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New York • London • Hong Kong • Paris • Singapore • Chicago • Shanghai • Dubai • Sydney • Milan • Beijing • Sao Paulo • Madrid • Mumbai • Los Angeles Office Report Metro Vancouver Second Quarter - 2013 Tel: 604 684 7117 www.dtzvancouver.com 980 Howe Street V ancouver • Victoria • Nanaimo • Kelowna • Calgary • Edmonton • Regina • Winnipeg • Toronto • London-Windsor-Sarnia • Niagra • Kingston • Ottawa • Montreal Fourth New Tower Under Construction Having secured BGC Engineering Inc. as a lead tenant, Manulife Financial has begun construction of a 270,000 sf office building at the corner of Howe and Nelson Streets in downtown Vancouver. The recent announcement concludes negotiations with BGC for approximately 70,000 sf in the low rise portion of the building. The location of the property within walking distance of the CBD and the benefits of being in a newly constructed, LEED Gold targeted facility contributed to BGC’s decision to occupy the building. Continued on Page 4... ---------------------------------------------

Office Report Metro Vancouver€¦ · Suburban Markets • There was approx. 70k sf of negative absorption in suburban markets continuing the trend of modest decreases in demand •

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  • New York • London • Hong Kong • Paris • Singapore • Chicago • Shanghai • Dubai • Sydney • Milan • Beijing • Sao Paulo • Madrid • Mumbai • Los Angeles

    Office ReportMetro VancouverSecond Quarter - 2013

    Tel: 604 684 7117 www.dtzvancouver.com

    980 Howe Street

    Vancouver • Victoria • Nanaimo • Kelowna • Calgary • Edmonton • Regina • Winnipeg • Toronto • London-Windsor-Sarnia • Niagra • Kingston • Ottawa • Montreal

    Four th New Tower Under Const ruc t ion

    Having secured BGC Engineering

    Inc. as a lead tenant, Manulife

    Financial has begun construction

    of a 270,000 sf office building at

    the corner of Howe and Nelson

    Streets in downtown Vancouver.

    The recent announcement

    concludes negotiations with BGC

    for approximately 70,000 sf in the

    low rise portion of the building.

    The location of the property within

    walking distance of the CBD and

    the benefits of being in a newly

    constructed, LEED Gold targeted

    facility contributed to BGC’s

    decision to occupy the building.

    Continued on Page 4...

    ---------------------------------------------

  • Vancouver • Victoria • Nanaimo • Kelowna • Calgary • Edmonton • Regina • Winnipeg • Toronto • London-Windsor-Sarnia • Niagra • Kingston • Ottawa • Montreal

    ECoNoMIC oVErVIEw

    •Growth in the federal GDP was tepid to begin Q2 showing a 0.1% advance in April – its weakest performance in 2013 and on track for an annualized quarterly pace of 1.5%

    •The Bank of Canada left the targeted overnight rate at 1% and the Bank rate at 1.25% with rates having been at these levels since September 2012 and where they are excepted to remain until at least mid 2014

    •The national unemployment rate was unchanged at 7.1% with an average of 14,000 jobs per month having been added through the first 6 months of 2013 - half the pace seen in the last 6 months of 2012

    •The Canadian dollar reached a 2 year low vs. the US dollar in response to appreciation in bond yields and increased confidence in the US economy

    • Inflation remained idle with gains of 0.4% in April and 0.7% in May – well below the

    Bank of Canada’s annualized target of 2%

    BrITISH CoLUMBIA

    •The unemployment rate in BC remained flat at 6.3% - below the national average but with no net gains in the last 12 months

    •The CPI in BC fell in April (-0.8%) and May (-0.6%) driven by declines in restaurant food prices (-4.5%), shelter costs (-0.9%), health & personal care costs (-1.8%) and recreation (-1.8%)

    •Housing starts in BC fell 5.8% in May and 4.8% in April with increases in single-detached starts having been more than offset by decreases in multi-family starts. Housing starts in Metro Vancouver tumbled by 18.3%

    •The newly re-elected BC Liberals released a revised budget showing a reduced surplus of $153m for 2013 resulting from lower economic growth projections for the year

    •reductions in retails sales, job growth and housing starts have led the provincial government to revise the projections for annual provincial GDP to 1.4% from 1.6%

