Vancouver Office Market Outlook€¦ · 11/04/2006 · Updated 11 Apr 2006 1 Vancouver Office Market Outlook Vancouver Real Estate Forum April 19th, 2006 Sandy McNair InSite Real

InSite Real Estate Information Systems Inc.Updated 11 Apr 2006

1

Vancouver Office Market Outlook

Vancouver Real Estate ForumApril 19th, 2006

Sandy McNairInSite Real Estate Information Systems Inc.

©2006 InSite Real Estate Information Systems Inc.


2

Panelists

• Tony Astles, SVP, BC, Bentall

• Bart Corbett, VP Cushman & Wakefield LePage

• Don Harrison, SVP, Western Canada, GWL

• Moderator, Sandy McNair, President, Altus InSite


3

Office Valuation ParametersDOWNTOWN CLASS A OFFICE SINCE Q1 2000

100125150175200225250275300325350375400

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

$ PE

R S

QU

AR

E FO

OT

VANCOUVER EDMONTON CALGARY TORONTO OTTAWA MONTREAL

TVCOME


4

Why Not Build When “New” Costs the Same as “Old”

• Leasing Risk

• Interest Rate Risk

• Permit Risk

• On Time Risk

• On Budget Risk


5

COMPLETIONS - 1950-2010

0.0

0.5

1.0

1.5

2.0

2.5

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

AR

EA

(000

,000

s S

Q. F

T.)

Vancouver New Office Supply

Occupancy Up, Rents Up = Stalled Growth?


6

Vancouver New Office SupplyCOMPLETIONS - 1950-2010

0

5

10

15

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

PE

RC

EN

TAG

E O

F IN

VE

NTO

RY

New Supply has averaged 3.5% of existing inventory over the past 60 years


7

Edmonton New Office SupplyCOMPLETIONS - 1950-2010

0.0

0.5

1.0

1.5

2.0

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

AR

EA

(000

,000

s S

Q. F

T.)

Edmonton supply and demand in check


8

Edmonton New Office SupplyCOMPLETIONS - 1950-2010

0.0

5.0

10.0

15.0

20.0

25.0

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

PE

RC

EN

TAG

E O

F IN

VE

NTO

RY



9

Calgary New Office SupplyCOMPLETIONS - 1950-2010

0

1

2

3

4

5

6

7

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

AR

EA

(000

,000

s S

Q. F

T.)

5.0 million sf is Under Construction in Calgary Downtown1.2 million sf is Under Construction in Calgary Beltline and Suburbs


10

Calgary New Office SupplyCOMPLETIONS - 1950-2010

0

5

10

15

20

25

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

PE

RC

EN

TAG

E O

F IN

VE

NTO

RY



11

Toronto New Office SupplyCOMPLETIONS - 1950-2010

0

2

4

6

8

10

12

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

AR

EA

(000

,000

s S

Q. F

T.)

New Supply Has Stalled Across the GTA – Soft Landing?


12

Toronto New Office SupplyCOMPLETIONS - 1950-2010

0

2

4

6

8

10

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

PE

RC

EN

TAG

E O

F IN

VE

NTO

RY



13

Ottawa New Office SupplyCOMPLETIONS - 1950-2010

0

1

2

3

4

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

AR

EA

(000

,000

s S

Q. F

T.)

1.2 million sf being added in 2006-2007


14

Ottawa New Office SupplyCOMPLETIONS - 1950-2010

0

5

10

15

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

PE

RC

EN

TAG

E O

F IN

VE

NTO

RY



15

Montreal New Office SupplyCOMPLETIONS - 1950-2010

0

1

2

3

4

5

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

AR

EA

(000

,000

s S

Q. F

T.)

Soft Demand = New Supply Quiet


16

Montreal New Office SupplyCOMPLETIONS - 1950-2010

0

5

10

15

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

PE

RC

EN

TAG

E O

F IN

VE

NTO

RY



17

National New Office SupplyINVENTORY GROWTH - 1950-2010

0

1

2

3

4

5


PE

RC

EN

TAG

E O

F IN

VE

NTO

RY



18

Available Rate HistoryQ1 2000 - Q1 2006 COMPARISON

ALL NODES ALL CLASSES

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

TOTA

L A

VAIL

ABLE

RA

VANCOUVER )NATIONAL AVERAGE (Less Vancouver


19

Available Rate History - WestQ1 2000 - Q4 2005 COMPARISON


0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

TOTA

L AV

AILA

BLE

RA

VANCOUVER CALGARY EDMONTON


20

Available Rate History - EastQ1 2000 - Q1 2006 COMPARISON


0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

TOTA

L AV

AILA

BLE

RA

TORONTO OTTAWA MONTREAL


21

Available Rate History - WestQ1 2000 - Q1 2006 COMPARISON

DOWNTOWN CORE CLASS A

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

TOTA

L AV

AIL

ABLE

RA

VANCOUVER CALGARY EDMONTON


22

Available Rate History - EastQ1 2000 - Q1 2006 COMPARISON

DOWNTOWN CORE CLASS A

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

TOTA

L AV

AIL

ABLE

RA

TORONTO OTTAWA MONTREAL


23

6 Year Growth in Number of Office WorkersQ1 2000 TO Q1 2006

Vancouver growth as a percentage of population is twice that of Toronto

-15

-10

-5

0

5

10

15

20

25

30

35


Num

ber o

f Wor

kers

(000

s)

