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Office buildings on top of rapid transit see their rents rise, vacancies decrease

June 14th, 2012 · 29 Comments

For at least the last year, every time I call up a commercial broker to talk about office leasing, I’ve been hearing the same story — tenants want buildings on transit.

It’s been anecdotal until now, but one company decided to do a more thorough analysis about those preferences and found that it’s more than anecdotal. My story here looks at some of the patterns that Jones Lang Lasalle found. As well, I talked to employers like Fluor Canada and Horizon Distributors about their decisions on where to locate.

(I also called Nokia, and got this strange message back from them, which I didn’t understand until today’s announcement about layoffs: “What I can tell you, is that our R&D operations in Burnaby is an important part of Nokia’s R&D network with some unique skills and responsibilities especially for 3rd party application development and Nokia Store.”)

This also bolsters the argument that I got recently from a Vancouver land analyst, who said people resisting paying additional taxes to invest in new TransLink rapid-transit projects are cutting off their own noses. Those investments will get paid back many times over by the increase in land value around them, he said, as well as reducing some of the development pressure in the parts of the city that are currently transit rich.

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  • Bill Lee

    While at Sapperton Days, (the premier street festival in thesouth east), I noticed all the new shops and building, before a lot of condos, on East Columbia Street just a minute away from the Sapperton Skytrain station.
    Thrifty foods there is 24 hours. Hmm, need stuff at 2 in the morning. Oh-oh, Skytrain shuts down at night. (Besides prices are 20% more than I usually pay at my local markets)
    New West also allowed purposeful buildings above the Skytrain at the New Westminster Stations (8th street and Columbia)

  • IanS

    Makes perfect sense.

    I noticed that most (if not all) of the examples in the article made reference to skytrain or Canada Line proximity. Is that a coincidence, or is this trend more connected with rapid transit than buses?

    I don’t use transit much myself, but if I did, I think I would prefer rapid transit than a bus.

  • MB

    A very illuminating trend.

    I wonder if quality and frequency of transit service has created its own economy?

  • spartikus

    Isn’t this a long established trend in other cities?

  • Michael Gordon

    A very interesting article Frances…one of the things I find fascinating about the Vancouver region is that the Livable Regional Plan approved by the 20 plus municipalities in the lower mainland in the mid-70’s identified a vision that had a number of ‘town centres’ linked by rapid transit throughout the region. Initially, there was very little job space in the town centres. Instead most were shopping centres.

    However, one of the key factors we have witnessed is that the Province and to some extent the federal government as well as local governments invested in the skytrain and of course the seabus. So now in addition to the CBD and the Central Broadway, we now have Lonsdale, Richmond Centre, Surrey City Centre, and Metrotown (even Port Moody) emerging as areas of higher density residential as well as shopping and more recently office and institutional developments. So the mid-70’s Livable Region plan and the pattern of development and transportation it envisaged is clearly emerging.

    I think most strategic was that a series of Provincial Governments beginning with the NDP 70’s administration financing the Seabus, the Socreds gave us the Expo line in the 80’s, the Clark NDP government invested in the Millennium line, the Campbell government, decided to go ahead with the Canada Line and now the current government is committed to assisting with funding the line to Port Moody and Coquitlam. The 40 years of investment from senior governments in rapid transit has been remarkable and has of course resulted in the pattern envisaged by the Livable Region Plan.

    As for other City regions, Toronto’s subway system has influenced the emergence of a coherent urban pattern of residential density and jobs since the early 50’s. It would be interesting to have a look at the pattern that has emerged around Calgary’s LRT and Montreal’s Metro transit system.

  • Raingurl

    Yeah, yeah, Skytrain this, millenium line that……….Oh, we need a line to the airport to accommodate the olympians! The Evergreen line got the shaft long enough. Finally breaking ground on a line that should have been done 6 years ago.

  • MB

    @ Sparti

    Isn’t this a long established trend in other cities?

    Can’t think of any west of central Toronto.

  • Jeff Dean

    Frances, the land analyst you refer to – does he/she suggest that property tax payers throughout the region should pay higher taxes for rapid transit, or that the higher taxes should be focused near the developments?

    If they were more focused it would be fair – the rise in land value is focused close to the stations. This arrangement is variously known as Land Value Capture schemes or, as Translink called it in a recent list of funding options, a Benefitting Area Tax. It is currently legal under the Community Charter, but I have not seen any serious proposals for it.

  • MB

    @ MG 5

    I believe the LRSP was approved in the mid-90’s. No matter, it was a unique document and its basic goals were generally met (the creation of seven rapid-transit linked town centes).

    Though the development of non-transit based office parks diluted the Plan over the past decade, it appears that trend is now being measureable countered by employees whose demand for direct transit access has stimulated a response by employers to pay a premium for office space near rapid transit stations.

    Transit-oriented commercial uses have a long ways to go to catch up to the billions in transit-oriented residential development stimulated by SkyTrain and now the Canada Line. The economics prove that high-frequency rapid transit is a positive investment of public funds, even if the quality of urbanism and architecture has to play catch up.

