Over the last decade, we’ve seen a major rise (literally) in office towers in and around Vancouver. Class A buildings are making their mark on the skyline and are being snatched up by technology and creative companies, while older buildings are being extensively renovated to compete for these high quality tenants. This is happening in all major markets across Canada today.
Some older class B buildings have added state-of-the-art gyms, coffee bars and nap rooms, while others have spiced up their lobbies in an attempt to out-compete class A properties for tech tenants. This focus on tech has left a gap in the market for older class C buildings to attract professional tenants who aren’t willing to pay the class A and B rents.
Outside Vancouver, Coquitlam and Port Moody have become recent members of the Skytrain line with the new Evergreen extension, which has allowed both cities the opportunity to become new urban centres.
For one professional office building at 1025 Austin Avenue in Coquitlam, the shifts in the market were beginning to hurt the property badly. Competition in the area was becoming fierce, with new developments attracting the best tenants and causing a general increase in vacancy rates in the neighbourhood.
Average vacancy in the market was approaching 20 per cent and asking rents were in decline. Seeing the market trends as they were, Martello approached the owners with a plan to revitalize the building and ensure its competitiveness.
Martello developed a comprehensive two-phase revitalization plan, which would be implemented over a two year period to make the property the premiere location in the neighbourhood for middle market professional tenants and small businesses, as these tenants would not be interested in the newly renovated class B buildings coming onto the market.
The first phase included:
- Modernizing common areas and interior lighting systems to freshen up the building and reduce utility costs.
- Developing a new inducement structure to attract high quality and professional tenants.
- Strengthening relationships with existing tenants to increase the likelihood of renewals.
Phase 2 included:
- Replacing existing capital components, including roof and HVAC to reduce operating costs.
- Utilizing new technology such as solar reflective film to support these systems.
Once renovations were complete, the building successfully became a high demand location for the selected target market. Now three years on from the project outset, the building is 100 per cent leased, with two solid anchor tenants and a quality tenant mix consisting of accounting, legal and educational professionals.
Owners of older class C buildings must be vigilant to stay on top of local market conditions, recognize any gaps in the market and think long term to fill that need. Doing so will ensure that your building is fully leased and cash-flow producing for years to come.
Last month we discussed the importance of revitalizing retail spaces. You can check out the article here.
Martello Property Services is a Vancouver-based real estate management company that specializes in commercial and residential property management, commercial insurance, strata management, and building operations. For any questions, you can reach out to them at 604.682.4034 or at www.martello.group.