We sat down with CBRE's High Technology Facilities Group (HTFG) to talk about what a growing tech company should know and can expect when thinking about real estate.
What is happening in the downtown office leasing market?
In short, and it should not come as a surprise, office rental rates are up and vacancy is down. Typically rents slightly go up year after year, however, in 2018 we are measuring rent increases by quarters even and month to month. This change has Vancouver ranked fourth globally for having the fastest growing office rental appreciation in the first three quarters of 2018. Perhaps it was long overdue and we are catching up, but this is now our new reality.
Depending on the size of your office (10-20, 30-50, 100+ employees) competition can be fierce. Landlords with move-in ready locations are the big winners, and market-ready firms that know their requirements need to execute quickly when they see the right space and want to secure it. Slow decision making or leaving the search until the last minute can cause companies to overpay, lose out on quality options, or even be forced to move.
What types of spaces are companies looking for and in what areas?
Tech companies are primarily looking for office spaces that are plug-and-play or move-in ready. They want a space that isn't going to be a big project (i.e., requiring time for design, needing permits, construction, or build out). The design trend for a tech office has typically been the open-concept with bench desks, interior meeting rooms, and an open ceiling with industrial/heritage features. Lately, this trend has been shifting back towards being less open and having more smaller sub-areas that split up into different teams, departments, or groups. This can minimize the number of distractions while optimizing work production. Developers and sales teams do not want the same type of space so this allows for a company to enjoy culture flexibility while giving each department its own space to work as they need it.
Location, location, location! This age-old real estate term is still relevant today and we are still seeing a net migration of companies going to the downtown core. They aim to shorten commutes for staff using transit and walking or biking while providing all the amenities that downtown offers.
Heritage brick and beam spaces have continued to be in high demand, as seen by Gastown and Yaletown's near-record low vacancies of 2.5-3% (compared to that of downtown at 4.5%). Downtown, Gastown, and Yaletown remain the highest in demand, specifically areas close to Waterfront Station and buildings with good amenities and views.
Mount Pleasant (Main/Cambie industrial area) has been getting a lot of attention since Hootsuite moved in 5+ years ago. I’ve seen lots of cranes going up and some new commercial buildings under construction. What companies are moving in, and why are they choosing to move here? Why here and not downtown?
Mount Pleasant, or as some call it the MBD (Millennial Business District), has a lot of momentum with significant tech, post-production, and VFX companies making this area their home. Companies like Relic, DHX Media, Samsung, Atomic Cartoons, Double Negative, Abcellera, Saje Wellness, Hootsuite and WeWork (along with many others), have all made a significant stamp and commitment to the area. Choosing this neighbourhood has become a cultural and brand decision within companies. Some of the many factors include its proximity to transit (Canada Line and buses) and the seawall, the fantastic amenities (restaurants, food trucks, coffee shops, breweries), and the vibrant work/live culture. People are walking or biking to work, grabbing a coffee from a local cafe, bringing their dog to the office, or visiting with friends after work for a beer or workout/yoga class, all while staying in the same area. Transit is great and getting to the downtown core is quick.
As a growing 20 person company, when should I start the process of evaluating space options and what should I expect through the process?
In today's highly competitive 'space race', it's very important to start the process early and get all key personnel/decision makers involved to avoid timely or costly changes in direction later. This means outlining the growth/hiring strategy and completing an evaluation to set the correct space parameters. Once this is done, learning and understanding the market no less than six months out from a lease expiry is key. This means you'll avoid making a rushed decision, can plan for renovations, and are not left hanging or rushing to move into a space that isn’t ready or the most optimal fit. It is never too early to get familiar with the office market conditions and build a strategy for a company’s real estate needs.
How is co-working impacting office leasing and who is moving in? Who should consider these options? Is it here to stay?
While the concept has been around for years, the recent explosion of WeWork, Spaces, and other co-working companies does seem to be the experience the market wants and it doesn't seem to be slowing down. WeWork leased over 230,000 SF of office space downtown over three buildings, recently added another 44,000 SF at Main/5th Avenue and they are still on the hunt for more. Spaces opened a full six-story building in Gastown and has plans for 35,000 SF on Great Northern Way. The demand is there and companies like it, however, it is not meant for everyone. They offer flexible month-to-month leases which can initially be good for many young start-ups but it comes at a premium. Once a company has stabilized its growth and reached a threshold level of employees (typically 10+), the rent premium of co-working often becomes less desirable and rental costs get cheaper for a direct lease space.
Why are companies choosing to open an office in Vancouver and why are local companies choosing to stay and expand in Vancouver? What is Vancouver’s edge over other cities like Toronto, San Francisco, and Seattle?
For larger international companies, Vancouver is a fantastic location due to its proximity and time zone to other major tech markets like San Francisco, Silicon Valley, and Seattle. The Cascadia region is getting attention from our governments, connecting businesses, and creating opportunities (like the new downtown Seattle to downtown Vancouver seaplane route).
Vancouver has a great tech talent pool to draw from. It is also growing as qualified companies help workers settle in with their work visas and local schools are expanding their programs to meet the growing demand. Salaries are still relatively low compared to the USA, however, this is expected to change once the 'Amazon effect' starts to kick in (Amazon will be adding approximately 10,000+ employees over the next four to five years). Talent, employee costs, and our growing tech ecosystem will ensure Vancouver continues to draw interest from international and out of province candidates and contribute to local company growth.
Who should people contact to learn more about growth and real estate in Vancouver?
The High Technology Facilities Group has been focused on providing tailored real estate solutions for the Vancouver tech community for over 25 years. The team is composed of Alain Rivere (604.662.5110), Kevin Nelson (604.662.5155), and Blair Quinn (604.662.5161) and they welcome anyone to reach out to them with questions // hightech.cbrevancouver.com