Mission Group is creating a whole new office and living environment at the Bernard Block in downtown Kelowna.

Image Credit: Submitted/Mission Museum

Kelowna’s newest office tower, The Block, is almost finished and while spaces haven’t been snapped up nearly as fast as the builders would have liked, they are optimistic it will be a huge success in the long run.

This comes at a time when office vacancy rates across the country have nearly doubled from 10.9% in pre-COVID 2019 to the 18.3% that is forecast by Statista for 2023.

There was a huge shift to working from home because of COVID and there has been some pushback from workers who, given the high demand for labour, have been able to dig their heels in about commuting to the office.

But that is changing, according to Jon Friesen, CEO of Mission Group. He expects The Block to be finished in about two months and ready for tenants to start making their improvements to the roughed-in office spaces.

“Generally speaking, the post-COVID world is in the process of returning back to normal,” Friesen told iNFOnews.ca. “Little by little you’re seeing, even organizations like Zoom, saying that they want their staff members to start working from the office now.

“Companies like Mission Group, we’ve always had a fairly flexible work-from-home policy where we encourage staff to mostly rely on the office for work but, if you’ve got to work from home for a special project or because the kids have this or that or there’s a doctor’s appointment, we’re perfectly flexible.”

He belongs to a peer group of CEOs based in Vancouver where one of them joked about telling his workers that, if they want a paycheque, they have to work in the office.

“It wasn’t really a threat and he sort of said it with a smile but their line of business, like ours, relies so much on collaboration,” Friesen said. “The organization does better when people work from the office. That also gives a sense of belonging. The culture has improved and career promotions are far more likely to happen if you’re in the office engaging with people than if you’re invisible.”

The Block is unique to Kelowna because it’s the only Class A office space downtown with 11 of the 16 storeys in the building offering 110,000 square feet of office space.

It’s also bordered by two residential towers built by Mission Group. The 26-storey Brooklyn on St. Paul Street is fully occupied and the 34-storey Bertram will be ready for occupancy, likely in September 2024.

“We’re highly engaged in building residential buildings downtown so this whole notion that you can live downtown, you can work downtown, you don’t need to start your car up at all is super appealing to businesses as it is to us and our employees,” Friesen said.

READ MORE: New Kelowna tower proposal aims to build community from ground up

ProducKIDvity, a company that specializes in childcare and co-working spaces, is already prepping the entire sixth floor as a childcare centre while it will have co-work space on the seventh floor.

“The idea is, instead of going somewhere to drop your child off and then going to work and maybe having to interrupt your day because your child may be having an issue or is sick or something like that, you just go to one place and that’s where you drop your child off and that’s where you work,” Friesen said.

There has been an immediate uptake of the available childcare spaces.

Mission Group will be one of the tenants in The Block and, just before his interview with iNFOnews.ca, Friesen had signed a counter-offer with a national tenant for an entire floor.

While that’s good news, some companies are holding off on making commitments and the building still has a number of floors available so it is taking longer to fill up than anticipated as the Canadian economy is slowing, Friesen said.

“In a perfect world it would be completely pre-leased but first, we’ve got to finish the building,” he said. “Office buildings that tend to lease up say, in a year instead of three months, or even longer, are still highly desirable, as long as the income property is long term which, for us, it always is.

“We don’t build office buildings to do well in five years. These are 60- to 70-year projects. It’s that kind of horizon we tend to look at. Rates of return are calculated over time and discounted to present value.”

Besides, he noted, other than the new Landmark 7 tower that opened last year, there’s not much in the way of competition for this kind of space.

“Major commercial developers are postponing or not moving ahead at all with their office buildings,” Friesen said. “We see that asset class, in the medium term, will be underserved. In other words, there won’t be enough supply and the demand will continue to grow as Canadian businesses continue to grow.”

There has also been a shift away from tenants wanting to finish their own space in a new building to those who want it prebuilt, so Mission Group will finish off one floor to cater to that market.

But that, again, lengthens the time before a unit is leased.

A more positive side is the retail spaces at the base of the three buildings that make up what Mission Group calls the Bernard Block.

READ MORE: This corner of downtown Kelowna is about to change

“The whole base is surrounded by a large amount of retail space all the way from St. Paul to Bertram so the street will be animated with retail spaces,” Friesen said. “There’s been a lot of action and demand on that. All the spaces are either spoken for or under contract.”

There’s also been a lot of interest in commercial spaces in another major Mission Group project, the Aqua in South Pandosy.

“Commercial office space is just working back to where it was pre-COVID,” Friesen said. “It seems that commercial retail units are on a bit of a tear right now.”

The Aqua has three residential towers that are expected to be ready for occupation next fall.

While these are all at least relatively good news stories for the Mission Group, times are tough. Last week, Friesen informed his staff that five of its 105 employees are being laid off due to the slowdown. The launches of two major downtown highrise projects are also being delayed, at least until 2025.

One is a partnership with Victor Projects to build a 34-storey mixed-use tower at the corner of Lawrence Avenue and Water Street in downtown Kelowna.

It will have retail on the ground floor, four storeys of parking, seven storeys with 88 rental units and 173 condos on the top 20 storeys.

That building will be unique in that the majority of the balconies will be enclosable with glass glazing to make them cooler in the summer and useable in the winter.

The other is a residential tower at the UBCO site at Doyle Avenue and St. Paul Street.

The original plan was for two additional towers, one residential and the other a shorter office tower. The new plan is to focus on residential with close to 400 units in a building that will exceed 30 storeys.

Mission Group will be filing development permit applications for both towers within the next few weeks. Friesen expects those to take about eight months each to work through City Hall.

Normally, as soon as a development permit is issued, companies launch their sales campaign. In this case, there are no plans to start that process in 2024 and a 2025 launch will depend on economic conditions.

Development permits are valid for two years from the date they are issued.

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