385 10.1% 177,793 - -

tenant BUILDING SF

TransLink (renewal) 13401 108 Avenue 55,825

BC Ministry of Children & Family Development

9180 King George Boulevard 18,500

Douglas College 13769 104 Avenue 14,200

Urban Systems King George HUB at the Stations 6,000

Legal Services Society Newton Landmark II 5,000


Lark Group City Centre 2, 9639 137A Street 172,000 (office) Strata 85% sold Q1 2018

Landview Construction GTC Professional Building, 10189 153rd Street 100,550 0 0% Q4 2019

Lark Group CityCentre 3, 13775 96th Avenue 108,500 (office) Strata 0% sold Q3 2020

PCI Group King George HUB at the Stations (phase 2), 9900 King George Boulevard (office/retail) 160,000 (office) 0 0% Q1 2021

Avondale Development / Monark Group

The Professional Centre @ South Point, 3231 152nd Street 71,780 32,300 45% TBD

Blackwood Partners Central City Tower 2, 100 Avenue & King George Boulevard 500,000 0 0% Proposed

Second most

annual absorption recorded since 2005


Vacancy trendsVacancy declined to 16.6% at year-end 2017 from 17% 12 months earlier. Vacan-cy has been greater than 15% since mid-year 2014 thanks to the delivery of the vacant 137,000-sf Anvil Centre. How-ever, leasing activity at the end of 2017 in the formerly empty building should lead to a sharp decline in overall vacancy in New Westminster’s office market in 2018. While deal velocity was muted in the back half of 2017, leasing and tour activity were on the rise when compared with the past 12 to 24 months. While significant occupancy of the Anvil Centre in 2018 will help reduce vacancy, the departure of the BC Safety Authority from Westminster Centre to Renfrew Centre in Vancouver will contribute to a significant increase in sublease vacancy in the first quarter. Despite the likely overall decline in vacancy anticipated in New Westminster from the lease up of the Anvil Centre, there remains multiple options for businesses seeking small-to-large-sized tenancies.

Absorption trendsDespite very modest annual absorption

of 6,678 sf in 2017, the total marked an improvement on the negative annual absorption recorded in 2016 (-33,772 sf ) and 2014 (-1,478 sf ). Evolution Gaming (16,000 sf ) and Aerotek (4,950 sf ) occupied Anvil Centre in 2017. Century Group, LTSA BC and Douglas College will occupy an additional 100,450 sf in 2018 and substantially reduce class A va-cancy. A series of small tenancies in the market was responsible for the negative annual absorption of -17,714 sf recorded in class B premises in 2017.

new construction

QuadReal Property Group’s proposed Sapperton Green development adja-cent to the Braid Street SkyTrain station continued to proceed as the developer works through the development permit application approval process after having secured the necessary OCP amendments in mid-2017. A valid and active develop-ment permit for two office buildings up to 400,000 sf still remains in place for the property, but a prelease commitment would be necessary to start construction.

market forecast

With vacancy expected to tighten significantly in 2018, rental rates are anticipated to increase slightly by year’s end. Absorption in 2018 will be primar-ily driven by multiple tenants moving into the Anvil Centre, but this positive absorption will be offset somewhat by the departure of the BC Safety Authority from the market in the first half of the year. There is a renewed interest in New Westminster’s office market, which has recorded limited leasing activity in the past 24 months, as tightening vacancy in Burnaby and Surrey pushes prospective tenants to explore leasing opportunities in other markets.

More than 90% of the Anvil Centre has been leased and will be occupied in 2018.

Vacancy finally set to decline significantly in 2018 new WestminsterVacancy and Absorption


Vacancy Absorption

Abso

rpti

on R

ate (

sf)

Vaca

ncy

Rate

9.3%

16.8%

15%

17%16.6%

10.3%

178,035

-1,478

29,444

-33,772

-

27,631

-50,000

0

50,000

100,000

150,000

200,000

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

2013 2014 2015 2016 2017 2018F

6,678



(SF)TOTAL





A 780,114 183,415 2,358 185,773 23.8% 24,392 $22 - $27 $34 - $41

B 700,684 80,502 0 80,502 11.5% -17,714 $14 - $19 $26 - $33

C 207,774 14,501 0 14,501 7.0% 0 $12 - $14 $24 - $28

Total 1,688,572 278,418 2,358 280,776 16.6% 6,678 - -


QuadReal Property Group 97 Braid Street (near Braid Street SkyTrain station) part of Sapperton Green mixed-use redevelopment site

