Downtown Vancouver no longer has Canada's lowest city centre office vacancies

Downtown Vancouver no longer has Canada's lowest office vacancy rate for a major city centre

Views from the rooftop of The Stack office tower. (Kenneth Chan/Daily Hive)

It appears downtown Vancouver is no longer the tightest leased office market amongst Canada’s largest city centres.

According to a new market update by Colliers International, downtown Toronto has squeaked by with its leased office vacancy rate of 11% in the third quarter of 2023. In contrast, downtown Vancouver’s office vacancy rate has seen a larger increase to 11.9% over the same quarter.

This ends downtown Vancouver’s years-long consecutive run — starting before the pandemic — of having the lowest office vacancy rate amongst major downtowns in Canada and the United States.

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It should be noted the leased office vacancy rate represents the technical real estate use of an office space and not the workforce occupancy rate of a space.

Across the Metro Vancouver region, the office vacancy rate reached 8.6% in the third quarter of 2023, including 5.9% within the suburban market (outside downtown). Metro Vancouver’s total office vacancy rate is the lowest amongst Canada’s 10 largest urban regions.

But Metro Vancouver has the highest sublet as a percentage of vacancy, with a rate of 29.3%, which is followed by Greater Toronto at 23%.

The office vacancy rates for downtown Vancouver, the suburban market, and the region as a whole have been trending upwards since the pandemic, reaching double digits earlier this year — the highest vacancy rates in about 20 years since the dot-com bubble.

Colliers’ report states although Metro Vancouver has one of the highest return-to-office levels in Canada, many businesses continue to optimize their office space requirements to adapt to semi-remote work arrangements and the changing nature of in-office work.

Also, while the rapidly growing tech industry has been leading the demand for office space in recent years, the healthcare sector has overtaken tech for the very first time, now seeking over 560,000 sq ft of office space across Metro Vancouver.

Previous quarter-over-quarter upticks in downtown Vancouver’s office vacancy rate were also driven by the substantial amount of new office space completions, with the office building boom that began before the pandemic now starting to wind down. So far, in 2023, about 2.2 million sq ft of new office supply has reached completion in downtown Vancouver, with about 750,00 sq ft currently under construction. Across Metro Vancouver, including downtown, there is currently 4.7 million sq ft under construction.

In the third quarter of 2023, downtown Vancouver’s office vacancy rate increased by 1.5% from 10.4% in the second quarter. Over the same period, downtown Toronto’s office vacancy rate went up by 0.4% from 10.6%.

The researchers state numerous business executives in Toronto reaffirmed their commitment to the return-to-office approach, with some prominent organizations now requiring their staff to spend at least two or three days per week in the office. However, Toronto’s overall vacancies are higher, with a suburban vacancy rate of 10.9% in suburban areas and 11% regionally.

Calgary and Edmonton continue to have the highest downtown, suburban, and regional office vacancy rates, continuing a longtime trend that began with Alberta’s recession a decade ago. However, both Alberta markets just experienced a quarter-over-quarter decrease in their vacancies.

The vacancy rate range considered for a healthy and balanced office market is generally between 4% and 8%. At the start of 2020, before the onset of the pandemic, downtown Vancouver’s office vacancy rate was hovering at about 2%.

Office vacancy rates of Canada’s largest markets: Q3 2023 (Colliers)

Vancouver
- Downtown: 11.9%
- Suburban: 5.9%
- Regional total: 8.6%
Calgary
- Downtown: 29.5%
- Suburban: 22.5%
- Regional total: 26.7%
Edmonton
- Downtown: 20.3%
- Suburban: 18.4%
- Regional total: 19.5%
Saskatoon
- Downtown: 19.2%
- Suburban: 7.3%
- Regional total: 13.2%
Regina
- Downtown: 16.9%
- Suburban: 11.1%
- Regional total: 15.7%
Winnipeg
- Downtown: 15.2%
- Suburban: 10.5%
- Regional total: 13.9%
Waterloo
- Downtown: 18.8%
- Suburban: 9.3%
- Regional total: 12.8%
Toronto
- Downtown: 11.0%
- Suburban: 10.9%
- Regional total: 11.0%
Ottawa
- Downtown: 12.3%
- Suburban: 12.9%
- Regional total: 12.6%
Montreal
- Downtown: 14.3%
- Suburban: 15.9%
- Regional total: 15.0%
Halifax
- Downtown: 18.7%
- Suburban: 11.2%
- Regional total: 14.2%

National commercial real estate firms such as Avison Young, CBRE, and Colliers International are known for releasing quarterly market updates on office and industrial space vacancy rates and leasing trends, with each firm providing slightly different data due to variations in their classifications, such as the geographical area considered as “downtown.”

For example, Avison Young pegged downtown Vancouver’s office vacancy rate in the second quarter of 2023 at 12.3%, higher than Colliers’ calculation for the quarter but still lower than Toronto’s.

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