    Metro Vancouver Office ReportSecond Quarter 2013

    AVErAGE oCCUPANCy CoSTS AND VACANCy

    Metro Vancouver Sales Activity

    Address Municipality Price Size (Sf) Price/Sf Cap Rate

    887 Great Northern Way Vancouver $66,135,000 164,364 $402.00

    12033 Riverside Way Richmond $7,600,000 34,605 $220.00

    12992 76th Avenue Surrey $7,000,000 42,359 $165.00

    #200 - 6061 No. 3 Road Richmond $4,150,000 9,624 $431.00 5.20%

    8425 120th Street Delta $2,660,000 11,977 $222.00

    32475 Simon Avenue Abbotsford $2,350,000

    8591 and 8593 132nd Street Surrey $1,340,664 6,244 $215.00

    27336 Fraser Highway Langley $1,300,000 8168 $159.00

    DowNTowN CorE - ABSorPTIoN, AVAILABILITy AND VACANCy rATES

    Significant Office Leases

    Address City Area sq ft Tenant

    745 Thurlow Street Vancouver 112,000 SNC Lavalin

    980 Howe Street Vancouver 65,000 BGC Engineering

    1055 West Hastings Vancouver 27,000 Heenan Blaikie

    4710 - 4730 Kingsway Burnaby 25,000 Hemmera Environmental

    1021 West Hastings Vancouver 16,300 Silver Wheaton Resources

    564 Beatty Street Vancouver 10,550 Lindsay LLP

    564 Beatty Street Vancouver 10,500 Ping Identity

    Source: realNet Canada Inc.

    0.0%

    1.0%

    2.0%

    3.0%

    4.0%

    5.0%

    6.0%

    7.0%

    8.0%

    9.0%

    -150

    -100

    -50

    0

    50

    100

    150

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    2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013

    Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

    Th

    ou

    san

    ds

    sq f

    t

    Downtown Core

    Absorption Vacancy Rate Availability Rate

    0.0%

    2.0%

    4.0%

    6.0%

    8.0%

    10.0%

    12.0%

    14.0%

    $0.00$5.00

    $10.00$15.00

    $20.00$25.00$30.00$35.00$40.00$45.00

    GVRD DownTown

    Yaletown Gastown Broadway Suburban A-Class B-Class C-Class

    Average Occupancy Costs and Vacancy Q2 2013

    Asking Rate Additional Rent Vacancy Rate

  • New York • London • Hong Kong • Paris • Singapore • Chicago • Shanghai • Dubai • Sydney • Milan • Beijing • Sao Paulo • Madrid • Mumbai • Los Angeles

    FoCUS oN rESoUrCE CoMPANIES

    with the recent declines in global de-mand for natural resources and the re-sultant devaluations of many resource companies, there has been specula-tion about the potential effects to the downtown office market. Many junior resource companies have diminishing cash reserves and are not able to tap stock markets for further cash injec-tions due to lack of investor interest and depressed stock prices. Further, with the recent increase in the return on govern-ment issued bonds, resource companies are finding it increasingly difficult to raise funds by issuing debt.

    How much exposure does the down-town market have to potential default by resource companies? what effects will multiple defaults have on the office market? of the 20m square feet of to-tal “A” and “B” class inventory, approx-imately 28% - or 560k sf - is currently occupied by resource companies. of that 560k sf, roughly two thirds (or 375k sf) is occupied by junior resource companies (JrCs) as defined by the fact that these companies do not have producing mines and rely almost entirely on capital mar-kets for funding.

    If all JrCs were to vacate their office premises – a highly unlikely scenario - the vacancy rate would increase by 1.3% to 4.9%. Although significant downsiz-ing of JrCs would have ripple effects in the market as their service providers also downsize, we do not anticipate that continued consolidation resulting from exposure to JrCs will have a material ef-fect on the downtown market.

    Currently, of the 1.3m sf of available space in “A” and “B” class buildings, 780k (38%) consists of sublease space of which approximately one third (260k sf) is available from JrCs. while some of the available sublet space is being mar-keted at below market rents, some pro-spective subtenants are wary of the risk associated with paying rent to someone other than the owner of the building. In many of these instances, tenants are ex-ploring head leases which provide more security but are not available at the dis-counted rents offered by subleases.

    rental rates will be insulated from nega-tive effects of major downsizing by JrCs.

    ANNUAL ABSorPTIoN, NEw CoNSTrUCTIoN & VACANCy rATE

    MArkET oBSErVATIoNS & TrENDS

    Downtown and Central Vancouver

    • There was 100k sf of negative absorption in the downtown core – the 3rd consecutive quarter of negative absorption which has returned approx. 250k sf (1.0%) to the market

    • Unlike the previous quarter and as evidenced by the enclosed list of Significant office Leases, there were few large transactions completed in Q2 with only 7 transactions of 10k sf or more

    • The combined vacancy rate for the downtown core and Broadway Corridor was 4.4% - up 0.7% from the previous quarter and 0.9% from a year ago