Up to 400,000 (office) 0 0% Proposed


tenant BUILDING SF

Douglas College Anvil Centre 68,450

TransLink 287 Nelson’s Court 21,000

LTSA BC Anvil Centre 16,000

Century Group Anvil Centre 16,000

Aerotek Anvil Centre 4,950

avisonyoung.com 13

Centreview delivered 78,800 sf of new office space in 2017.

Vacancy spikes with delivery of new vacant space north shore

Vacancy trendsVacancy jumped to 12.9% at year-end 2017 from 7.9% a year earlier due to the vacant delivery of Onni’s CentreView development, which added 78,800 sf of new office space to inventory in 2017. While the office space is approximately 60% leased and will start to be occu-pied in 2018, the project’s largest office tenant, COWI North America, is simply relocating from its current North Shore location at 788 Harbourside Drive. If the delivery of CentreView is removed from the statistical analysis, vacancy remained stable with some tenants relocating within the market while others down-sized. Deal velocity remained stable in the back half of 2017 with sublease vacancy reduced to nil by year-end. With no new office product for lease set for delivery until early 2020, vacancy is anticipated to decline in 2018 and likely continue to tighten into 2019.

Absorption trendsNegative annual absorption of -733 sf in 2017 represented a significant improve-ment from mid-year as strong leasing activity in the back half of the year helped offset the relocation of Work-SafeBC and the downsizing by ICBC that occurred in the first half. Harbour-

front Business Centre occupying more than 10,000 sf at 224 West Esplanade contributed significant positive absorp-tion in the back half of 2017.

new construction

Construction on Hollyburn Properties’ new mixed-use development in Central Lonsdale broke ground in November 2017 and includes 13,890 sf of contig-uous office space that can be demised into smaller units for lease. The project is scheduled for completion by the second quarter of 2020 and besides delivery of Seaspan’s new build-to-suit office build-ing in 2018, is likely the only new office supply for lease to come to market for at least the next three years.

market forecast

Rental rates remained stable in 2017 and will continue to remain flat in 2018 until vacancy starts to decline in a meaningful fashion after CentreView has been oc-

cupied. Plus, much of the space coming available as a result of COWI’s relocation has been backfilled and will be occupied in 2018. The uptick in leasing activity in the back half of 2017 is anticipated to continue in 2018 with more options for tenants, and vacancy will likely start to decline by mid-year 2018. However, a decline in vacancy by mid-year may be slightly delayed as Seaspan vacates approximately 12,000 sf of office space in various buildings in order to consolidate operations in its new four-storey, 84,000-sf head office at the foot of Pemberton Avenue in early 2018.



tenant BUILDING SF

Keith Plumbing & Heating 788 Harbourside Drive 17,885 sf

Harbourfront Business Centre 224 West Esplanade 10,305 sf

Red Lion Management 267 West Esplanade 6,155 sf

FDM Software Ltd. 930 West 1st Street 5,110 sf

Enbala Power Networks (renewal) 930 West 1st Street 4,360 sf

Coast Performance Rehabilitation 138 East 13th Street 4,190 sf

Western Canadian Properties Group 930 West 1st Street 4,000 sf

ePACT Network Ltd. 267 West Esplanade 3,790 sf

Revitalize Wellness Centre 138 East 13th Street 3,670 sf


Vacancy Absorption

Abso

rpti

on (s

f)

Vaca

ncy

Rate

8.5%7.8%

7.3%7.9%

12.9%12.1%

16,128

-86,621

6,576

-7,751-733 -8,783

-100,000

-80,000

-60,000

-40,000

-20,000

0

20,000

40,000

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2013 2014 2015 2016 2017 2018F


Hollyburn Properties 1301-1333 Lonsdale Avenue and 120-141 West 14th Street 13,890 0 0% Q2 2020

Concert Properties 801, 889 & 925 Harbourside Drive and 18 Fell Avenue TBD 0 0% Proposed

