Commercial real estate: New tower on West Hastings to be ready by 2021
Experts say the downtown office vacancy rate is now three to four per cent, but approximately four million square feet of new office space is expected in the downtown core between 2020 and 2023.
No tenants, no problem for the developers of the new office tower going up at 601 West Hastings Street in downtown Vancouver.
“We don’t have any pre-leases yet,” said Jarvis Rouillard, the vice-president of acquisitions and leasing with PCI Developments, which is developing a 25-storey, 210,000-sq.-ft. tower at the northwest corner of Seymour and Hastings with property co-owner TD Greystone.
The tower is expected to be delivered to market in the third quarter of 2021. Construction continues at the site below street grade.
“We’re starting to get interest,” he told Postmedia recently. “We’ve held off on the marketing campaign until now because we just want to get all of our ducks in a row in terms of the design.”
PCI’s confidence stems from the unrelenting demand for office space in downtown Vancouver, which has far outpaced supply, especially amid current lack of new openings.
Experts say the downtown office vacancy rate is now three to four per cent, but approximately four million square feet of new office space is expected in the downtown core between 2020 and 2023. It remains to be seen how much that new stock will ease the vacancy crunch.
“We’ve got probably the most office density to be developed over the next five, six years out of anybody in Metro Vancouver,” Rouillard said. “We’ve got about 3 million square feet of density with commercial across Metro Vancouver.”
They like what they’re seeing in the market.
“There has still not been enough new office to keep pace with both population and economic growth, so there are a lot of new projects that are in the pipeline,” he said. “Some are under construction and some may not go depending on where construction costs continue to go over the foreseeable future. It’s a pretty easy decision (not to pre-lease with) the location that we have.”
That location was a city-owned public plaza one block over from Waterfront Station. A glass dome for public use once stood there.
The small lot means the tower will have smaller-than-usual floor-plates at around 9,100 sq. ft. The B+H designed tower will have space for about 1,700 workers.
The developers are targeting LEED-gold certification and the building will share a parking facility and fitness facility with the neighbouring office building at 333 Seymour, which PCI and TD Greystone also co-own.
The “unprecedented” level of demand in the market gives them confidence the building will fill up easily, said Mark Chambers, an executive vice-president with JLL, the leasing agency for the project. “It’s a smaller building … I would call it more of a bite-sized building for the market with some of the other towers that are scheduled to come on in the next several years.”
While the vacancy rate is three to four per cent, the actual vacancy rate of space that is available — meaning empty and not spoken for — is at two per cent or less, he said.
601 West Hastings would be suitable for smaller firms who want an entire floor or more, including the obvious assortment of tech firms and professional service firms such as lawyers, accountants and financial planners, Chambers said.
He said tech and co-working companies remain the dominate players in the market.
“If you combine technology and co-working space, you’re getting pretty close to 70 per cent of the demand you’ve seen in the last little bit,” Chambers said.
Demand should remain strong unless there is some kind of major economic event, he said.
The office leasing market is “desperate need of relief”, he added.
Co-working has been spreading quickly across the Vancouver office leasing market and this building could prove to be no different.
PCI has done several deals with co-working giants Spaces and WeWork, Rouillard said.
PCI has signed a large deal with Spaces at 565 Great Northern Way and signed an 80,000 sq. ft. lease with WeWork at 333 Seymour, he said. WeWork also leased a tract of office space at PCI’s Marine Gateway building in south Vancouver.
“We’ve definitely shown that we’re open to leasing to these types of users when it makes sense and 601 West Hastings is no exception,” he said. “If the deal makes sense as we come out of the ground … and a user comes to us with a deal that we feel will benefit the complex, then we’ll certainly look at it.”