While Metro Vancouver still has the lowest office vacancy rate in North America, demand for urban and suburban office space in the region is increasingly divided.
According to CBRE’s Q4 2022 Office Figures report released earlier this week, Metro Vancouver’s office vacancy rate rose to 7.8 per cent in the final three months of 2022, driven primarily by increases in direct space and sublease availability in downtown Vancouver.
At the same time, office space availability in region’s suburbs decreased to 5.8 per cent.
Jason Kiselbach, senior vice-president and managing director with CBRE, said this trend of demand for space outside of Vancouver’s downtown core has been emerging since 2021.
Areas such as Mount Pleasant and the Broadway Corridor have become popular for technology and life sciences companies, for example.
“That's where new development projects have been concentrated over the last couple of years for offices,” said Kiselbach. “They’re located near transit and in a neighborhood that people want to live in. So [employees] can walk or bike to work, and it's a nice, vibrant area.”
Kiselbach said that new developments in that area have been fully leased, resulting in a low vacancy rate. In addition, he said that there are not many office development projects in the pipeline, which means that vacancy will remain low in those areas.
In downtown Vancouver, the addition of new office spaces contributed to the higher vacancy rate posted in the last quarter of 2022.
“We're at the tail end of the largest new development cycle for downtown office construction that we've ever had. And that was in response to historic low vacancy rates prior to the pandemic. So, it's sort of a multi-year cycle but a lot of the projects ended up delivering in the fourth quarter of last year,” Kiselbach said.
The Stack and Vancouver Centre 2 added about 296,000 square feet of supply to the market, accounting for most of the increase in direct vacancy, CBRE said in its report.
Meanwhile, the industrial market in Metro Vancouver continues to experience a land squeeze, Though some space became available in the fourth quarter of last year – with the overall industrial vacancy rate rising to 1.2 per cent – Kiselbach said little relief is expected from the secondary leasing market or new builds.
“The industrial market is still categorized by extremely strong demand, lack of available supply and lack of land to build new projects. So it's a continuation of the trends we've seen the last several years,” Kiselbach said.
The report noted that limited space in Burnaby, Richmond and Delta have pushed occupiers to seek opportunity in the Fraser Valley.
“I think it's inevitable that the market will continue to push further south and east into some of those geographies, but even they don't have that much space available. So it's really a critical lack of supply throughout the whole region,” he said.