Downtown Midtown Suburban

12,255 25,915 20,938 2,528 11,4393,519


24

Change in Number of Office WorkersFIFTEEN MONTHS - Q4 2004 TO Q1 2006

0

5

10

15

20


Num

ber o

f Wor

kers

(000

s)

8,241 11,488 19,327 1,835 1,5142,398


25

6 Year Growth in Number of Office WorkersQ1 2000 TO Q1 2006

GREATER VANCOUVER - ALL CLASSES

-2

-1

0

1

2

3

4

Downtown DowntownFringe

BroadwayCorridor

Burnaby Richmond Surrey

Num

ber o

f Wor

kers

(000

s)


26

Available Rate History – Up/Down CyclesQ1 2000 - Q1 2006 COMPARISON

VANCOUVER MARKET

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

TOTA

L A

VAIL

AB

LE R

ATE

DOWNTOWN CORE A BURNABY ARICHMOND A SURREY A


27

Vancouver Office SnapshotEXISTING INVENTORY PLUS COMPLETIONS

VANCOUVER MARKET

32

34

36

38

40

42

44

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

SQU

AR

E FE

ET (0

00,0

00s)

Leased Sublet Available Direct Available

7.8%12.3%15.7%

7.8% Available across all of Vancouver


28


VANCOUVER DOWNTOWN CORE A

8

9

10

11

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

SQU

AR

E FE

ET (0

00,0

00s)


5.6%9.3%13.8%

5.6% Available in Central Core Class A


29

Vancouver Tenant Options - Pricing Power Q1 2006


0

10

20

30

40

50

60

70

80

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

NU

MB

ER O

F SP

AC

ES

0

2

4

6

8

10

12

14

16

18

PER

CEN

T

Number of 4-8000 sf Available Spaces Total Available Rate

29 Spaces in 38 buildings - Few Current Options for Tenants


30


BURNABY A

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

4.6

4.8

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

SQU

AR

E FE

ET (0

00,0

00s)


4.2%8.1%12.1%

4.2% Available in Burnaby Class A


31

Vancouver Tenant Options - Pricing Power Q1 2006

BURNABY A

0

2

4

6

8

10

12

14

16

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

NU

MB

ER O

F SP

AC

ES

0

2

4

6

8

10

12

14

16

PER

CEN

T

Number of 4-8000 sf Available Spaces Total Available Rate

9 Spaces in 44 buildings - Few Current Options for Tenants


32

Available Rate History - Cadillac FairviewQ1 2000 - Q1 2006 VANCOUVER DOWNTOWN CORE CLASS A


33

Available Rate History - BentallQ1 2000 - Q1 2006 VANCOUVER DOWNTOWN CORE CLASS A


34

Available Rate History - GWL Q1 2000 - Q1 2006 VANCOUVER DOWNTOWN CORE CLASS A


35

Vancouver MarketUnder ConstructionAs at 3 Apr 06

Q2 07 Q3 0789.7%

Pre-leased55.9%

Pre-leased


36

COMPLETIONS - 1950-2010

0.0

0.5

1.0

1.5

2.0

2.5

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

AR

EA

(000

,000

s S

Q. F

T.)

Vancouver New Office Supply

Occupancy Up, Rents Up = Stalled Growth?


37

Downtown New Supply Questions

• Zoning error results in lack of downtown development sites

• Push towards suburbs

• Rising occupancy and rental rates

• Still relatively few tenant options, especially for large users


38

GREATER VANCOUVER MARKET

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006

Mill

ions

Change in Occupied Area

Annual Change in Occupied Area varies widely, but averages 505,555 sf

3.9% of 42,712,897inventory

1.2% of inventory


39

VANCOUVER DOWNTOWN

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006

Mill

ions




0.9%of inventory


40


-600

-400

-200

0

200

400

600

800

Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006

Thou

sand

sChange in Occupied Area

Annual Change in Occupied Area varies, but averages 162,669 sf


1.6% of inventory


41

BURNABY A

-150

-100

-50

0

50

100

150

200

250

300

Q1 2002 Q1 2003 Q4 2004 Q1 2005 Q1 2006

Thou

sand




2.4% of inventory


42

RICHMOND A

-200

-150

-100

-50

0

50

100

150

200

250

Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006

Thou

sand




0.5% of inventory


43

SURREY A

-100

0

100

200

300

400

500

Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006

Thou

sand

s




11.4% of inventory


44

Occupied Area – Normal Absorption ScenarioEXISTING INVENTORY PLUS EXISTING UNDER CONSTRUCTION