    • Vacancy climbed in “A” and “B” class buildings but fell in “C” class buildings with the largest increase in “A” class which rose to 3.3% - up 1.5% from Q2 2012. This trend is a reflection of a desire by tenants to reduce expenses by relocating to “B” and “C” buildings

    • rental rates remained relatively unchanged despite the increase in vacancy as landlords remain confident that the balance between demand and supply continues to favour owners

    • Although demand will remain tepid through 2013 resulting in more options

    for prospective tenants, rental rates will remain near current levels

    Suburban Markets

    • There was approx. 70k sf of negative absorption in suburban markets continuing the trend of modest decreases in demand

    • Vacancy rates in the suburbs range from a low of 7.5% in Burnaby to a high of 21.9% in Surrey with an average of 11.9% - up 0.2% from the previous quarter and the 3rd consecutive quarterly increase.

    • There was one significant lease completed that being Hemmera’s commitment to occupy 25,000 sf in the midrise portion of Metrotower III in Burnaby which is scheduled for completion in April 2014

    • rental rates in the suburbs remained relatively unchanged although there remains downside risk as slack demand and pending increases to inventory (eg. Metrotower III, Solo District, Marine Gateway) have a combined effect of increasing vacancy

    • Tenant demand continues to be focused near Skytrain stations with buildings within 500 meters of stations leasing faster and at higher rental rates

    0%

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    10%

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    14%

    16%

    18%

    -800,000

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    -200,000

    0

    200,000

    400,000

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    1,000,000

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 F 2014 F 2015 F

    Vaca

    nt %

    Sq. F

    t.

    Absorption, New Construction & Vacancy Rate

    Absorption New Construction Vacancy

  • Vancouver • Victoria • Nanaimo • Kelowna • Calgary • Edmonton • Regina • Winnipeg • Toronto • London-Windsor-Sarnia • Niagra • Kingston • Ottawa • Montreal

    Metro Vancouver Office ReportSecond Quarter 2013

    All information has been obtained from sources considered to be accurate but is not guaranteed and is subject to conditions at the time of any transaction taking place. Properties are submitted subject to prior sale or lease, withdrawal or changes without notice. DTZ Vancouver real Estate Limited, real Estate Brokerage 2013.

    Tel: 604 684 7117 www.dtzvancouver.com

    DTZ Vancouver’s brokers have an industry-wide reputation for getting deals done. we focus exclusively on commercial property with the goal of providing clients with in-depth knowledge of the strategic business issues unique to the commercial marketplace.

    As one of the top performing commercial real estate teams in Greater Vancouver, our brokers are industry leaders, possessing extensive experience and unparalleled expertise. our clients benefit from a proven track record of innovative strategies and problem solving skills. DTZ brokers develop long term relationships with clients to assist them in maximizing returns and achieving long-term market success.

    Our Office Team:

    Mark Trepp, Senior Vice PresidentHoward MalchyConor FinucaneJason MarriottCorbin MacDonald

    For more information please contact:

    Phil Garratt, office Properties [email protected]: 604 630 3382

    James Fraser, Director of [email protected]: 604 630 3405

    DTZ Vancouver Real Estate Ltd800 – 475 west Georgia StreetVancouver, BC, Canada V6B 4M9Tel: (604) 684 7117 Fax: (604) 684 1017www.dtzvancouver.com

    DTZ Barnicke and UGL Services are now united under a single global brand - DTZ, a UGL Company. The combined business creates one of the world’s largest property services companies, encompassing industry leading advisory, brokerage and management solutions to occupiers, developers, owners and investors worldwide.

    DTZ has been providing full service commercial real estate brokerage services and creating remarkable value in commercial real estate for leading international corporations and institutions in Canada since 1959. our new brand recognizes the reputation, history and specialist capabilities of DTZ and adds the endorsement of UGL’s financial strength. we move forward as a global, world leading business with over 47,000 people worldwide.

    TRANSFORMING THE WORLD OF PROPERTY SERVICES

    Vancouver • Calgary • Toronto • Montreal • New York • Chicago • Los Angeles • Hong Kong • Singapore • Shanghai • Sydney • Beijing • Paris • London

    Continued from Page 1

    FoUrTH NEw TowEr UNDEr CoNSTrUCTIoN

    Access to an impressive list of amenities including common area meeting rooms, lounges, decks, fitness facilities and change rooms also influenced the decision. 980 Howe Street is scheduled for occupancy in Q2 2015. The addition of 980 Howe Street to the pending inventory of office space increases the total amount of space under construction in the downtown core to 1.4m square feet excluding the conversion of the former Sears store. of the 1.4m sf, approximately 60% has been preleased with another 140,000 sf of new leasing pending. watch for DTZ Vancouver’s next quarterly report where we explore how much of the leasing in the new towers represents true growth in the demand for office space in the downtown core.

