Commercial realtor forecasts further drop to 2.1 per cent in 2008

Derrick Penner
Sun

Already at historic lows, Vancouver‘s downtown office vacancy should shrink further to 2.1 per cent in 2008, the lowest central-core vacancy rate in the country, according to commercial realtor Cushman Cushman & Wakefield LePage’s 2008 forecast.

Rents are also expected to rise 10 to 15 per cent for so-called commodity space in Class A buildings, which, combined with low vacancy should continue to fuel the trend of businesses relocating outside of downtown.

“The suburbs is really the outlet for a lot of these tenants,” Jeffrey Rank, Cushman & Wakefield’s managing director in Vancouver said in an interview.

“I think with employee bases moving eastward and occupancy costs doing what they’re doing downtown, tenants will see it becoming more and more of an option to be considered in ’08.”

Catalyst Paper Corp.’s move from offices on Howe Street to Richmond, and Bell Canada‘s move of some functions out of the core were a couple of the prominent examples.

Rank added that those kinds of moves will ensure that downtown tenants will continue to find downtown space.

“Those [moves] are happening inside [quarterly reporting periods] so you don’t necessarily see the ebbs and flows in the statistics,” Rank said. “That’s going to continue for 2008.”

The large space that law firm Fasken Martineau vacated in the MacMillan building at 1075 West Georgia Street still needs to be absorbed, he added.

The pressure on downtown vacancy shouldn’t push up the top end of rents. Rank said the top-rated AAA Class view space, at about $45 per square foot, is already at historic highs. “You’re starting to see push back from users who can’t justify those kinds of rents in this market.”

Rents are, however, expected to rise for the lower floors of the same buildings to close up the differential between rents at the bottom and the top of towers.

The Cushman & Wakefield forecast calls for vacancy in Vancouver‘s suburban markets to remain stable at 10.5 per cent over 2008. However, with downtown’s vacancy shrinking, the combined Metro Vancouver vacancy is expected to drop to 5.1 per cent by the end of 2008.

Nationally, the Cushman & Wakefield forecast calls for combined office vacancies in all Canada‘s major cities to fall to 5.6 per cent from the current rate of 6.2 per cent.

© The Vancouver Sun 2007

The architect was Ross Lort, who designed Casa Mia

John Mackie
Sun

The ‘hobbit house’ with the unique roof at 3979 West Broadway has been sold, the lot subdivided and the old house, one of the best examples of its kind in town, is to be restored. Photograph by : Ian Lindsay, Vancouver Sun

In the 1920s and ’30s, there was a brief fervour for “storybook” houses, structures that mixed the traditional look of an old English cottage with a playful style inspired by the houses in children’s books and Hollywood movies.

One of the best storybook houses in Vancouver is at 3979 West Broadway, two blocks west of Alma. The house is quite small, but it has an amazing shingle roof that curves, dips and rises over the building like a living organism. It’s the kind of roof Hansel and Gretel might have, or a hobbit house out of a J. R. R. Tolkien book.

Recently a construction fence went up and the windows were boarded up with plywood — the familiar look of a building about to be demolished. But this time, one of Vancouver‘s great character houses is going to be saved, and restored.

Plans are being prepared to subdivide the property the house sits on, with a new house to be built on the west end of the lot and the storybook house restored on the east side.

Unfortunately, the house has been sitting empty for some time and has been vandalized.

“You leave a building vacant for a day practically and it gets stripped,” laments Don Luxton, who is working as the heritage consultant on the project. “Somebody got in and got the plumbing out of there and wiring and just really made a mess out of it.”

The thieves also made off with the house’s distinctive cross-leaded windows. But the owner went looking for them, and found them in a salvage store nearby.

“They were stolen but my client found them,” said Luxton. “Somebody had taken them out, put them in a shopping cart and rolled them down to Fourth Avenue. My client went looking for them and got them back.”

The house was constructed in 1942 by Brenton Lea, a builder. The architect was Ross Lort, who also designed the Casa Mia mansion on Southwest Marine Drive.

Lea’s modus operandi apparently was to build houses, live there a while, then sell them.