VANCOUVER DOWNTOWN

18.0

20.0

22.0

24.0

26.0

28.0

30.0

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

SQU

AR

E FE

ET (0

00,0

00s)

Occupied Vacant & LeasedSublet Vacant Direct Available Vacant

Inventory/New SupplyFuture Occupied Area

Falls to 4.1% Vacant in Q4 2013

Normal - 125,000 sf/yr Change in Occupied Area

7.6% 6.9% 5.5% 5.0%4.1%

Vacant6.4% 6.0% 4.6%7.3%


45


VANCOUVER DOWNTOWN

18.0

20.0

22.0

24.0

26.0

28.0

30.0

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

SQU

AR

E FE

ET (0

00,0

00s)


Inventory/New SupplyFuture Occupied Area

Falls to 1.6% Vacant in Q4 2013


7.3% 6.0% 3.8% 3.1%

1.6% Vacant

5.3% 4.5% 2.4%6.7%


46

Vancouver New Office Supply – Who’s Next?DOWNTOWN & SUBURBAN PRE-LEASING MODE

Address Developer Office Area 848 West Hastings St. Jameson Development Corp. 75,000 525 West Broadway PCI Developments 100,000 100 East Esplanade Pinnacle 51,800 2925 Virtual Way Bentall Real Estate Services 115,000 4200 North Fraser Way Canada Lands 43,000 4200 Canada Way Discovery Parks Inc. 155,248 4730 Kingsway Ivanhoe Cambridge 385,000 4300 North Fraser Way Canada Lands 35,000 3294 Production Way Bentall Real Estate Services Corp. 100,000 Willingdon Business Park Phase VIII Hospital of Ontario Pension Plan (HOOPP) 90,000 Willingdon Business Park Phase IX Hospital of Ontario Pension Plan (HOOPP) 90,000 4555 Kingsway Bosa Developments 62,772 8980 Nelson Way Discovery Parks Inc. 57,861 NE corner Appia Group 108,000 4488 Halifax Street CDCL Real Estate 32,000 13900 Wireless Way PK Projects 75,000

New Supply 1,575,681 sf


47

GREATER CALGARY MARKET

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006

Mill

ions



4.7% of46,657,173inventory

1.7% of inventory


48

DOWNTOWN CALGARY

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006

Mill

ions




1.3%of inventory


49

CALGARY DOWNTOWN CENTRAL CORE A

-400

-200

0

200

400

600

800

Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006

Thou

sand




1.3% of inventory


50

Calgary Downtown Central CoreUnder Construction

Q1 07 Q1 07 Q1 10Q2 07 Q4 07Q1 07 Q2 06 Q2 08100%

Pre-leased100%

Pre-leased100%

Pre-leased100%

Pre-leased0.5%

Pre-leased100%

Pre-leased100%

Pre-leased100%

Pre-leased


51

CALGARY DOWNTOWN

25.0

27.0

29.0

31.0

33.0

35.0

37.0

39.0

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

SQU

AR

E FE

ET (0

00,0

00s)


Inventory/New Supply Future Occupied AreaAdditional New Supply

Climbs to a peak of 8.8% Vacant in Q4 2011


2.0%0.7%

2.0%

8.8%6.1%

Vacant

3.8%3.4%

7.4%Assume 1.85 million sf of “Additional” Supply



52

Build More Office Space….Half Full OR Half Empty?

NEED MORE

• Rising Values at or near Replacement Cost

• Wall of Investor Funds exceeds Supply of Commercial Real Estate

• Low Portfolio Vacancy for large Investors

• Canada’s Lowest Vacant Carry • Demand for Office Space will

Continue• Employee Retention and

Attraction is Key and Office Facilities can be a differentiator

STOP NOW

• Speculative Leasing is Inflating Demand in the Near Term

• Limited Office Worker Supply will eventually result in Sublet occurring in both the Backfill and in the New Buildings

• Suburban Calgary and other Global options will become more attractive due to increasing people and material costs

• Business is a cycle with the extremes being greed and fear


53

Bonus Questions


54

Thank You for Your Time and Support.

For Clarifications or More Information:

Sandy [email protected]

©2006 InSite Real Estate Information Systems Inc.

Documents

Vancouver Office Market Outlook€¦ · 11/04/2006 · Updated 11 Apr 2006 1 Vancouver Office Market Outlook Vancouver Real Estate Forum April 19th, 2006 Sandy McNair InSite Real