    Calgary offers nothing close. C-Train is slower and not as frequent, and I believe the demand for employment centres near stations has been static because of this. Because the system was initially built cheaply, there was a trend to follow existing rail lines thruiogh industrial areas and freeway medians rather than to bring rapid transit into employment centres and educational institutions outside of downtown. This has changed with the West Line, currently nearing completion, which is largely grade-separated and brought into or adjacent to at least three shopping complexes.

    Only fairly recently have they discovered the benefits of increasing residential density near stations in Calgary, but the urban design response there is for the most part worse than Metrotown. Passengers are often dumped into ugly parking lots where village squares should be.

    Calary also suffers from (they would say “benefits from””) from vast tracts of grossly undervalued agricultural land at its periphery from which to build contiguous mono-zone subdivisions from. I believe this will work against instituting Smart Growth there until the price of fuel drives people away from cars in future. The trouble is, there is no transit alternative in the exurbs.

    What bugs me about local transit debates are the vociferous criticisms about the cost of high-frequency train service while concurrently ignoring the huge and ongoing economic stimulus it provides. The economics have been proven over a generation. Now it’s time to address other aspects like urban design.

  • Brian

    While the preference for employment near transportation seems obvious, its good to see some hard evidence.

  • Richard

    @MB

    Very well said. Thanks!

  • Roger Kemble

    The Lower Mainland Regional Planning Board was operational well before I commenced practicing in 1957.

    http://sfucity.wordpress.com/2007/09/

    “ There’s Tory political organizer Tom McDonald, who pushed for regional planning in the late 1940s. There’s the man McDonald found in Tennessee to do the job, Jim Wilson, who helped lead the first regional planning efforts in the 1950s. Early 1970s GVRD planner Harry Lash gets his own chapter for championing ideas and processes — he promoted the phrase “livable region” and created a very open model of consultation and decision-making — that persist today. ”

    “. . . very open model of consultation and decision-making . . .” ???

    I knew Jim Wilson: he was actually a Scott.

    Grosvenor Laing’s 1960’s Annacis Island industrial park and Guilford were hardly the result of good planning: the latter contributed to the gross sprawl we see today.

    We still haven’t learnt to germinate a community focal point other than as a shopping mall with acres of parking.

    Oh how we wax so eloquently about the village green but we wont do a damn thing to rationalize it’s only inhibiter: exorbitant land prices.

    Planning by realtor just doesn’t bring out the best in us!

    I do not wish to dampen anyone’s latter day enthusiasm but given all the good intentions, the treasure devoted to regional planning over, the so far, sixty years plus I am not impressed by planning-by-office-rentals.

    As for planning by Skytrain: isn’t that rather expensive? And surely should be the other way around: community first. Skytrian if nec!

    To say the very least, current planning is catch-up, a bit of a bummer.

    And now we eagerly anticipate the South Fraser Perimeter Road. We haven’t learnt a bloody thing.

  • Roger Kemble

    PS Will Marine Gateway go office? Does this mean decentralization of the office culture, furthering downtown as an entertainment enclave?

    Bicycle couriers wont like it! Scoozis wont like it!

    This isn’t planning. This is chaos!

  • boohoo

    More and more we hear why we should be/need to build more transit.

    And more and more we get non-commitments, political bullshit and excuses. When are we going to grow up as a region and start being proactive and engaged in the reality in which we live.

  • Guest

    Marine Gateway has always had a substantial office component – it is a separate midrise tower.

    I understand that government (Federal?) agency or department has leased all of the substantial office component of Onni’s “Central” project in Main half a block from the Main St. Station.

  • spartikus

    Can’t think of any west of central Toronto.

    I was thinking more of Europe, where even proximity to The Mode of Transport That Must Not Speak It’s Name can positively affect rental and real estate prices.

  • IanS

    Hey… we got 13 posts into the thread before someone mentioned biking. New record?

  • Agustin

    MB,

    Can’t think of any west of central Toronto.

    I wonder if Calgary’s C-Train has had a similar effect… It would be hard to discern now, since the bulk of the system was built some time ago, but maybe someone will do a study when the new line comes in next year.

  • spartikus

    I’ll need to up the encryption.

  • Roger Kemble

    To attract the best employees, offices must now locate close to transit. Yeah pull the other one: another urban legend.

    The . . . errrrrrr . . . best employees are lucky to have a job anywhere!

    If that’s the criteria how much closer to TX can you get than downtown?

    They’ve saturated the empty condo market. Now they want to saturate the empty office market . . . just another type of sprawl.

  • Michael Gordon

    MB…very thoughtful post.

    I definitely know that the Livable Regional Plan was first approved in the mid-70’s. I was in planning school in Ontario in the mid-70’s and even there, we were intrigued with its vision as a regional future for the Greater Vancouver Region. A brilliant planner Harry Lash was one of key authors of it.

  • Frank Ducote

    Roger@10 – those very shopping malls and acres of parking are, as you note, located in the prime locations for neighbourhood centers, but fail to meet their full potential. As such, they also offer great opportunities for transformation into true urban centers. Metro town, Surrey Centre slash SFU, Coquitam Centre, willowbrook and even Lansdowne Mall, among many others, either are undergoing urbanization or are planned to do so.

