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Function landlords optimistic despite vacancies

Judging by the signs hung in windows and perched along the road there...



Judging by the signs hung in windows and perched along the road there are a lot of vacancies in Function Junction these days, but according to landlords and real estate agents, there is also a lot of interest.

The vacancies started late last fall with the opening of the new warehouse and office complex at 1410 Alpha Lake Road, which offered lower square footage rates and commissary rates. Businesses left their existing Function spaces and opened shop in the new building. The new buildings on Lynham Road in the area two years before also had an affect.

Adding to the number of vacancies, almost two months ago the Muncipal Bylaw Department started to enforce the zoning and Whistler Fire Services started to enforce provincial fire codes in Function, which resulted in evictions at several illegal residences for safety reasons.

"The bottom line is that there’s more space in Function today that is empty than there has been in 10 years," said Drew Meredith from the Whistler Real Estate Company.

According to Don Wensely of Park Place Investments – the owner of the new building at 1410 Alpha Lake Road, a place on Lynham road and the Lordco building – there was 38,400 square feet of empty space in Function Junction at press time.

His new building has 43,000 square feet of space, all rented except for 1,200 square feet. Although he’s aware that he’s a big part of the reason for the vacancies in Function Junction he says the lower rates were necessary to compete with Pemberton and Squamish and bring new businesses to Whistler.

"There’s no question it took tenants out of other buildings," said Wensely of his building.

"The biggest problem here, in Function Junction, is that our success was killing us."

He said his lease rates are $14 to $15 per square foot, depending on the building, and commissary fees average $4.50 to $5.50 per square foot. That brings the total cost of renting a space to close to $20 a square foot, not including the cost of heat and light.

"There are landlords here who are charging $17 to $18.50 a square foot base rent. The businesses were wanting out of here. They were saying why settle in Whistler when I can go to Squamish or Pemberton for less than half the price," he said.

In addition to the existing tenants, Wensley says he personally knows of several major clients who are looking for space in Whistler but have been put off by the price. Even with rates as low as $13 a square foot, these businesses are still reluctant.

"The vacancies are not an indication that business is bad, it’s an indication that… our rents are too high, we’re discouraging people from coming into the community," said Wensley.

Wensley believes that the high number of vacancies will be positive in the long run, forcing landlords to lower prices while bringing more businesses to town. In addition, lease rates in Pemberton and Squamish are going up, he says, which will help drive more business to Function Junction.

The proof is in his new building, where he says he already has four new businesses that were not in Function Junction before.

He also doesn’t mind the fact that a proposed development at 1330 Alpha Lake Road will make competition even harder. That project includes 21 residential apartments, more than 24,500 square feet of office space and another 23,290 square feet of light industrial or retail space.

He doesn’t object to the competition for warehouse space, but to the idea that the municipality would approve a project that will see people living next to a concrete plant, under hydro lines, on a busy stretch of road, in a dirty, noisy industrial park.

"There’s nowhere near to walk, play, escape from their units…. If the planning department set out to find the worst location to put housing in Whistler, they could not have picked a better spot," said Wensley.

As for the vacancies, he says things should look better in the near future.

"My prediction is that the vacancies will last another year and a half, but I’ll make you a wager that in the meantime there will be an adjustment in rents. By December of 2005 there won’t be any vacancies in this industrial area, but there will be a little heartache along the way."

Meredith also believes that things will improve.

"As far as leasing commercial spaces, we’ve been anticipating this excess supply situation for quite some time, basically because of the new building that was built at the end of the road," he said.

"I’d say we’re pretty healthy, given the fact that there’s some vacancy down there – if I was landlord I wouldn’t be happy, but as a new tenant coming into town they’ll have selection and maybe a little more negotiating power.

"At the same time we’ve got to recognize that there is a bit of flattening. We’ve been under such incredible growth in Whistler for so long, we just presumed there would continue to be incredible growth. But with the decline in real estate development in town, it does tend to slow the demand for other services.

"That said, there’s a lot of space, but there are people looking at it. Some places are going to go faster than others, it’s as simple as that."

Matt Jong is a landlord who owns a unit on Millar Creek Road. He had eight tenants living on the second floor who could lose their houses as a result of the fire code and zoning enforcement.

He has hired a consultant to make a report on the situation, which he will take to the municipality and apply for rezoning. The lower floor of his building doesn’t contain any industrial applications, and he’s confident that it could pass fire regulations.

"My concern is for the people who live upstairs," he said. "People like to live where they work.

"If we do get it rezoned it probably will devalue the property a little more, and we won’t be getting as much rent as the commercial guys, but I’m happy with it because the upstairs tenants are workers in Whistler.

"I have eight tenants who don’t know what else to do. They can’t even afford to move to Squamish or Pemberton because they can’t afford transportation, and it’s expensive to rent in town."

He’s not concerned with a vacancy on his lower floor because he has already received some interest in the space. "I think it will be temporary," he said.

"Our prices were very low to start with. You just have to be realistic about things, and we have a few inquiries already."