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Tenants Trade-up to The Exchange Office Tower
VANCOUVER, BRITISH COLUMBIA–(Marketwired – May 31, 2017) -
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The next office tower coming to completion in downtown Vancouver is more than half leased with the confirmation of several new tenants, highlighting the city’s commercial market has made a dramatic comeback to become among North America’s strongest.
Today, the development team of The Exchange announced the signing of three tenants, including a high-profile British Columbia-based hotel chain. More than 205,000 square feet have now been leased in advance of the building’s completion.
“When Credit Suisse Asset Management embarked on this ambitious project, we were confident that The Exchange would be able to fill much-needed demand for quality office space,” said Herbert Meier, project manager at Credit Suisse. “We are pleased that The Exchange is now also delivering additional hotel space to Vancouver.”
Executive Hotels & Resorts will operate a 202-room, luxury boutique hotel on 10 floors of the heritage portion of the Old Stock Exchange building (circa 1929) – which is being restored and converted to LEED Platinum as part of the newly-constructed Exchange tower. The conversion could make this Canada’s greenest hotel. It will also have its own entrance and elevators, creating separation between it and the 31-storey office tower.
“The Exchange is arguably the best example of collaborative modern and historic architecture in Canada, and it boasts a world-class location,” said Salim Sayani, president of Executive Group, which recently opened hotels in New York and Toronto. “The Exchange’s design team has done an amazing job integrating state-of-the-art technology with space-planning strategies.”
Other additions to The Exchange include a Vancouver accounting firm that will be headquartered in the building, taking up approximately 28,000 square feet, as well as a local fintech company that is expanding from its existing premises to occupy approximately 22,500 square feet.
According to commercial real estate brokers, Triple-A office space is seeing strong uptake. JLL says vacancy rates last spring were 12.5 per cent. This year, vacancies have dropped sharply to 7.1 per cent, making Vancouver one of the strongest office markets in North America.
“Tech companies represent about 40 per cent of tenant demand in Vancouver, but there is also a resurgence in demand from traditional office users who see this building as an opportunity to refresh their premises and their brands,” said Mark Chambers, JLL Vancouver’s executive vice president of office leasing. “With the upcoming completion of The Exchange, the newly-signed tenants have a chance to be in the heart of Vancouver’s financial district, while also close to other smart, innovative technology companies.”
In 2015, The Exchange signed anchor tenant, National Bank, who will occupy approximately 45,000 square feet. Swiss chocolatier Lindt will operate a retail store on the ground floor.
“Our confidence in the market has come to fruition as we continue to sign tenants for The Exchange,” said Franz Gehriger, president and CEO of Swissreal Investments, the Vancouver-based company developing the tower with Credit Suisse Asset Management.
The Exchange is a CAD $240 million LEED Platinum office tower that includes Canada’s first LEED Platinum heritage conversion. Designed by renowned Swiss architect Harry Gugger in partnership with Iredale Group Architecture of Vancouver, The Exchange is slated for completion at the end of 2017 with 165,000 square feet available for lease.
Renu Bakshi, telephone 604 787 1873, email@example.com
Source: Credit Suisse, otherwise specified.
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Credit Suisse AG
Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to here as ‘Credit Suisse’). As an integrated bank, Credit Suisse is able to offer clients its expertise in the areas of private banking, investment banking and asset management from a single source. Credit Suisse provides specialist advisory services, comprehensive solutions and innovative products to companies, institutional clients and high net worth private clients worldwide, and also to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 46,640 people. The registered shares (CSGN) of Credit Suisse’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.
Credit Suisse Asset Management (Switzerland) Ltd.
Credit Suisse Asset Management is a multi-specialist manager with more than CHF 322 bn of assets under management operating within the International Wealth Management division of Credit Suisse. Backed by the institutional quality governance, stability and opportunity of Credit Suisse’s worldwide franchise, we deliver distinct product expertise through active and passive solutions in both traditional and alternative investments.
Swissreal Investments Ltd.
Swissreal Investments purchased the site in 2003, and in 2008, the Vancouver-based company conceived the idea of building The Exchange. With more than 30 years of experience, Swissreal is a leader in real estate consulting and development. It is a minority investor in The Exchange. For more information about Swissreal, go to www.swissreal.com.
This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.
