Office construction is on a high in Metro Vancouver, especial in the city of Vancouver as numerous projects are underway in downtown, Broadway, East Vancouver and even South Vancouver.
As new office inventory comes on line, there has been a rise in office vacancy rates to a new 10-year high of 9.6 per cent. With the delivery of 700,000 square feet of new office inventory in the fourth quarter of 2014, the vacancy rate is expected to increase next year.
The technology/digital media and creative industries continue to spearhead the demand for office space in Vancouver.
Although there were a few notable deals in the third quarter of 2014, leasing activity within the Downtown Core remains soft. Technology and digital media tenants continue to drive demand in this market but their preference is for office space in the Gastown, Yaletown and Railtown areas. Meanwhile, the market landscape in the Downtown Core is changing with stronger downward pressure on rental rates and inducements on the rise.
The office component of 510 Seymour, a new development by Serracan Properties, is 100 per cent committed. The bulk of the space will be occupied by Adler School of Professional Psychology with
30,500 square feet and Onlineshoes.com with 24,000 square feet.
The past quarter showed significant activity in sublease spaces resulting in a 23 per cent drop in available sublease space for the Downtown Core. As sublandlords revise their recovery expectations, financially attractive deals with flexible terms are beginning to lease.
The availability rate for the Broadway Corridor dropped to 4.0 per cent this quarter, a marked decrease from 4.7 per cent in the second quarter of 2014. The decrease in the availability rate is caused by strong demand from technology and health care tenants. With steady demand in the area and with limited availability, we expect the vacancy rate to remain stable over the next several quarters
Broadway Central (Neelu Bachra Centre) at 550-558 W. Broadway completed construction this quarter. The project will add approximately 78,000 square feet of office space, of which 62,000 square feet is strata office.
Technology and Digital Media firms continue to be the most active in this market with more than 27,000 square feet of requirements currently looking for space.
Combined the two largest employment regions in the province, downtown and Central Broadway will see over 2.5 million square feet of office space in the coming years. To put that in perspective, the rest of Metro Vancouver has about 866 thousand square feet of office space under construction. Majority of that space is under construction in Burnaby.