2024 looks good for highrise office space in Kelowna

What a difference a year makes.

In 2023 demand for highrise office space in Kelowna all but dried up.

Stober Group, which developed and owns the 23-storey Landmark 7 office tower, and Mission Group, which is constructing the 17-storey The Block office building downtown, were worried.

But, in the early days of 2024, there seems to be a turnaround.

"We're excited for 2024," said Mission Group executive vice-president Luke Turri.

"We're pretty optimistic for the mid-to-long-term. We've already started to see the shift of workers returning to in-person rather than remote work. The best work is done in-person when people can collaborate and add value."

Scott Wandler, the director of leasing at Stober Group, is seeing the same.

"2023 was definitely slow," he admitted.

"But, the gist is office space will be in huge demand in the near future. At the end of the day, both us and Mission Group will fill up our buildings (Landmark 7 and The Block),"

Highrises have cachet.

They are tall and make a statement, they demand attention, they exude progress and wealth.

As such, when demand for highrise office space waned in 2023, people took notice and wondered if Landmark 7 and The Block might sit partially empty for years.

Landmark 7 has 226,000 square feet of office space over 23 floors.

Right now it is 40% occupied with tenants such as Wellington-Altus Wealth Management on the top two floors, Sunlife Financial and a dentist on the 20th, CTA Architecture and Honce Dental on the 17th, MNP accountants and consultants on the 14th and 15th, Bone & Biscuit head office and Farm Credit Canada on the 10th and the BC Ministry of Social Development on the 4th.

"We expect deals to close for 30% more of the building this year," stated Wandler.

"That will put us at 70% occupied at the end of 2024 and on target. Landmark 7 should be 90% full by the end of 2025."

In other words, it's a plodding and steady race to the finish line when it comes to filling up an office highrise.

While The Block is 17 storeys, it has 110,000 square feet of office space over 11 floors (the 6th through 16th) because the five-storey podium is made up of ground-floor retail and five levels of parking and the 17th floor rooftop is a patio and has a boardroom.

Mission Group will move its head office from the 10th floor of the 18-storey Landmark 6 to the 16th floor of The Block in the summer to kick off occupancy of the building.

Produckidvity daycare will take the 6th floor and Lloyd Sadd Insurance Brokers will move into the 7th.

"40% of the building is under lease or negotiation," said Turri.

"We don't have a target for full occupancy."

Both The Block and Landmark 7 are Class A office buildings that are changing the skyline and office culture of Kelowna.

Mission Group claims The Block is leading the city's monumental transformation.

Stober Group touts Landmark 7 as eclipsing the standard of what Class A commercial space represents within the City of Kelowna.

"The news around the world is that office space is in trouble post-pandemic because people are working remotely and don't want to come back to the office," said Lindsey Termul, vice-president of sales and leasing at HM Commerical Realty in Kelowna.

"But in Kelowna we're holding steady and it's not too bad. The office vacancy rate is around 6.5%. Which is a lot better than the 12% and more they have in Vancouver and Calgary."

Termul said as two new highrise office buildings, The Block and Landmark are adding vibrancy and excitement to the Kelowna real estate scene.

Wandler said office space is filling faster in Kelowna because people don't have long commutes to work in Kelowna, as they would have in a bigger city, so returning to the office is more appealing.

While Mission Group is hyped on The Block, it has decided to scrap the early concept it had of building another 17-storey office building beside the under-construction UBCO 42-storey vertical campus and student residence at the corner of Doyle Avenue and St. Paul Street.

As well, the office market isn't hot enough for Stober Group to start planning Landmark 8 yet.

"In the future, that will be a residential-only site for us," said Turri of the plot beside the UBCO skyscraper.

"A highrise that may be rentals or condos or a mix of both."

Mission Group overall is a fan of highrises.

At the same corner of Bernard and St. Paul where The Block is there are the 25-storey Brooklyn condo and an under-construction 35-storey condo.

Mission Group is also building the three-tower Aqua condo village on Okanagan Lake south of the Hotel Eldorado and plans a condo-rental apartment tower at the corner of Lawrence Avenue and Water Street.

It's all part of Kelowna's highrise jag and growing skyline.

Currently, there are 25 buildings of 10 storeys or more in the city with about 25 more under construction or planned.