New downtown Vancouver office tower having difficulty keeping tenants

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The Vancouver Centre II office tower officially opened a year ago, but it has been one step forward, one step back in terms of filling its floors, according to local commercial real estate agents.

They say it is surprising that GWL Realty Advisors’ 33-storey AAA office building at 733 Seymour St. in downtown Vancouver isn’t finding success with tenants.

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“If you look at other new builds, it’s fair to say they’ve been more successful,” says Vancouver-based Ross Moore, a managing broker at real estate company Cresa, which advises companies on leases.

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He hasn’t done a deal in the building at 733 Seymour, but says that comparable new buildings such as Oxford Properties’ The Stack, a 37-storey tower on Melville Street, are occupied except for a few of the lower floors.

Vancouver-based software company Kabam! was the first large tenant at 733 Seymour, originally leasing eight floors, from level seven to 14, for a total of about 120,000 square feet.

Now, the company is trying to sublease the top three of those floors, for a total of 48,000-square-feet, about 40 per cent of its original lease.

Sandstorm Gold Royalties, which holds royalty rights on mining operations, leased the top four floors of the building, from level 30 to 33, and then another space on the 27th floor.

But recently it began advertising to sublease its total of 49,000-square-feet and is moving to a space in BentallGreenOak’s new B6 building at 1090 West Pender where Microsoft Corp. is subleasing its space.

Peter Jenkins, senior director of leasing at GWL Realty Advisors, told Postmedia the building at 733 Seymour is 82 per cent leased, but “we do have more subleases than the rest right now.”

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He said that the companies keep paying GWL rent as per their leases even if they choose to sublease the space. That said, he added that the company does want to have those spaces occupied by tenants.

Moore said it’s a frustrating situation for a landlord or developer when groups that have leased space in a building then turn to the sublease market.

“They’re competing against you. That’s the worse part. They are cutting better deals than you are, and you have got this competition in your own building.”

On a recent weekday, there wasn’t anything obvious in the lobby of the building or in the food court traffic below to indicate the building is having difficulty with contracts. The building sits west of the Telus Garden office tower and is beside the Scotia Tower. An underground walkway goes beneath West Georgia Street and connects to the Hudson’s Bay store.

Some earlier renderings for the lobby showed a space for a hip-looking coffee bar near the elevators, but that has yet to be added. Jenkins anticipates the company will be up and running in the space by April or May.

Moore said that new office buildings that came online in 2015 to 2017, when vacancy rates were low, were fully leased and occupied at completion.

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“That’s not the case anymore, so I think you have to have that perspective. But I think the bigger concern is there’s so much sublease space. You’ve got a landlord in the profit business and you’ve got a sublessor that is in a cost-minimizing exercise. They’re just trying to get some of their money back. It’s a challenge.”

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