It’s a way for companies to cut costs in notoriously tight downtown Vancouver
Derrick Penner
Sun
Sometimes business trends converge. In this recession, there is a window of opportunity for a trend towards more self-employment to meet another one: companies downsizing and subleasing some of their office space.
Metro Vancouver’s commercial realtors saw the latter trend develop midway through 2008, with companies either bracing for the downturn by giving up some of the office space they’d leased to accommodate growth, or suffering economic storms that forced them to downsize or close up shop.
Shawna Rogowski, director of research at Colliers International in Vancouver, currently counts 244 sublease listings for a total of 1.34 million square feet of space available across Metro Vancouver.
Notorious for its tight office vacancy rate, downtown Vancouver accounts for 171 of those listings for a total of 844,600 square feet of space.
“I have to admit, people can low-ball [on sublease space],” Rogowski said in an interview. “[For direct or head-leasing], not so much, because landlords are still in a great position.”
However, for subleasing, “if it’s a question of nothing or someone in there tomorrow who will pay the rent, at a reduced rate, they’ll take [it].”
That can mean basic office space in downtown Vancouver at base rents of $12-$15 per square foot per year for a sublease, versus $18 to $22 per square foot for a head lease, Rogowski said. Costs in the suburbs, however, could be half that.
Rogowski said prospective sublease tenants do have to endure the limited terms of a sublease, but for companies starting out, the savings can be worth it.
She added that subtenants can economize further if the company leaving it behind is willing to leave it furnished, which is a strong likelihood if companies are giving up space to economize themselves.
“Just to un-furnish space costs money,” Rogowski said, and to build improvements for a new tenant might cost in the range of $40 per square foot.
“So if you’ve got improvements in place, it’s quite a bit of cost savings.”
However, such deals aren’t necessarily available if a retail store is the self-employment choice of prospective entrepreneurs, according to Doug Le Patourel, a vice-president at Colliers in the retail leasing area.
Metro Vancouver‘s retail vacancy sits in the four-per-cent-to-4.5-per-cent range, Le Patourel said, which is “pretty insignificant.”
There are pitfalls potential store owners can avoid, he said, such as determining whether the retail space they are looking at has adequate electricity or utility services for their purposes, and before they sign a lease. Upgrading to a more powerful electrical service after they’ve committed to renting can be an expensive afterthought.
Le Patourel said commercial realtors can help prospective retailers with a lot of research on demographics of neighbourhoods to make sure a tenant is finding his key target markets, on what kind of traffic they can expect, what kind of sales they should get when renting at specific rates and what improvements should cost.
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