As industries like tech continue to grow, the demand for new buildings with prime amenities and luxury finishes is increasing. And while most developers and landlords would see this as beneficial, in Vancouver it’s becoming an increasing problem. The current supply of AAA buildings are few and far between, with the average age approximately 27 years old. In addition, there are more of the less desirable A, B, and C classes to choose from – options that simply won’t meet the expectations of big firms and Fortune 500s.
So what can landlords of these buildings do to compete? Paula Wright, Leasing Director of Manulife Real Estate, suggests there are three initiatives that should be undertaken:
- Renovate. To attract top tier clients, renovations are essential. She notes that "If you can put $3 million in marble, do it. You’re going to get it back.” This includes refining the lobby, upgrading gym equipment, and providing a more contemporary look and feel to the interiors.
- Work with what you have. In other words, if you’re in the B class, be the best of the B. Accept that you’ll never be AAA or demand those types of lease rates. Instead, strive to attract the kind of clients that are in your market and price range.
- Play up location. If the building is situated near a Skytrain, bus route, or within waterfront views, these assets are highly attractive to Millennials. And as many have foregone car ownership, try installing secure bike storage as well as offer electric charging stations for those who do venture in with hybrid or electric vehicles.
While these initiatives will help to improve your vacancy rates and increase your rents, Maury Dubuque, Managing Director Colliers International, predicts in the next 15 years the entire city will be AAA buildings. He foresees that the current lower A, B, and C grades will be converted into residential, because in his words, “you can only use so much lipstick.”
Do you agree with Maury’s predictions? Tweet @NAIOPvancouver and let us know!