A crunch on new office supply and rapid growth in workspace demand, particularly from the city’s tech sector, are putting downtown Vancouver on the global map for office rent growth.
A new report by CBRE indicates downtown Vancouver’s prime office market saw the largest year-over-year increase in occupancy costs of any Canadian city in the first quarter of the 2019 fiscal year– up by 12.9% since the first quarter of 2018.
This astoundingly also ranks the seventh largest increase globally, with the rate of Vancouver’s prime office rents exceeding the growth in London, Tokyo, and New York combined.
Moreover, since 2017, Vancouver’s office rents have increased by 31.1%, and it is the only city in the CBRE ranking to place in the top 10 for rent increases in two years in a row.
“It comes as no surprise that the cost of renting office space in Vancouver is climbing so quickly. We’ve got a powerful combination of strong tenant demand, limited available space, and new supply that is still years out,” said Norm Taylor, managing director for CBRE Vancouver, in a statement.
“The ongoing challenge for occupiers is to secure quality space that meets the increasingly exacting demands of the workforce, while also controlling costs.”
A surge in new supply is not expected until the early 2020s, as construction on a number of new developments in the current office building boom only began recently. By the end of 2023, new developments producing a combined total of 4.6 million sq. ft. of office space will be completed in the city centre alone.
The largest single source of absorption has been Amazon, which is set to become the largest office tenant in downtown with at least 882,000 sq. ft. of office space leased by the multinational giant by 2022.
Of course, other global markets still have real office rents that are far higher than Vancouver’s market; Vancouver is still only the 66th most expensive market in the world for office rents, with rents just one-sixth of Hong Kong — the world’s most expensive office market.