Metro Vancouver is on the move eastward in Metrotown. Without any indication that anything like this was in the works, Metro Vancouver announced it has purchased Metrotower III adjacent to the Metrotown Skytrain Station. The cost to taxpayers, $205 million. the new acquisition ”offers over 414,000 square feet of ‘AAA’ Class office space-” Possibly the most expensive office space in the City.
Metro Vancouver’s media relations stated in its press release,
“As part of our long-term strategic planning, we evaluated options to best meet our future needs for necessary office facilities including potential redevelopment scenarios and relocation,” says Greg Moore, Metro Vancouver Board Chair. “Based on thorough due diligence, detailed forecasting and independent third-party validation, the acquisition of Metrotower III was deemed by the Board to be the most economically and environmentally responsible decision in the best interests of our members and ratepayers.”
Over the last year, Metro Vancouver has been updating all of its long term plans for its infrastructure, which included an undisclosed evaluation of the options for the current Head Office at 4330 Kingsway and 5945 Kathleen.
“There appears to have been no prior public discussion on this matter.” According to City Hall Watch, a Vancouver Blog. “The board went in-camera on Friday, December 11, 2015 and at that time likely approved the purchase.”
The video feed of Metro Vancouver Board meetings are not archived.
“Within 10 minutes of the start of the 2016 Inaugural Metro Board meeting, the discussions went in-camera. Was one of the first decisions by this board to authorize spending $205 million of taxpayer’s money on a brand new building? Will anyone ever be held accountable for this decision?”
Ivanhoé Cambridge, the previous owner and developer of the site, will manage Metrotower III on behalf of its new owner.
Metro Vancouver’s existing head office complex, consisting of two office towers located at 4330 Kingsway and 5945 Kathleen Avenue in Burnaby, will be disposed of at market value and the proceeds used to offset costs associated with the acquisition of Metrotower III. “The regional authority’s former head office will likely be redeveloped and subsequently removed from Burnaby’s office inventory,” according to Avison Young
This is a little concerning from a taxpayer’s point of view, since speculation has driven up sale prices of land in Metrotown far beyond assessed value in many cases. The combined 2016 Property Assessments for Metro Vancouver’s existing head office complex is approx. $82.5 million. Given the influence and primacy of developer money in most municipal election campaigns, it is reasonable to be concerned that the successful bid for the property will greatly favour the buyer over the seller-taxpayers.
The future fate of the 30 year old gold, glass structures is unknown, but there has been speculation that it could be demolished and replaced with something “much taller”.
It should also be noted that most of the adjacent properties are owned by the Bosa family, and that Mayor Corrigan and his council are advocating for an event center somewhere in the Willingdon-Kingsway area, close to Bosa’s Sovereign project.
Metro Vancouver may have trouble renting out the rest of the building. Currently the building has two major tenants, Stantec Engineering and Hemmera Engineering.
According to the leasing site for Metrotower III, entire floors 8,9,10,11 and 12 are available for rent. Most likely they have sat empty since construction was completed in 2014 after being mothballed for 4 years due to a sluggish economy. Ground was broken on the development in 2008. Despite renewed strength in the economy, office vacancy rates are over 13 percent in Burnaby and the inventory continues to grow.
Avison Young states, rates may soften in Burnaby as heightened vacancy persists and new supply is delivered. Vacancy will likely continue to rise in 2016. Additional office space is also included as part of the Brentwood Town Centre redevelopment and Onni Group’s Gilmore Station project. With leasing activity likely to remain subdued for the remainder of 2015 and only a handful of large users currently in the market with lease expirations in the next 12 to 36 months, landlords such as Metro Vancouver in Burnaby’s office market will need to be very competitive and creative by offering large inducements and extended deal terms to attract and retain tenants.
In 2015, almost all submarkets registered positive absorption, led by Surrey, Richmond and Vancouver-Broadway. However, Burnaby registered negative absorption during the first half. Meanwhile, vacancy rose year-over-year in Burnaby.
Total office space inventory in Burnaby is around 9.1 million sf with approximately 1.22 million sf or 13.5% vacant.
In comparison to the region, regional vacancy increased to 10.3% – the highest since year-end 2004.
In sum, in my opinion the predicted revenue streams will be far less, leaving taxpayers with larger burden and less public land to benefit the public good.
Thanks to City Hall Watch