Surrey city council has defeated a proposed city policy aimed at bolstering development of office space in the downtown core after property developers warned against saturating the market.
Council voted down bylaws that were presented for final adoption April 11 with the intent of ensuring consistency and strengthening “alignment” of the Official Community Plan and City Centre Plan as well as advancing office space and employment opportunities “within a designated urban centre in alignment with the Metro Vancouver Regional Growth Strategy.”
One of the bylaws was designed to “provide clarity on the impact of employment space requirements on the calculation of Capital Projects Community Amenity Contributions” for properties that are designated Downtown in the OCP.
Council defeated these following a public hearing earlier that night.
Evan Lewis, director of development for Wesgroup Properties, a real estate company that owns and manages over 3.2 million square feet of commercial property and has built more than 7,000 homes in 100 communities, expressed concern about “overly onerous and prescriptive requirements to deliver office space.”
“Specifically we’re concerned that pre-leasing requirements for hundreds of thousands of square feet of office can result in stalled or undevelopable projects,” Lewis told council.
Jason Teahen, a senior vice-president of Colliers International, also weighed in. “My biggest concern with this proposal is just the over-supply of office space within Surrey City Centre, sort-of pushing developers to construct an unsustainable amount of office space,” he said.
Teahen said he’s spent the last 15 years of his career focusing on promoting and leasing office space in Surrey’s city centre.
“No one wants more office space in Surrey city centre than me,” he told council, “because my entire business is built on it. However, the key to a healthy office market is balance, and that’s extremely critical. Right now, Surrey has a very balanced and healthy and successful office market.”
Blaire Chisholm, chief operating officer of Pooni Group – a technical urban planning and communications company – appeared as the agent on behalf of Crombie REIT, which owns property east of City Hall where the Safeway grocery store used to be.
She said concerns had been discussed with city staff related to an interim policy requiring 50 per cent of floor area to be office space. “We’ve been consistent in expressing our concerns with having a requirement period, as it makes project viability and financing more difficult.”
Chisholm cited a study warning that a “glut” of office space in the city centre would increase vacancy rates for existing and new buildings.
Coun. Laurie Guerra said while there is merit to the bylaw she couldn’t support it, arguing more work needs to be done “within a broader representation of the development community” to “find the right fit.”
Coun. Brenda Locke said she wants it sent back to staff.
“I think it’s important to keep the balance right now, especially between office space and what we can be considering right now. Oversupply can be a massive problem if we end up there,” she said.
Coun. Mandeep Nagra said the city should study the market “a little more.”
Coun. Doug Elford agreed.
“Yes, I think this needs a re-look as well,” Elford said. “You know, we’re hearing out there because of COVID a lot of businesses have changed their modelling and office space isn’t in as much demand as it used to be, they’re changing the way they go about doing business and we don’t really know how it looks in the future. Is everyone going to be working from home? This is something we really have to take a serious look at.”
Meanwhile, Coun. Linda Annis told her council colleagues she’s in favour of lots of office space downtown.
“I have some concerns that we’re building too many condominiums here and we’re not building a downtown,” she said. “The very last thing I want to see the city of Surrey being is a commuter city for Vancouver, New West and other points beyond. So we really do need to get the office space right but I don’t think we’re there yet.”
According to a corporate report that came before council on March 28, providing an update on the vision for city centre’s central business district, the proposed strategy’s focus is a “comprehensive approach to ensure that transit-oriented sites are protected for office and employment space in city centre” and identified the Central Business District, or CBD, as the principal focus of office and employment growth.
An Office and Employment Strategy Engagement Summary notes that the Vancouver region has one of the lowest office vacancy rates in North America and in Surrey city centre office vacancy is very low (4.7 per cent) with new projects being significantly leased and wait lists for existing buildings.
“Nonetheless, office construction remains risky and speculative office construction is a challenge,” the report states. It notes that financing requirements have increased with COVID-19 (50 per cent pre-lease compared to 25 per cent pre-COVID).