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Telus tower brings new life to Vancouver office market

The downtown Vancouver peninsula – which appeared headed for resort-town status, crowded only with residential condos – is poised for a commercial office building renaissance, as Telus (T-T45.73----%) prepares to unveil a new headquarters.

The $500-million-plus Telus project expected to be announced this week joins a similarly large proposal two weeks ago from a group that includes Vancouver billionaire Jimmy Pattison. Three other real estate companies are close to building significant new office space as well.

It is a major reversal from the seemingly entrenched trend of the past several years, where the last notable office space was completed in 2007 and nothing had been started since then. In the intervening years there have been office building booms in Toronto and Calgary.

Now, with an office vacancy rate in Vancouver that is almost half the national figure – and rental rates are near the highest in the country –downtown office building is about to come alive again. It likely allays fears that a large city without many big corporate head offices was going to see its economic vibrancy wither.

Telus aims to make its new 22-storey headquarters at 520 West Georgia Street – coupled with a 43-storey residential tower on the same large downtown block – a civic icon.

“It’s stunning,” said one person closely involved in the project. “It doesn’t look like any office building you’ve seen.”

For Telus, the company is leveraging its real estate assets on a block of downtown Vancouver where it has a small head office, its central telecommunications network hub and other holdings. The company, which this year opened a $250-million building in Toronto, doesn’t plan to use operating cash flow for the Vancouver project, according to second source, close to the company.

There had been a shadow over commercial real estate on the crowded downtown peninsula, where developers have been able to fetch far more money per square foot from condominiums as buyers paid big dollars for beautiful views of mountains and ocean.

The fear for politicians was too many residents in an area where eventually there wouldn’t be enough jobs, a situation that could have seen downtown dwellers actually commuting to the suburbs to work.

However, in part because Vancouver City Council two years ago made zoning changes to prevent condos from completely taking over, changing market dynamics have persuaded builders to pursue office towers.

“The [Telus] application shows a strong confidence in the direction this council has been taking for business,” said city councillor Raymond Louie of the governing Vision Vancouver party.

Avison Young, a commercial real estate brokerage firm, said recently that “the race is on” to build new office towers in Vancouver.

Among the firms is Oxford Properties Group Inc., looking to build two buildings. Bentall Corp. awaits a development permit for a large tower. The Aquilini family, a local real estate player and owner of the Vancouver Canucks, want to build a 22-storey office tower across from their hockey arena.

Despite the ambitious plans, some doubts still course through the Vancouver commercial real estate scene, “All bets are on hold until cranes start swinging.”, Avison Young said.

Behind the Telus project is a leading Vancouver development team, Westbank Holdings Ltd., led by the flamboyant Ian Gillespie, and the reclusive Ben Yeung of Peterson Investment Group Inc. The two have built several downtown Vancouver landmarks in recent years, including the tallest building in town, the 61-storey Shangri-La condo/hotel, a style that has been typical for developers in recent years.

The architect on the Telus project is the celebrated Gregory Henriquez, noted most recently for his Westbank-backed Woodward’s project, an internationally respected $375-million development on the city’s once-emaciated but recovering Downtown Eastside, where the group built an elaborate mixed-use facility – expensive condos and social housing, commercial retail space and a university art school.

For Vancouver, the Telus plan is a significant endorsement. The city, with a diffuse but successful business community, is home to only three of the top 30 public companies on the Toronto Stock Exchange. Goldcorp Inc., No. 9, occupies space in an anonymous tower. Teck Resources, No. 14, has its corporate nameplate on the ground floor of Bentall V, the last tower completed in 2007. (Montreal-based Bell Canada has its name affixed to the top of the building.) Telus stands at No. 29 on the TSX. North America’s leading lumber producer, West Fraser Timber Co., is ranked No. 150 in the 234-member TSX and has offices in a small building near the old football stadium on the far edge of downtown.

“[The Telus project] is really a vote for the City of Vancouver,” said Bernie Magnan, chief economist at the local board of trade. “That’s pretty big.”