  • Totalbuildings

    Total area (sq ft)

    TotalVacant (sq ft)

    Sublet Vacant (sq ft)

    Q2 2013 % Vacant

    Q2 2013 Absorption

    (sq ft)

    YTDAbsorption

    (sq ft)

    Q1 2013 % Vacant

    Q2 2012 % Vacant

    Avg. asking lease rate ($/sq ft)

    Avg. Additional Rent ($/sq ft)

    Metro Vancouver 669 51,868,362 3,915,232 606,257 7.5 -69,158 338,280 7.2 7.1 20.00 13.05

    Class A 276 30,855,778 2,361,850 435,911 7.7 -106,994 293,604 7.0 6.6 22.94 13.52

    Class B 238 14,415,582 1,039,123 103,522 7.2 -52,334 -14,179 6.8 7.1 18.52 13.14

    Class C 155 6,597,002 514,259 66,824 7.8 90,170 58,855 9.2 9.1 17.42 12.15

    Downtown Core 221 23,904,043 1,023,495 270,689 4.3 -100,579 -213,584 3.9 3.4 23.55 15.39

    Class A 58 13,262,702 437,842 174,863 3.3 -105,495 -203,120 2.5 1.8 31.16 18.99

    Class B 80 6,733,115 284,286 54,275 4.2 -2,405 -46,157 4.2 3.5 23.92 15.54

    Class C 83 3,908,226 301,367 41,551 7.7 7,421 26,798 7.9 8.4 18.72 13.14

    Broadway Corridor 77 3,848,974 192,099 6,839 4.9 15,250 -27,560 5.3 4..2 21.57 14.86

    Class A 30 2,007,813 80,783 0 4.0 15,343 23,330 4.8 5.2 24.58 15.66

    Class B 27 1,179,118 50,716 6,839 4.2 -2,393 4,304 4.0 4.5 18.00 14.70

    Class C 20 662,043 60,600 0 9.2 2,300 -55,194 9.5 0.8 18.60 13.11

    Surrey 47 3,032,627 662,963 116,844 21.9 -118,500 -172,246 18 15.7 15.73 9.22

    Class A 23 2,170,875 507,074 94,171 23.4 -74,113 -111,720 19.9 16.5 17.08 8.88

    Class B 16 582,127 118,915 0 20.4 -52,676 -41,898 11.4 13.2 14.36 10.04

    Class C 8 279,625 36,974 22,673 13.2 8,289 -18,628 16.2 15.1 14.50 7.92

    Richmond 76 4,590,516 673,573 65,904 14.7 38,383 154,811 15.5 19.2 14.57 10.00

    Class A 41 3,017,702 534,522 39,281 17.7 -12,392 16,750 17.3 20.0 16.55 9.47

    Class B 24 1,075,635 112,051 24,023 10.4 -650 60,659 10.4 16.1 13.50 11.39

    Class C 11 497,179 27,000 2,600 5.4 51,425 77,402 15.8 21.0 10.79 8.80

    North Shore 42 1,988,802 181,002 8,659 9.3 -22,873 -19,509 8.1 8.3 19.38 11.92

    Class A 17 933,337 69,652 8,659 7.5 -12,609 -22,428 6.1 5.1 23.64 12.52

    Class B 19 822,898 92,981 0 11.8 -49 13,134 11.8 13.5 17.60 11.99

    Class C 6 232,567 18,369 0 7.9 -10,215 -10,215 3.5 3.5 15.33 10.31

    Burnaby 115 9,036,819 681,534 128,643 7.5 45,247 114,112 8.0 8.8 17.52 12.22

    Class A 63 6,142,479 432,774 110,258 7.0 8,746 79,191 7.2 8.3 19.39 11.66

    Class B 39 2,344,432 244,902 18,385 10.4 6,217 384 10.7 10.5 15.30 12.61

    Class C 13 549,908 3,858 0 0.7 30,284 34,537 6.2 7.0 0.00 13.49

    Yaletown 37 2,078,419 82,766 6,400 4.0 -10,633 -36,276 3.5 2.2 23.86 14.86

    Class A 6 602,285 21,159 6,400 3.5 1,067 -18,117 3.7 0.5 35.00 14.43

    Class B 13 849,254 20,185 0 2.4 2,164 703 2.6 2.5 28.00 14.51

    Class C 18 626,880 41,422 0 6.6 -13,864 -18,862 4.4 3.6 21.44 15.00

    Metro Vancouver Office ReportSecond Quarter 2013

    www.dtzvancouver.comTel: 604 684 7117