Building a downtown office seems like a great idea — unless no one wants to move into it.
There isn’t enough demand for downtown business space for it to compete with the suburbs, according to a survey by real -estate consultants Turner Drake & Partners.
“The rental rates just aren’t high enough to support development in the downtown area,” said firm spokeswoman Alexandra Baird Allen.
“Whereas with land values in suburban areas are so much cheaper.”
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Despite all the talk of downtown developments, there hasn’t been a new office building built since Summit Place in the 1980s. Baird Allen believes part of the reason is the higher land and construction costs compared to the suburbs.
Downtown may seem like plum real estate, but offices there cost only 14 per cent more than the suburbs. Class A office space in Burnside costs an average of $15.88 per square foot per year. Downtown that number is $18.07.
“There is demand for office space in the downtown area, but we don’t really see that it’s yet economically feasible to construct new buildings,” said Baird Allen.
One developer planning a downtown office is hedging his bets. Franklyn Medjuk wants to built a 20-story office building on Barrington Street above where the Discovery Centre is now.
But he’s got a plan B just in case.
“By the time you go through the process and appeal periods, the market could be very different,” said Medjuk.
“We applied for an option, so if Turner Drake are right, we have the option to switch to an apartment building.”
Medjuk building would be the same height regardless of whether it ends up for offices or apartments. But it gives Medjuk an insurance policy if a bunch of downtown developments get built at the same time, sapping demand.