Darwin Construction North Shore Innovation District, 2420 Dollarton Highway TBD 0 0% Proposed



(SF)TOTAL





A 871,813 134,971 0 134,971 15.5% -15,329 $22 - $30 $34 - $48

B 481,395 45,723 0 45,723 9.5% 12,663 $18 - $22 $25 - $33

C 97,690 7,170 0 7,170 7.3% 1,933 $15 - $18 $24 - $31

Total 1,450,898 187,864 0 187,864 12.9% -733 - -


suburban development timeline (to 2020)

Q2 2018

Broadway Commercial988 West Broadway

Q2 2018

204 West 6th Avenue

Q1 2018

The independent at main 275 East 10th avenue

Q1 2018

The Lightworks Building 22 East 5th Avenue

Q1 2018

City centre 29639 137A Street

city Vancouver-Broadway Surrey Vancouver-Broadway Vancouver-Broadway Vancouver-Broadway

Developer PC Urban Properties Corp. Lark Group Rize Alliance BlueSky Properties Rendition Developments / MDC Property Services

Storeys 6 12 1 floor 10 4

office sf 46,740 172,000 17,000 94,120 28,430

tenants 46,740 sf - Saje Natural Wellness Strata No tenant at this time 94,120 sf - iA Financial Group 21,230 sf - Umedia

Occupancy 100% 85% sold 0% 100% 75%

Q4 2019BUILDING OVERVIEWANCHOR TENANT OPPORTUNITY

Offering prominent building signage for a large format tenant.

OPPORTUNITY

GTC Professional Building will be comprised of more than 100,000 square feet of Class A office and retail space designed to LEED® standards. Distributed over five floors and offering a variety of floor plates ranging from 17,808 – 21,973 square feet, the building is designed specifically to provide maximum flexibility and allow for many types of employers seeking high-quality premises

OCCUPANCY DATE

Occupancy estimated for mid 2019

PARKING RATIO

Approximately 3 stalls per 1,000 SF

LEASE RATE

Retail | from $25 per SF Office | from $23 per SF Additional Rent | est. $11 per SF

GTC Professional Building 10189 153rd Street

Q3 2019

the Beltline off Broadway224 West 8th avenue

Q3 2020

CityCentre 313775 96th Avenue

iFortune Centre, 6860 No. 3 Road

Q4 2020Q2 2019

Kings Crossing 7350 Edmonds Street

City Burnaby Vancouver-Broadway Surrey Surrey Richmond

Developer Cressey Development Group Rendition Developments Landview Construction Lark Group iFortune Homes

Storeys 8 4 5 10 11

office sf 70,430 32,898 100,550 108,500 (office) 105,420 (office)

tenants Strata Strata No tenant at this time Strata No tenant at this time

Occupancy 30% sold 0% sold 0% 0% sold 0%

q3 2018

Station Square 6060 Silver Avenue

q2 2018

565 Great Northern Way

q1 2019

Nickel 285 WEst 5th Avenue

City Vancouver-Broadway Vancouver-Broadway Burnaby Vancouver-Broadway Vancouver-Broadway

Developer PCI Group Chard Development Anthem Properties Porte Commercial PC Urban Properties Corp.

Storeys 7 4 Two floors 4 4

office sf 161,000 54,350 52,804 (office) 34,310 70,915

tenants

38,770 sf - Spaces28,690 sf - Finning International28,690 sf - Blackbird Interactive

20,200 sf -Samsung

Strata No tenant at this time No tenant at this time 47,000 sf - SEGA (Relic Entertainment)

Occupancy 73% 87.5% sold 0% 0% 67%

q3 2018

34|w7 34 west 7th Avenue

Q4 2018

The George 1157 Parker Street

avisonyoung.com 15

BC Growth to slow in 2018 but still lead canada

“Modest interest-rate increases and a tightening of mortgage lending standards will act as headwinds for residential real estate activity,” according to the report. “Real estate has been a substantial growth driver for the prov-ince in recent years so the anticipated downshift will spill over to retail sales and others linked to real estate sales and construction.”

