‘No relief in sight’ for Metro Vancouver’s office and industrial vacancies: CBRE

Institutional investors bullish on region’s commercial market, with office vacancies set to tighten further while rents rise

By
Glacier Media Real Estate
February 25, 2020





vancouver-commercial-investment

Major institutional investors are boosting their presence in Metro Vancouver's increasingly attractive commercial real estate sector, as office and industrial vacancy rates tighten and lease rates increase, according to CBRE.

The global commercial real estate firm issued its national market outlook February 25, which predicted there is “no relief in sight” for vacancies in Metro Vancouver’s office and industrial sectors.

Downtown Vancouver’s office sector is particularly tight. Its vacancy rate is “expected to fall yet again this year, reaching another all-time low of 1.7 per cent, down from 2.3 per cent in Q4 2019,” according to the report.

The Metro region’s industrial vacancy rate is predicted to remain at 2.4 per cent this year, with both new supply and absorption set to increase. Net asking rents are expected to increase well above inflation, by about 4.6 per cent, said CBRE.

The report said, “Despite each of Vancouver’s office and industrial sectors ending 2019 with 5.5 million square feet of new construction underway, combined preleasing of 57 per cent means this near record-setting wave of development will not provide significant relief to the city’s historically low vacancy rates... It is expected that continued tightness should support rent growth in both sectors in 2020.”

These market conditions are luring institutional investors to increase their exposure to the Metro Vancouver commercial real estate market, according to CBRE.

The report authors wrote, “Strong fundamentals across asset classes are attracting significant capital to Vancouver. As liquidity mounts, it is expected that investors will become more creative in terms of built form and deal structure and that pricing will continue to climb in 2020. New entrants including Blackstone, Crestpoint and KingSett have shown increased conviction and have looked to partner with local firms to gain a foothold in the market.”

Jason Kiselbach, CBRE Vancouver’s managing director, confirmed this trend. “We’re seeing a growing number of institutional investors partnering with local owners in Vancouver,” he said. “They continue to be bullish, and we anticipate large purchases in 2020. They’re looking at our current low inventory fundamentals and potential rental rate growth as an opportunity, and we expect that they will continue to purchase industrial, office and multi-family assets, with the continued increase in rental rates and lack of supply driving further construction of new projects.”

CBRE's prediction's for the Metro Vancouver commercial market are listed in the table below, and you can download CBRE’s full national report from here.

CBRE metro vancouver commercial forecast Feb 2020
Source: CBRE

Joannah Connolly is editorial director of Glacier Media Real Estate, Glacier Media's real estate division. Joannah writes and curates real estate news for Glacier Media's local newspaper websites, including the Vancouver Courier, Times Colonist, Prince George Citizen, North Shore News, Burnaby Now, Tri-City News and others. She also writes and oversees editorial content in Real Estate Weekly Homes, West Coast Condos & Homes, Western Investor and Glacier's special real estate publications. A dual Canadian-British citizen, Joannah has 23 years of journalism and editing experience in Vancouver and London, with a background in construction, architecture, healthcare and business media. Joannah has appeared on major local TV outlets as a real estate commentator, has moderated and spoken on various industry panels, and spent two years hosting the Real Estate Therapist talk radio show on Vancouver's Roundhouse Radio.
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