Commercial Boom Gathers Steam
In Vancouver, British Columbia

A face-lift for a small 10-story office building in downtown Vancouver, British Columbia, underscores the strengthening office market in Canada's third-largest metropolitan area in terms of population after Toronto and Montreal.

The Evergreen building -- its trademark jagged balconies covered with green vines -- was designed by prominent Canadian architect Arthur Erickson and built in 1981. A previous owner had obtained approval to convert the structure to residential use, but instead the Evergreen, deemed historically significant by the city, will be preserved as an office building. A 10 million Canadian dollar, or roughly US$9 million, renovation, to be completed by next spring, will upgrade the windows, elevators and mechanical systems, according to Bentall Capital L.P., a Vancouver-based developer and real-estate services company that is managing the property for owner British Columbia Investment Management Corp.

An additional 11 floors are being constructed on top of the Bentall 5 office building in downtown Vancouver.

Even as the city's condo boom rages on, the Evergreen's renovation signals that commercial properties are increasingly sharing some of the spotlight. The new plans for the Evergreen come in the wake of concern about the potential loss of available commercial sites that prompted the city to impose a moratorium, with some exceptions, on new residential construction in Vancouver's core central business district in 2004. The shift in the market has also prompted the addition of 11 floors to the existing Bentall 5 office tower in downtown Vancouver. "The office market has improved to the point that it can support new buildings and renovated buildings," says Tony Astles, a senior vice president for Bentall. "I'm not sure we're in the driver's seat, but at least we have some control."

The area is also getting a kick-start as it gears up to host the winter Olympics in 2010. The Vancouver Organizing Committee for the 2010 Olympic and Paralympic Winter Games has a capital budget of about C$580 million, which it will spend building and renovating sports venues as well as adding housing in and around Vancouver and the Whistler ski resort, about 75 miles north of the city.

The Olympics is only one piece of the strong economy's puzzle, says Jorum Schramm, director of business development for the British Columbia Chamber of Commerce. Rather than changing the face of Vancouver, the Olympics are "going to expedite infrastructure projects that were needed or long overdue," Mr. Schramm says. Among the projects slated to be completed in time for the Olympics is the C$2 billion rapid-transit train which will provide service between the airport and downtown Vancouver.

The greater Vancouver region, an area with a population of about 2.2 million just 140 miles north of Seattle, is marked by dramatic natural beauty with views of the Pacific Ocean and the Coast Mountain range. The region's mountainous terrain has put a premium on land. It is Canada's priciest residential market, according to Cameron Muir of the Canada Mortgage and Housing Corp., the national housing agency. In the second quarter, average home prices stood about 80% above the Canadian average of C$283,452.

 These days the commercial real-estate market is also gaining steam, as the area's economy has been robust in recent years, driven by the strong lumber, mining and energy sectors, port-related businesses that have benefited from increased trade with Asia, and a surge in residential and commercial construction, according to Greg Sutherland, an economist with the Conference Board of Canada, a nonprofit economic research and forecasting institute.

The province's unemployment rate stood at 4.7% in July, well below the 6.4% rate for Canada, according to Statistics Canada. Vancouver's diversified, service-oriented economy, which also has its share of tech companies, is probably more similar to Seattle than to Calgary, Alberta, its energy-dominated neighbor to the northeast, Mr. Sutherland says.

New office construction is ramping up as rents are rising and vacancies falling, with the downtown office submarket particularly tight, according to Don Vassos, senior executive vice president of operations for CB Richard Ellis Ltd. in Vancouver. Buildable industrial sites are fetching the highest prices in Canada, ranging from C$350,000 per acre on the outer fringes of the region to as high as C$1.5 million closer to the core, according to CB Richard Ellis. New infill retail development is following the residential construction, such as a Costco Wholesale Corp. store which is being built below a 900-unit condominium complex.

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