The city has hired a new company to negotiate leased space in the new Anvil Centre.
Cushman & Wakefield will be taking a fresh look at leasing opportunities in Merchant Square after Avison Young, another commercial real estate company's contract finished.
The City of New Westminster is building a nine-storey office tower on top of the Anvil Centre that's under construction on Columbia Street. Believing the office component is critical to downtown revitalization and economic development, the city opted to proceed with construction of the office tower when the Uptown Property Group withdrew from the project.
"Avison Young was the group that UPG had in place. They were very good, but when their time frame ran out we thought we would go through our usual RFP (request for proposal) process. We went through that and decided to go with Cushman & Wakefield," said city administrator Lisa Spitale. "They have international experience. We also liked a lot of their leasing experience in the downtown," she said. "We thought, let's see what they can do."
Last summer, representatives from Avison Young Commercial Real Estate stated they were in discussions with two large tenants and were confident they would have announcements by the end of 2012. Merchant Square has a total of 137,000 square feet of office space that will be completed in the spring of 2014.
"I don't think anything came through on that," Spitale said. "What everybody said to us in the interviews was . once the glazing goes up people really start taking notice of the building, they start recognizing that it is there, that it is going ahead and actually start to take greater interest in the site." Spitale said the project is expected to hit that milestone in August or September, so it will be interesting to see whether there's renewed interest by those two earlier prospects.
"They haven't gone away, but I can't tell you right now they have signed up. They haven't. They haven't gone away," she said. "Once we hit that milestone of the building really starting to look like the building, what everyone says to us is that is when we should start seeing more progress."
Spitale said she isn't concerned about the city's potential to fill the office space at Merchant Square because of the things she's heard from companies that submitted proposals to coordinate the sale of the Merchant Square office tower. Although companies may buy into buildings before they're complete in downtown Vancouver, they told city officials that buildings in the suburbs generally are further along before there's a buy-in.
"They said that is really standard," she said. "The other thing they talked about was the kind of expectations now in the office market - they all talked about now, unless you are next to SkyTrain, your office product will have a more difficult time to lease up."
The fact that Merchant Square is located next to the New Westminster SkyTrain station, will have large floor plates that provide flexibility and will be LEED Gold construction are all deemed to be critical to the building's success.
"We have that," Spitale said. "If I look at the factors objectively, we certainly hit that market."
When the glazing of the building takes place in a few months, Spitale said the city will be in a better position to evaluate the potential to sell or lease the office tower.
"I think by the spring of 2014 there will be some tenancies that we actually can announce because they are done, they are secure. I do believe that," she said when asked to predict when a tenant will be announced for the office tower. "The good thing is that is only a few months away - you will either be able to quote me on it or have me eat crow."
Some critics have voiced concern that the City of New Westminster has risked taxpayers' money by funding construction of an office tower.
"Either we have to believe in what we are doing based on the best information, then you have to hope all the marketing, all the leasing efforts and everything else are consistent, and everything else we are trying to do works into the overall vision," Spitale said. "I believe that is going to come together."
CBRE Global Research and Consulting recently released its quarterly report about the Metro Vancouver office market. The report stated that a trend of "subdued market activity" has carried over from a "lagging tenant demand" from the second half of 2012, and market statistics reflected slower leasing activities.
The CBRE Global Research and Consulting report stated that Merchant Square is one of the anticipated "highlights" in the region in 2013.
The report stated that New Westminster has a vacancy rate of 53.6 per cent for Class A, 8.5 per cent for Class B and 7.5 per cent for Class C office space. Vacancy rates for Class A office space in other Metro Vancouver areas ranged from a low of 4.3 per cent on the North Shore and 4.5 per cent in Vancouver up to 18.3 per cent in Richmond and 21. 8 per cent in Surrey.
"Our understanding is when they did that they were factoring in some of the empty space that was about to be built at the Brewery District," Spitale said of space that has since been filled by tenants including TransLink. "Somebody explained that to me, too, because I said that (53.6 per cent vacancy rate) makes no sense. When they did the numbers they were factoring in the empty space that was being built at the Brewery District."
Although the report indicated there has been reduced tenant activity to start the year, Spitale said Merchant Square has a lot of assets that appeal to potential tenants or buyers.
According to Spitale, there isn't much Class A office space located on the SkyTrain corridor.
"Within that space, we are also told, customers and employees are really looking for being in spaces that have amenities. It has a lot to do with, what can I do at lunchtime? What restaurants are in the area? Can I go shopping? Can I go for a run? It's also driven by amenities," she said. "Even within the suburban transit office market, that's the other critical factor. So when I look at all of that objectively, I think we hit all of those marks. I think the fact we focus on the downtown, and we focus on the amenities in the downtown, actually contributes to the leasibility of the office."
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