Selling office property

General information, not tax or legal advice. Rules and rates change, and every situation is different. Talk to your lawyer and accountant before you act on anything here.

Who buys office

Owner-users looking for their own space, and investors buying the income. A vacant strata unit often suits an owner-user; a leased building suits an investor.

What to prepare

• Rent roll, leases and operating cost statements
• Reports on HVAC, elevators and roof
• Strata documents, if it’s strata
• A plan for any vacancy

Leases first

If a major lease is ending soon, think about renewing it before you sell.

Office property in detail

What drives value

• Tenant quality and the weighted average lease term left across the building.
• Rents in place against market rents, and how much space rolls in the next three years.
• Building class, age, elevators, HVAC and how efficient the floor plates are.
• Transit access and parking ratio. In Vancouver, being near SkyTrain matters to tenants.

Typical lease structures

• Most multi-tenant office leases are net: base rent plus additional rent for operating costs and property tax. Some smaller buildings use gross or semi-gross rents.
• Terms of three to ten years, often with free rent and a tenant improvement allowance up front.
• Area is usually measured to a BOMA standard, so rentable area includes a share of common space (the load factor).

Due diligence

• Rent roll, every lease and amendment, and estoppel certificates from tenants.
• Two to three years of operating cost statements and year-end reconciliations.
• Building condition report, roof, elevator and HVAC age, and any capital plan.
• Strata documents if the office is a strata unit: bylaws, minutes, depreciation report and Form B.

BC and Vancouver specifics

• Office is assessed as Class 6, business and other. See BC Assessment property classes.
• Strata office units are common in Vancouver and Burnaby, and owner-users buy many of them.
• Check zoning on the Vancouver zoning map; many central areas are zoned for mixed commercial use.

Questions to ask

• When do the biggest leases expire, and what are their renewal terms?
• What will the next tenant improvement and leasing commission bill look like?
• Are operating costs fully recovered from tenants?

GST. The sale of commercial property is generally subject to GST. If the buyer is registered for GST, the buyer usually self-assesses instead of paying it to the seller. See the CRA guidance on real property and GST/HST and talk to your accountant.

Know your building better than the buyer

• Have the facts ready: class, core type, floor plate size, load factor, elevators, power, HVAC hours and parking ratio. Lead with what beats nearby buildings, such as better elevator service.
• Think about who the ideal tenant is for your floors. It shapes the marketing and the value.
• In new space, the gap between your standard improvements and a tenant’s wish list is where the lease gets made. Know what over-standard items cost.
• In a softer market, offering improvements on second-generation space can land a strong tenant before you sell.
• Don’t promise what the building can’t deliver, such as core drilling, extra power or telecom to the suite.

Show actual numbers, and label anything projected

Serious buyers rebuild the income from the rent roll and the last 12 months of statements. If the package mixes projected income with actual, they discount everything in it. Show the actual numbers first, then present any upside separately with the assumptions spelled out. It keeps your credibility intact when the buyer’s lender checks the figures.

Questions people ask

Should I sell my office vacant or leased?

It depends on who’s buying. Owner-users pay for vacancy; investors pay for income. I can help you decide.