Surrey will have the tightest office market in Metro Vancouver by year-end with a 3.1 per cent vacancy rate, according to Avison Young, while neighbouring Langley will see office vacancies cut in half from mid-year.
Linking the two Fraser Valley centres is the new SkyTrain extension, which started construction this year and is changing the future of both markets.
In central Surrey the first three phases of King George Hub by PCI Developments are already complete, with 350,000 square feet of office space and 130,000 square feet of retail, plus more than 1,000 homes.
This all surrounds the King George SkyTrain station, launch point for the $4 billion Langley extension.
Anchor offices at the Hub include the headquarters for Coast Capital Savings and Westland Insurance.
Currently under construction and completing in 2025, King George Hub’s fourth phase will bring an additional 886 condos and 30,000 square feet of office and retail space.
In early 2023, construction will start on the fifth phase that will deliver an additional 400 rental homes, according to PCI Developments president Tim Grant.
The fifth phase should be completed in 2026.
Grant said the overall project cost is more than a $1.1 billion investment.
PCI Developments purchased the land adjacent to the King George station 10 years ago when it was a single oversized block consisting of a parking lot and two small, obsolete buildings.
“By all measures, this land was underutilized, even though the Expo Line started service in the area in 1994,” Grant noted.
PCI Developments, Metro Vancouver’s pre-eminent transit-oriented developer, has also completed the mixed-use Marine Gateway at the Marine Drive SkyTrain station at the south end of Cambie Street, Vancouver. The company has several projects at existing and future stations in planning and development, including in Surrey and on Vancouver’s Broadway subway and Canada lines.
The additional office space in central Surrey will be welcomed, agents say.
The overall office vacancy in Surrey, which is currently at 4.5 per cent, will continue to tighten – even more so for the Surrey City Central area where the current vacancy is 2.2 per cent, Cushman & Wakefield reported in its second-quarter office report.
In comparison, the downtown Vancouver office vacancy rate is currently 8 per cent and is forecast to reach 9 per cent by the end of this year. The overall Metro Vancouver office vacancies are projected to fall to 7.3 per cent by year-end, Avison Young reported in its mid-year market survey.
At mid-year 2022, Surrey continued to be the third tightest market in Metro Vancouver with only the North Shore and New Westminster having lower vacancy rates.
Avison Young noted that, as of the end of the second half of 2021, only 2,900 square feet of the 170,000 square feet of King George Hub office space was available. Even with the new space being developed, Surrey’s office vacancy rate is forecast to be the lowest among suburban markets by the end of this year.
The closest new space completed over the next two years will be next door in Langley, where 291,000 square feet is set for completion prior to 2025. Moreover, 43 per cent of that space has been spoken for, creating the very real risk of a space crunch, according to Cushman & Wakefield.
In Langley, the overall office vacancy rate decreased from 12.6 per cent at year-end 2021 to 10.4 per cent at mid-year 2022.
There were multiple new lease transactions at Langley’s Xchange this year, totalling about 21,000 square feet. The Xchange, which completed construction during the latter half of 2021, added 94,000 square feet of office space. Lingering vacancies remain in the First West Credit Union building and the Langley Business Centre, both of which completed in 2020. Most of Langley’s vacant Class A space is in buildings that were delivered from 2020 onwards, according to Avison Young.
Still, Avison Young’s mid-year office report forecasts that Langley’s office vacancies will fall to 4.5 per cent in the second half due to a lack of new supply.
The 16-kilometre Surrey-Langley SkyTrain extension will spur new office development, but that is not expected until 2024 as the line does not start running until 2028. Until then, office space will be at a premium in the Fraser Valley, analysts say.