Commercial Real Estate: Amazon to take over entire former Canada Post building
Credit to Author: Hugh Dawson| Date: Tue, 10 Dec 2019 19:22:17 +0000
Amazon’s lease of the entire former Canada Post building in downtown Vancouver is large enough to reduce the city’s projected office vacancy by two per cent, commercial property insiders say.
Last week, the it was reported that Amazon had agreed to lease all of the 1.13 million square feet of QuadReal’s two-tower building called The Post, the former Canada Post site on Georgia Street that is now undergoing a major redevelopment.
Currently, Vancouver’s downtown office vacancy rate sits at 2.4 per cent, which is at or near the lowest in North America, said Jamil Jamani, a senior market analyst in Vancouver with CoStar Group, an international property data company.
“In downtown Vancouver, we’ve got 4.2 million square feet of (office) construction activity under way,” he said.
Construction at the former Canada Post Building on West Georgia street in Vancouver, BC, December 9, 2019.
CoStar had forecasted that with the new inventory the downtown vacancy rate would climb to roughly 6.5 per cent by the end of 2023.
“We expect to see a decline of about two per cent in (forecasted) vacancy just due to the announcement of Amazon is taking up the 1.13 million square feet of office space within The Post building,” Jamani said.
Once Amazon takes over The Post, it will have a total local office footprint of 1.5 million square feet across several locations, he said. “They’re going to be our largest corporate tenant.”
Open excavation of the former Canada Post Building with Library Square in background on West Georgia street in Vancouver, BC, December 9, 2019.
The Post will be comprised of two office towers and a mixed-use podium and is expected to complete in mid-2023. An estimated 7,000 people can work at the building.
When reached via email, an Amazon spokesperson declined to comment on the deal, but did confirm that Amazon has leased both towers.
QuadReal did not respond to three requests for comment by deadline.
“It is virtually impossible for me to overstate how significant this is to the Vancouver office market,” said Ross Moore, a tenant leasing specialist with Cresa brokerage house in Vancouver.
He said Amazon’s deal would put the giant’s stamp of approval on the local tech ecosystem.
Construction at the former Canada Post Building on West Georgia street in Vancouver, BC, December 9, 2019.
“With a tech giant like Amazon taking that amount of space, I think most people will now agree, yes, we have that critical mass,” he said. “Once that snowball is rolling, it just keeps going.”
Colin Scarlett, an office specialist with Colliers International in Vancouver, said Vancouver’s relatively low labour costs are one of the main attractants for enormous tech companies like Amazon.
He said real estate only accounts for three to six per cent of a company’s overall operation costs. Salaries typically account for about 70 per cent.
When compared to other tech cities like Seattle, San Francisco, New York and Boston, Vancouver’s labour costs remain much lower and therefore attractive to big firms.
Construction at the former Canada Post Building on West Georgia street in Vancouver, BC, December 9, 2019.
Canada’s open immigration policies are also helping. “It’s easier to bring (skilled tech workers) into Canada than it is to bring them into the U.S.,” he said.
The brokers all said one consequence of a deal this large is that it makes it tougher for other, smaller companies to get the space they need in Vancouver. It will also further escalate lease rates.
Of the new construction being built now and set to open by the end of 2023, 70 per cent is already pre-leased, including The Post, Scarlett said. “That doesn’t leave a lot of space for local companies,” he said.