Tessa Bousfield posted an articleWhile our tech boom is no longer a phenomenon, the sector keeps growing... see more
Source: Remi Network
Author: Rebecca Melnyk
As government moves to new Class A assets, tech companies snap up vacated, older stock
In an old two-storey brick building, once old home to the Victoria Stock Exchange, a start-up has moved into its new office digs. Previously situated in Langford, B.C., educational technology company RaceRocks 3D relocated to the Exchange Building in downtown Victoria to be closer to clients, save money on space and live in the rhythm of a prosperous tech haven.
“We’re right downtown with a lot of other creative people; there’s a lot of talent,” says Scott Dewis, chief executive officer of RaceRocks 3D. “We see the founders and staff of other companies at lunch walking around the street. It’s a vibrant place for an entrepreneur.”
After scouting 16 other local office spaces with Colliers International, the company found its home, knocked down the walls and created an open-floor plan with a kitchen. Now they have long-term plans to stay put in the area.
Startups like RaceRocks 3D Inc. are a common feature in Western Canada’s second oldest city. While the tech boom there is no longer a phenomenon, the sector keeps growing and is now part of a $4 billion a year industry. Dave Ganong, managing director at Colliers International (Vancouver Island), remembers back to 2000 when American company JDS Uniphase acquired Victoria-based optical-component supplier SDL Inc. for $41 billion in what was one of the biggest tech mergers in corporate history.
“The foundation of the tech industry has been there for 20 to 25 years or more,” he says. “But what’s happening is it’s becoming this incubator hub that is not just trendy, but sustainable.”
Victoria has a long history as a lively business centre, with miners and adventurers flocking there during the gold rush of 1858. Once a calm village, Victoria evolved to become a city where lots were said to go from $25 a piece to $3,000 each, immediately following the influx of gold-seekers. Eventually, government and tourism generated the greatest economic impact for the region.
Until the tech sector started creating a buzz. Now, more and more buildings fill with start-ups and early stage entrepreneurs every year. About 900 tech companies populate the city, employing a workforce of about 20,000 and growing. Local conferences accelerate the global reputation of Victoria and attract investors. Demand for new office space among the industry has now outpaced government in the downtown core, specifically in brick-and-beam buildings which tend to be Class B and C assets.
“There’s a building boom in the office sector in the downtown core where we’re doubling the size of our Class A inventory in the next 18 to 24 months,” notes Ganong. “That’s half a million square feet of space coming on—a massive increase. 75 per cent of that space has been preleased to the government or private sector, but what happens from this is we’re seeing a lot of vacancies coming up in Class B and C space where the majority of demand comes from the tech sector.”
Ganong has seen an exponential increase in leasing to the tech sector over the past three years, moving from 100,000 square feet to an estimated 300,000 to 350,000 square feet in 2016. This doesn’t take into account other competitors.
Developers and investors are also buying more on spec (some with tech companies in tow), looking to create flex office space where desks and common facilities can be rented.
Dan Gunn, chief executive officer at The Victoria Innovation, Advanced Technology and Entrepreneurship Council (VIATEC), a not-for-profit incubator accelerator, says his program’s success has resulted in a move to the downtown core, into a 100-year-old, 16,000 square foot building on Fort Street.
“We have 18 private offices of varying size and another 24 open desks that companies can rent at an affordable price,” he says. “We opened the building in September 2014 not knowing what to expect. The building was full in a matter of months.”
To accommodate demand and sector-specific needs, large buildings are being gutted for purpose-built use. For instance, the 20,000 square-foot Summit Building on Fort Street once stood completely vacant, but was fully revamped and open to tenants in September 2015. Several companies wishing to share a building can do so and expand as required.
Besides the flexibility and character of these older buildings, companies are also putting roots down due for lifestyle offerings.
“More and more companies trickling in from the rest of Canada are quite often going there through an acquisition or because one person leading a development team wishes to move their family to Victoria,” says Marc Foucher who brokered the RaceRocks 3D deal.
The proximity to qualified students graduating from local colleges and universities is also key. Change.org, the world’s largest online petition platform, is in the midst of renovations in its new office on the second floor of 1221 Broad Street and plans to recruit local talent. After the company wanted to expand its engineering team, it realized more room was needed. The landlord offered them a temporary space while they await finishing touches.
“Once we move downstairs, we’ll have plenty of room for growth and more meeting rooms,” says Chris Campbell, principal engineer at the Victoria location.
Campbell says the company, headquartered in San Francisco, figured that expanding its engineering office in Victoria was more affordable in terms of cost of living and office space. But it is also relatively easy to find suitable employees in the area.
The city no longer relies on tourism’s “shoulder season,” as Gunn calls it, between May to September, but a year-round tech economy that supports a large number of retail assets like the 11 craft breweries, independent coffee shops and North America’s second-highest number of restaurants per capita, behind San Francisco.
“Retail leasing agents who used to find it a challenge in the downtown core are starting to see some activity that is almost on par with the increases we’ve seen in the tech sector office leasing market,” says Ganong, adding that another factor here is tourism—an industry that could experience its best season ever this year.
In less than a year, Ganong says his company has seen storefront vacancy drop a full percentage point from where it peaked north of 10 per cent. The city has also been supportive in granting bonus density to start populating higher density residential development in the downtown core, which helps populate more retail activity.
“There is some sort of convergence here that is happening,” he says. “I’ve lived in Victoria for 33 years and some of my colleagues have lived here all their lives. They are even starting to feel something here they’ve never felt before.”