More office space is expected to come available in what has been one of Canada's tightest and most competitive markets for office space, but is now facing the highest vacancy rate in years.
Metro Vancouver’s office vacancy rate is expected to increase over the next 12 months, after more than doubling from 2019 to 2020.
CBRE’s latest real estate outlook forecasts the region’s downtown vacancy rate will reach 8.4 per cent in 2021, up from 5.8 per cent in 2020, and 2.2 per cent the year before.
More than 1.1 million square feet of new supply is also expected to hit the market this year.
Downtown Vancouver currently has nearly 600,000 square feet of sublease office space that has been returned to the market, part of a total of 1.5 million square feet of vacant offices, according to a recent survey by Avison Young.
Across the entire Metro region, more than four million square feet of office space – equal to 90 acres of carpets and concrete – is currently empty. Avison Young found that nearly 70 per cent of the vacant space is in Vancouver, Burnaby and Richmond towers.
“Canada’s largest cities have been disproportionately impacted [by COVID-19] as high population densities and dependency on mass transit created logistical challenges which reduced office occupancy,” the CBRE report stated.
While higher office vacancy rates is expected to persist throughout the year, CBRE forecasts that leasing activity will resume as vaccination rates climb, and business activity recovers.
The firm also projects that current allocations of square footage per employee could increase, as employers rethink space, health and safety requirements in the post-pandemic world.
In the meantime, the cost of premium downtown office space in Vancouver is expected to tick down by around 3 per cent to $43.10 per square foot this year, after holding fairly steady from 2019 to 2020.