“He had done some contemporary architecture,” said Luxton.

“He did a sort of Frank Lloyd Wright style house at 25th and Marguerite back in 1930 [which was on a Heritage Vancouver house tour a couple of years ago].

“This was his wife’s dream house. The one she wanted was basically Anne Hathaway’s cottage,” [William Shakespeare’s wife, who had a famous cottage in England].

Storybook architecture was quite popular on the West Coast.

“In California you had backlots in the ’20s and ’30s where you had set designers building fanciful villages and things,” relates heritage expert John Atkin.

“Many of these guys were architects, and the architecture kind of caught on. They started building homes for clients, sometimes stars and studio execs [like Charlie Chaplin] in this very fanciful style which became known as storybook style.”

Lea built three storybook houses around 1942; one of them still stands at 587 West King Edward. But financial constraints forced him to sell off his wife’s dream home soon after he built it.

“The sad thing is that the timing was bad,” said Luxton.

“He built it in 1942, and by the time they finished the house they couldn’t afford to keep it very long. They were only apparently there for about a year.”

Though the house is small (two bedrooms), it sold for $1,050,000 in June 2006. A year later, it was sold again, for $1,650,000.

The house is on Vancouver‘s heritage register, and the heritage department negotiated with the successive owners to find a way to keep it. Because it’s a heritage house, the city was able to offer the subdivision of the lot as an incentive, which the owner accepted.

Restoring the house won’t be cheap, because the roof has to be replaced. Luxton said that will cost upwards of $100,000.

“It’s a very specific kind of shingling, many many many layers,” he said.

“Demolishing the existing roof is part of the expense: there’s so many layers nailed together that it’s really hard to deconstruct the roof and then put a new one on. It’s very expensive.”

© The Vancouver Sun 2007

Pre-Olympics workload spurs city hall demands for more staff

Frances Bula
Sun

VANCOUVER – Get ready for an ugly budget year in Vancouver.

City managers are asking for a host of new planners, engineers, emergency personnel and more, to try to cover a work overload and prepare for the Olympics, at a cost of $2.5 million.

Police want 96 additional officers and 22 civilians, just for regular operations. The projected cost of that in 2008 is $3.7 million.

Wage increases for existing city staff, police and fire are estimated to add up to $15 million.

Money that might have gone to the budget from lease earnings from the city-owned Pacific Centre mall is going instead to an Olympic legacy fund.

And homeowners were already facing a stiff tax hike, as the city prepares to transfer more of the tax load from business to residences.

All of that means city council is looking at a six-per-cent tax increase overall, but one that could go up to eight per cent for homeowners.

“It’s going to be very tough,” said Coun. Peter Ladner, the head of the city’s finance committee, as council prepares to wrestle for the next four months over its almost $1-billion budget.

“Next week, we’re going to give staff a tax ceiling and they’re going to have to work within that ceiling.”

Finance director Estelle Lo said the biggest driver of increased costs is the wage settlements for both the city hall union members, who got a new contract after a three-month strike, and the police and fire unions, which are still negotiating.

The next biggest is the police staffing increase, if approved. That’s not a sure thing with a council that last year gave police only half the number of new officers that the department had requested.

And then half a dozen other departments and commissions are asking for extra money, some of it to deal with either the Olympics or the heavy load of pre-Olympics development hitting the city.

Emergency planning, for example, is asking for an extra 21/2 employees, saying “these positions are essential for the city’s role in preparing for the 2010 Olympics and Paralympics.”

The planning department, which has been drowning in a sea of applications as developers race to get projects up just before or just after the Olympics, along with having to commit staff to projects such as the Canada Line and the Olympic Athletes’ Village, is asking for six new staff, the conversion of four temporary positions to permanent and two other temporary positions.

“They have been burning themselves out trying to keep up,” said Lo.

Ladner agreed. “I know in planning applications we are way behind.”

He said the city is going to save some money with an internal review it’s doing right now to try to operate more efficiently.

Opposition Coun. Raymond Louie said he’ll be calling on Mayor Sam Sullivan to keep his promise to hold taxes down.

“This is another significant rise, with more to come possibly because of the transfer of business taxes to residential.”

