Vacancy rates for all office classes in downtown Vancouver have further lowered to 4.5 per cent, down from 5 per cent a year ago. Class A office vacancy rates are even lower, at 3.9 per cent. At the same time, Class A average gross rents are continuing to climb with annual rates exceeding $51 per square foot, according to a survey by Devencore, a real estate brokerage and advisory firm.
“The market is showing no signs of slowing down in terms of rental rates. With no major new office buildings delivered to the market until 2021, tenants with upcoming leases are competing within a very tight market,” said Jon Bishop, executive vice-president and managing principal of Devencore’s Vancouver office. “Due to the forecasted high demand of the new developments coming up, we are seeing trends with large space users pre-leasing new AAA-class office space slated to be delivered in 2021 and beyond. In the meantime they are utilizing flexible swing-space provided by third-party space providers like WeWork and Spaces to hold them over until their new offices are completed.
“As vacancy rates continue to fall, it’s not unusual to see tenants renewing leases or even considering a move to the suburbs,” Bishop said. “There is very limited sublease space available in the market and limited direct vacancy in the downtown area.”
Suburban office properties on transit, however, continue to be in high demand, and tenants can expect to pay close to downtown rental rates for these prime locations, Bishop noted.
“With a few years before new supply hits the market, tenants are forced to plan two to three years in advance for their growth and get creative in their search for office space,” Bishop said.