The report continues: “BC’s job market remains healthy, although there is some early indication that the pace of job growth is moderating. Some slowing is inevitable as the unusually strong gains earlier in 2017 were not sustain-able. With both the export sector and domestic activity still expanding, BC economy is in good shape. While there are risks to the outlook, there is nothing on the horizon to derail BC’s expansion.”

BCBC predicts real GDP growth of 2.3% in 2018 and 2.4% in 2019 with both the unemployment rate and housing starts dipping in 2018/19. Retail sales are also forecasted to decline from current levels in that period.

Central 1 Credit Union’s Economic Analy-sis of British Columbia (Volume 37, Issue 3) published in September 2017, reported that BC’s economy expanded by 3.5% in 2017, higher than both the BCBC and the Conference Board estimates. It predicts the BC economy will expand by 2.5% in 2018.

“Robust consumer demand continues to support the economy thanks to surg-ing employment, combined with strong exports and government support,” said Bryan Yu, deputy chief economist at Central 1. “Housing activity will remain elevated but will not be a significant

Housing Starts for British Columbia

special feature

Source: Central 1 Credit Union

British Columbia’s economy will slow in 2018 compared with 2017 but will still lead all provinces in terms of GDP growth despite facing local and interna-tional headwinds, according to Central 1 Credit Union, the Business Council of British Columbia (BCBC) and the Conference Board of Canada.

The provincial economy expanded by 3.2% in 2017, according to the Confer-ence Board of Canada’s Provincial Outlook Economic Forecast: BC – Autumn 2017 published January 2, and will grow by another 2.7% in 2018. While growth will be weaker than the gains of 3% or more recorded from 2015 to 2017, B.C. will lead the country in growth in 2018.

A slump in the BC housing sector will be the main factor behind the slower growth, according to the Conference Board of Canada. Housing starts are expected to drop by close to 2% in 2017 and only negligible growth is antici-pated in 2018. Other factors slowing economic growth in BC include U.S. duties on imports of Canadian softwood lumber, which are a key factor behind the anticipated drop of nearly 2% in real forestry output in 2018.

The BC Economic Review and Outlook published by the BCBC on January 18 forecasted a similar economic future for the province in 2018 with higher commodity prices providing a boost to BC’s export sector even as the economy is poised to downshift in 2018 after real GDP growth of 3.1% in 2017. BCBC an-ticipated real GDP growth to be 2.3% in 2018, lower than the Conference Board’s estimate.

driver of growth over the next few years,” he added. “BC’s important forestry sector continues to face potential headwinds to growth due to softwood lumber trade disputes, this summer’s record wildfire season, and long-term timber availability.”

The report goes on to add:

• Provincial growth will continue to fare well compared with other provinces and will meet or exceed the national growth rate over the period.

• Housing market has outperformed early-year expectations with housing starts forecast to decline only 6% in 2017 following the 33% surge in 2016.

• Growth in employment has supported growing population and high con-sumer demand, but should stabilize. Despite this, unemployment will trend lower due to changing demographics.

• A low Canadian dollar, combined with economic growth and investment, will continue to drive goods and services exports higher.

• Softwood lumber trade negotiations are a risk for the forestry sector and will combine with production impacts from wildfires to drag on growth.

Central 1 predicts real GDP growth of 2.5% in 2018 and 3% in 2019, but also highlights declines in both the unem-ployment rate and housing starts out to 2019.

“Growth in goods exports, tourism, film industry, technology and business investment will be steady due to a fa-vourable currency,” Yu said. “Government investments also remains high with large utility, transportation and public works projects.”

201739,200

201838,800

201939,000

202037,000

© 2018 Avison Young. All rights reserved.