Louie said residential taxpayers have already seen their taxes go up 15 per cent over the past two years, between regular increases and the ongoing shift of taxes from businesses to residences.

Business groups have been lobbying the city intensively for several years, arguing their tax rate is five times as high as the residential rate, a level that’s driving small businesses under and hurting the business climate in Vancouver.

City council will go through a five-month budget process before arriving at a final tax increase, with several public meetings planned in February and March.

Council is expected to make a final decision April 29.

© The Vancouver Sun 2007

Tenants must consider Class B and C buildings

Province

TORONTO — Vancouver‘s central office market will record the lowest vacancy rate in the country next year at just 2.1 per cent, a new report says.

Much of the tightening in the city is due to no new supply coming on line, according to a report by Cushman and Wakefield LePage. Only 80,000 square feet of new construction is expected to be finished next year, the real-estate company said yesterday.

“The Vancouver 2010 Olympic Winter Games continue to have a strong impact with infrastructure-related companies — architects, engineers and construction companies — driving demand for office space,” it said.

“The natural resource and life sciences sectors are also showing strong growth, putting further pressure on the market.” The report predicts tenants will be forced to consider moving into less desirable Class B and Class C buildings, or continue leaving the core for suburban markets.

There also is not enough office space to go around in downtown Toronto, Cushman and Wakefield LePage said.

Vacancies in Toronto‘s central office market will reach a “tight” 3.8 per cent in 2008, way down from the 6.2-per-cent vacancy rate at the end of 2006.

“We are now at the point where demand will have to slow in the central market, simply due to the lack of available space,” it said. “Those expanding or entering the market are now considering space in midtown or further into the 905 regions to meet their space needs.”

The Toronto office space crunch is clearly influencing the national vacancy rate, which is expected to drop to 5.6 per cent in urban centres in the fourth quarter of 2008, down from the current 6.2 per cent.

Toronto is home to 40 per cent of all of the country’s office space.

Cushman & Wakefield surveyed five cities across the country and found vacancy rates dropping in every city but Calgary.

© The Vancouver Province 2007

Eastern markets to heat up as the West undergoes a ‘massive cool down’

Derek Abma
Sun

OTTAWA — In recent years, Western Canada has made the national housing market look a lot better than it really is, but a report released Tuesday says there will be less difference over the next two years in rates of price appreciation throughout different parts of the country.

TD Economics predicts the average price of a resale home sold over the Multiple Listing Service will be about $305,000 this year, making for the third-straight year that the rate of price growth has been more than 10 per cent.

The report says this “remarkable performance” has been skewed by exceptional gains in the West, particularly in Calgary and Edmonton, where prices have gained more than 30 per cent in each of 2005 and 2006.

“National housing market statistics had lost much significance over the last three years due to a marked divergence in performance between the West and the rest,” TD said in a statement.

But after bottoming out in late 2006, residential resale markets in Ontario and Quebec — and Atlantic Canada to a lesser degree — are expected to accelerate, picking up the slack as Western markets move into a “massive cool down.”

“The dispersion [in price growth] will be much narrower than it was,” said TD economist Pascal Gauthier.

Gauthier said resale-price growth should slow down to between five and six per cent, nationally, over the next two years. In 2008, Saskatchewan is one of the few areas expected to stand out, with growth in the 15- to 20-per-cent range, he added.

The report says Saskatchewan is “currently on fire” but will follow a similar pattern as Alberta a year from now. It says Saskatchewan, because of its smaller market size, is not skewing national numbers the way Alberta‘s major cities have.

TD says listings are growing in Calgary and Edmonton, leading to a more balanced market, while the opposite is happening in Ontario and Quebec, where the market is tightening.

Gauthier said a slowdown in economic growth and an erosion of housing affordability are among the factors that have cooled the housing market in Alberta.

He said Canada‘s strong employment picture is “really a coast-to-coast story,” which is helping drive markets in Ontario and Quebec. As well, he said demographic patterns such as an influx of new entries to the housing market and baby boomers retiring is driving demand for condominiums in large cities like Toronto and Montreal.

© The Vancouver Sun 2007