    I look at them as very valuable land banks, basically there for optimization with the right paradigms in their particular locations. Hopefully this will be based on mixed use, transit-orientation and job creation, which are the themes of this thread.

  • Lewis N. Villegas

    This just in:

    Professional family abandons the Woodward’s—and in a tough decision between Mount Pleasant and the West End—choose the latter to be close to the grandparents.

  • Roger Kemble

    Frank @ #20 “. . . those very shopping malls and acres of parking are, as you note, located in the prime locations for neighbourhood centers, but fail to meet their full potential.”

    Yup, still fail to meet their potential. Metrotown and Lougheed were there long before Skytrain arrived some forty years ago and they are still an assembly of Ill-conceived boxes in a vast parking lot.

    The sooner the demise of the auto culture: but will we be ready?

    Indeed the first shopping mall in the region was Park Royal, West Van. When I arrived, 1951 the long gone fountain was, I was told, inspired by some mall in London: my youthful eye couldn’t make the connection. In those days I knew of no malls in London!

    Indeed my, now, ancient eyes cannot make the connection between your planning cohorts self congratulatory comments . . . and reality.

    MB @ #8 LRSP. “ . . . it was a unique document and its basic goals were generally met . . . ” “WAS” MB and if you had any part of it you should be ashamed . . . just another verbose document to be usurped by the new craze: sprawl by office.

    and

    Michael @ #19“MB…very thoughtful post . . .”

    . . . what exactly are you referring to Michael?

    Self-congratulation, given what you are congratulating your selves about, is inappropriate and self-serving and certainly not constructive advice to the, oh so mediocre, local planners, architects and developers: giving me no hope that we can ever look forward a well designed city or region. You betray your own lack of professional confidence.

    As for the city, False Creek north: your august planning department showed no understanding of figure ground articulation. Instead it took the easy way: running existing street axes to the seawall. There is no sense of connection to the existing city: amateurs at work!

    The region. There are no nodes identifying communities other than as parking lots. Knight and Kingsway: no public space, just a garage access dubiously labeled Cedar Cottage Lane: ridiculous, it’s a parking entrance!

    Norgate, what happened to Norgate? No identifying public presence, Kingsway, its shopping centre.

    Surrey, the largest city in BC yet? A conglomeration of show-off unrelated architecture: again no public fulcrum: sprawl as far as the eye can see and growing. The pedestrian still takes her chances despite well-meaning incestuous chatter.

    Jobs? Well if you can get a job in Surrey that pays enough to cover the mortgage and you live in Coquitlam, hey, go for it.

    The Canada line to Richmond! Actually it’s to YVR and to hell with Richmond.

    Mary Hill by-pass! South Fraser Perimeter road!

    Shall I go on?

    As for Harry Lash, he was fresh from doing it to the farmers in the Arrow lakes: damn that dam!

    I am tempted to say, as professionals, you all should be ashamed of yourselves, but I wont!

  • Frank Ducote

    Roger – the thing I’m ashamed about is trying to respectfully respond to your previous post. Why I bothered, I’ll never know.

    Over and out, sir.

  • Roger Kemble

    Frank @ #23

    Frank what you have just written is both petty and petulant. I am pointing out issues that should be discussed in public, indeed should have been discussed decades ago!

    When it comes to planners and planning in the city all we hear is pusillanimous excuses from its cheer leaders.

    At the last count there are 160 planners at thu hall and God knows how many in Metro.

    The pay off isn’t there.

    Planners and planning departments are heavy on rules and numbers but blind to the impaired out come of their machinations.

    City and Metro is a cacophonous dystopia of conflicting forms, noises and purposes: a disgrace to a pretend civil society.

    Of course the ambient culture of City/Metro is formed by ignorant operatives (the public Wall/MacDonald Rolls Royce bet comes to mind: huh vulgar!) dating back to the beautiful couple de-industrializing the city.

    Flogging our future birth right off shore, being the only game in town now, and meekly paying obecience to the recipients of our foolish largess is hardly is hardly medal-worthy or even having a failed development named after one of your august planners . . .

    Accordingly I am unsympathetic to your meek self serving protestations directed to me . . . and there you are!

    No I am not impressed and it is my duty to let you know . . .

  • Andrew Browne

    Blah blah blah. Mock outrage. Etc.

    Rinse. Repeat.

  • MB

    Roger, sounds like you have a 1,500-page self-congratulatory book in the works.

    What’s Wrong With the World (No Suggestions on How tot Fix It)

  • Roger Kemble

    Don’t be silly MB @ #28. Sometimes you come up with good ideas, i.e. lateral subdivision of corner lots to increase RS density, but most of the time you’re just mumbo jumbo-ing.

    One motherhood issue, easy to implement in the planning stages, is attention to figure ground: it can cost nothing but it would add to the pedestrian’s delight walking between those ominous chunks of concrete.

    Read Roger Transik’s Finding lost spaces and stop being smart-ass: it un-becomes you!