The first speculative developers on Vancouver’s False Creek Flats may be the last to see land prices at less than $500 per square foot.
It is a lesson that could be carried into Vancouver’s historic Railtown area.
The flats, 450 acres roughly bounded by Main Street, Prior Street, Knight Street and Great Northern Way, is zoned for industrial and commercial use with only a tiny amount set aside for residential, most of that housing to accommodate students at the new Emily Carr University of Art and Design.
The lack of housing on the flats was intentional from the get-go, according to Vancouver Mayor Gregor Robertson, who has defended reserving the flats primarily for workspace, not living space.
The zoning was expected to shelter commercial developers from the soaring land prices that characterize city neighbourhoods that have a potential for high-density residential.
But that may not work out as planned.
False Creek land zoned for industrial and light industrial use increased in price by at least 48 per cent in the past year, according to a study by Andy Yan, director of Simon Fraser University’s City Program.
In many cases, land prices have doubled.
“Our clients got in ahead of it,” said Blair Quinn, executive vice-president of CBRE Canada.
His clients, PCI Developments and Low Tide Properties, bought 565 Great Northern Way, a 1.85-acre site in the flats, in 2016 for $34.6 million, or $430 per square foot.
BC Assessment now values the site at $72.1 million.
PCI and Low Tide plan to build a 160,000-square-foot, seven-storey office building, with Class A space aimed at the city’s burgeoning tech industry.
It is the first multi-tenant office building in the area in 18 years, and the first of more than 1.9 million square feet planned to be built in the flats by this development team alone.
Already 72 per cent leased, Quinn said takeup of the office tower has “surpassed all expectation.” Quinn did not release lease rates, but said they would be lower than Class A office space downtown, which average north of $45 per square foot.
Current tenants include Finning International, the world’s largest dealer of Cat equipment and once owners of the land.
Finning is moving its global headquarters from downtown Vancouver back to False Creek Flats, occupying 29,000 square feet in the new building. Blackbird Interactive Game Studio will be leasing 29,000 square feet, with Spaces, a co-working space, leasing 39,000 and Samsung, leasing 20,000 square feet.
Quinn said PCI and Low Tide plan to start on a second phase of 300,000 square feet of commercial space at the site by mid-2019.
Railtown on commercial developers' radar
Jake Luft, a senior associate with Avison Young in Vancouver, said a rush of commercial development applications have followed the city’s approval of False Creek Flats. “There’s a lot of land there that’s ripe for redevelopment.”
Land for office development is rare in Vancouver, which explains the demand and rising prices for sites in both the flats and in neighbouring Mount Pleasant, where a 3.0 floor-space-ratio density is now allowed.
Two recent sales highlight the latter: a 12,573-square-foot site was bought a year ago on West 7th by Rendition Developments for $9.5 million; and an 18,400-square-foot site on Yukon and West 6th was purchased by Chard Development in December for $20.4 million.
Both sites are being developed as light industrial and office space over four floors.
The next hot spot could be Railtown, Avison Young detailed in a recent Metro Vancouver office market report.
Much of Railtown, an aging industrial enclave just above the rail tracks and port in the Downtown Eastside, now has zoning similar to Mount Pleasant.
At least three new mixed industrial and office projects are planned for Railtown, totalling more than 250,000 square feet.
These include a seven-storey, 152,000-square-foot office and industrial complex designed for technology companies, by Omicron and Rendition. Being built on the site of an old boiler factory, it received city permit approval December 17, subject to conditions.
At 353 Railway, a six-storey, 35,000-square-foot building is planned by Rendition, which originally applied for permits in 2015. Now approved, it is expected to break ground this year and complete in 2019.