Downtown Vancouver still has North America's lowest office vacancies

Jul 2 2021, 1:22 pm

Despite the difficult economic conditions and the ongoing temporary work-from-home practice, downtown Vancouver’s office market remains strong.

According to CBRE’s new office market report, the office vacancy rate in downtown Vancouver as of the second quarter of 2021 was 6.6%, continuing its position as the city centre with the tightest office vacancy rates in Canada and the United States.

Office vacancies only increased by 0.4% from 6.2% in the first quarter of 2021. The pandemic has resulted in a gradual rise in the vacancy rate, up from 2.2% in the first quarter of 2020 and 5.8% in the fourth quarter.

But still, these rates are still within the healthy range — generally considered to be below 8% — and are considerably lower than the vacancies in other major downtown markets across North America.

In the second quarter of 2021, the downtown office vacancy rates increased to 10% for Toronto, 11.1% for Montreal, and an unimaginable 32.7% for Calgary.

CBRE also notes that the sublease of vacant spaces in downtown Vancouver are now moderating, as companies that had put space on the market for sublease are considering their potential needs ahead of the return to the workplace, with the end to the pandemic now in sight.

Over the quarter, 380,000 sq ft of new office supply reached completion, and there is currently 4.6 million sq ft of office space under construction in the city centre. Commercial real estate developers have also signalled their continued interest in proposing to build new major office developments in Vancouver.

Metro Vancouver’s office market as a whole — both downtown Vancouver and suburban markets combined — is also amongst the strongest in North America, with a vacancy rate of 7.3% in the latest quarter, up from 6.5% earlier in 2021.

As well, the industrial space market in Metro Vancouver is still experiencing a severe shortage, escalating rents by 7.2% in a single quarter to $15.01 per sq ft.

The region’s industrial vacancy rate decreased to 1.1% in the second quarter of 2021 from 1.7% in the first quarter.

The tight industrial market is driven by the growing needs of e-commerce and logistics businesses, resulting in a record shortage of existing and available large-format industrial spaces. Some of this vacancy shortage is driven by Amazon’s plans to open five new distribution hubs in Metro Vancouver by the end of 2021, including a new additional 450,000 sq ft fulfillment centre at a Port of Vancouver facility in South Richmond.

In recent years, the growth of the film and television production industry has also converted traditional large warehouse spaces into studios.

The 1.2 million sq ft of new industrial space completed in the second quarter was nearly 100% pre-leased, and provided little relief to alleviate the accumulated pent-up demand that began before the pandemic.

Of the 5.5 million sq ft of industrial space currently under construction, about 68% is either pre-leased, sold, or under contract.

Kenneth ChanKenneth Chan

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