The key risks of real estate investments include limited liquidity in the real estate market, changing mortgage interest rates, subjective valuation of real estate, inherent risks with respect to the construction of buildings and environmental risks (e.g., land contamination).
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Modern office space is becoming harder to find in Vancouver, which may spur some developers to try to accelerate projects in the planning and permitting stages.
“Demand is getting stronger and supply is constrained,” said Michael Wright, vice-president of Newmark Knight Frank Devencore, which just released a new study on Vancouver’s office market. “So in the short term, vacancies will go down and rents will go up and inducements will stay the same or begin to get compressed.
“Our long-term forecast is that, because of the healthy market, the second cycle of more recent development is going to go ahead in the early 2020s. By 2023 and 2024, we should have a number of new buildings delivered to the market. It will shift back to a more balanced tenant-landlord situation.”
Recent activity at The Exchange
The largest tenant transactions over the first five months of the year were: WeWork’s commitment to almost 80,000 square feet in the Anbang Insurance Group-owned Bentall Centre’s
Bentall III; and a deal with Executive Group Development to convert approximately 110,000 square feet to hotel use in Credit Suisse’s spec-built $240-million The Exchange building at 475 Howe St.
The hotel will occupy the second through 11th floors of Vancouver’s first LEED Platinum tower, which has 31 storeys. Until recently, National Bank of Canada’s commitment to take 45,000 square feet (including street-level retail) was the only one for the office space.
It was announced on Wednesday, however, that: a Vancouver accounting firm will be headquartered in the building, with approximately 28,000 square feet; and a local financial technology company that’s expanding from its existing premises will occupy approximately 22,500 square feet. The Exchange is scheduled for completion by the end of the year and still has 165,000 square feet of office space available for lease.
“It’s a good building and it’s sort of the last game in town right now that’s got some good contiguous space in it, if you’re looking for a larger block,” said Wright.
Other new Vancouver office projects
Of the two other new office projects, Serracan Properties’ 10-storey, 71,000-square-foot Five Ten Seymour is approximately 90 per cent pre-leased, and Century Group’s four-storey, 25,000-square-foot Ormidale Block at 151 West Hastings St. is fully leased.
Tenants in the technology, finance, professional services and hospitality sectors are driving the recent leasing activity. The overall vacancy rate stands at 7.1 per cent, down from 8.7 per cent a year ago.
The decline in supply has put pressure on average gross rents, which currently stand at $41.76 per square foot, compared to $40.73 a year ago.
“A lot of the improved space has been leased, so large blocks of space are more challenging to come by and the space that is available often is comprised of older space in need of improvements or in shell condition,” said Wright. “What that means is that there is a larger capital investment required for tenants moving into that type of space, which can make it a little trickier given how careful everybody is in this business environment.
“Landlords will offer inducements on those types of spaces to subsidize the capital expenditure required. It differs from landlord to landlord, but some fairly substantial inducements are being provided.
“It’s just a function of ‘How far does that go against the full cost of construction, IT and furniture?’ The inducements offered by the landlords don’t get you there typically.”
Developments that could be accelerated
Westbank has applied to rezone a Budget Rent A Car site at 400 West Georgia St. Wright said the company is looking to move up completion of its proposed 24-storey, 350,000-square-foot office and 5,775-square-foot retail building to late 2019 or early 2020.
Construction has begun on One Burrard Place, a mixed-use development with up to 150,000 square feet of space in a 13-storey class-A office building and 394 residential condominium suites in a 60-storey tower that’s scheduled for completion in 2019 by Reliance Properties and Jim Pattison Developments Ltd.
Future office developments
The Newmark Knight Frank Devencore report says other future office developments, most slated for a 2021 opening, include:
Burnaby and Richmond
Burnaby and Richmond are the two biggest office markets in Vancouver’s suburbs, and vacancy rates have dropped in both during the past nine months.
“When new development came on in downtown Vancouver, there was a fair chunk of new development in Burnaby as well,” said Wright. “Demand was going south and supply was going north, so that market softened.
“We’ve seen that correct and a lot of the new developments are pretty close to fully leased there. Richmond has seen positive activity over the past 24 months. In general, I’d say the markets are healthy and getting tighter.”
Link to article: https://renx.ca/vancouver-office-market-waiting-new-buildings/