E. & O.E.: The information contained herein was obtained from sources that we deem reliable and, while thought to be correct, is not guaranteed by Avison Young Commercial Real Estate (B.C.) Inc.; DBA, Avison Young.

avisonyoung.com

Avison Young #2900-1055 W. Georgia Street Box 11109 Royal Centre Vancouver, BC V6E 3P3, Canada

For more information, please contact:

Michael Keenan, Principal & Managing DirectorDirect Line: [email protected]

Andrew Petrozzi, Principal & Vice-President, Research (BC)Direct Line: [email protected]

Sherry Quan, Principal & Global Director of Communications & Media RelationsDirect Line: [email protected]

Avison Young Office Leasing Team

*Personal Real Estate Corporation

Nicolas Bilodeau [email protected]

Robin Buntain* [email protected]

Fergus Cameron [email protected]

Kirstin Campbell [email protected]

Matthew Craig* [email protected]

Bill Elliott [email protected]

Glenn Gardner* [email protected]

Jordan Gill [email protected]

Sean Keenan [email protected]

Mitchell Knoepfel [email protected]

Nabila Lalani [email protected]

Derek Lee [email protected]

James Lewis [email protected]

Jason Mah* [email protected]

David MacFayden [email protected]

Justin Omichinski [email protected]

Brian Pearson [email protected]

Ronan Pigott* [email protected]

Max Ripper [email protected]

Dan Smith [email protected]

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Bahareh Tabar [email protected]

Terry Thies* [email protected]

Tammy Stephen [email protected]

Matt Walker [email protected]

Ian Whitchelo* [email protected]

continued from page 1

Vacant sublease space

Squa

re fo

otag

e

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Metro Vancouver Downtown

190,092240,814 249,851

128,232101,438

480,936425,921

484,102456,175

497,131

2013

148,684

322,884

2012 2014 2015 2016 2017

or decline further in 2018. Suburban vacancy of 9.2% at year-end 2017 was the lowest since 2009.

While annual absorption has remained positive regionally since 2014, the amount of positive absorption Downtown has been in decline since peaking in 2015. While Vancouver-Broadway registered a record level of absorption in 2017, Burnaby achieved a 17-year-high and Surrey posted the second-most annual absorption since 2005, annual absorption Downtown in 2017 was down 48% from 2016 and 82% from 2015. This decline is not attributed to weak demand but a lack of supply. The strong annual absorption recorded Downtown in 2015 was the result of the culmination of a development cycle that delivered several new office towers without vacancy exceeding 10% or a tsunami of sublease space undercutting rates. As vacancy continues to decline Downtown and elsewhere in Metro Vancouver in 2018, annual absorption will also likely continue to drop, particularly in markets such as Vancouver-Broadway, Burnaby and Surrey. New supply constraints are starting to manifest throughout the region and are charac-terized by tight vacancy, reduced absorption and substantial preleasing/presales activity. The temporary result is the emergence of an imbalanced market that favours landlords until new supply can be delivered.

At year-end 2017, there was just 395,693 sf available for sublease outside Down-town Vancouver, while Downtown sublease space totalled 101,438 sf, for a total of 497,131 sf or 12.1% of the overall vacancy region-wide – up from 10% a year earlier. This increase is almost entirely attributable to the sharp rise in sublease space in Burnaby in 2017, climbing to 255,199 sf at year-end 2017 from just 57,386 sf 12 months ago.

With no new supply scheduled to be delivered Downtown until the end of 2019, no new development contemplated in Yaletown in the next 12 months and almost two-thirds of new supply being delivered out to 2020 in Vancouver-Broad-way already preleased, there will continue to be fewer options for tenants as vacancy tightens and absorption slows in the core markets. This pause in new development is also pronounced in suburban markets. Burnaby has just one mixed-use project with office space for lease coming at the end of 2018 and then nothing until 2022. New supply will not be delivered in Richmond until the end of 2020 (the first since 2008). Surrey has a single office development with office space for lease set for delivery at the end of 2019. There is no new supply con-templated currently in New Westminster and the North Shore will not see more office space delivered until mid-2020.

Market activity in the next 24 months will highlight the supply constraints in Met-ro Vancouver’s office market. While sublease space in Burnaby and a very limited supply of strata product in mostly suburban markets, particularly Surrey, may temporarily relieve some pressure for tenants, vacancy is forecasted to continue to tighten amid rising rental rates and limited availability in most submarkets. This will spur additional development activity and place even more pressure on municipalities to streamline their approval and permitting processes to meet the demand that markets will be challenged to match in the near term.

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Avison Young Canada: Commercial Real Estate Company - Metro …Young... · 2018-02-02 · the statistics at year-end 2017 in the Vancou-ver-Broadway, Burnaby, Downtown and Surrey