More office space became available in the last quarter of 2023, with the potential for a market shake-up due to new federal policies.
Metro Vancouver’s office vacancy rate rose slightly to 10 per cent in the fourth quarter of last year, up from 9.9 per cent in the third quarter. This accounts for roughly 5.7 million square feet of available space across the region, according to real estate services firm Avison Young (AY).
The education sector was responsible for “several” large transactions last year, in addition to making up 25 per cent of tenant demand in the region’s market as of December, according to the AY report released on Feb. 6.
However, the commercial real estate brokerage is predicting that demand will slow down for this sector as it adjusts to new federal regulations.
“With the federal government’s recent announcement on the cap of student visas … which will take effect on Sept. 1, 2024, it is expected that their requirements for space in Metro Vancouver will decline as schools re-evaluate their real estate needs,” said the report.
Ottawa announced at the end of January that it’s placing a two-year cap on international students who come to study in Canada. The feds said they would approve 360,000 undergraduate study permits in 2024 – a 35 per cent decrease from 2023.
A shake-up in office space is not the only potential consequence of the cap on students, with industry experts signalling that B.C. businesses could also be negatively impacted.
The office market has been continually adjusting to new realities and vacancy rates throughout 2023 thanks to shifting moods around hybrid work models, as well as companies looking to move to higher quality spaces to attract employees to return to work, according to the AY report.
“While some companies are still opting for a hybrid work model to meet their employees’ needs, many tenants have realized the benefit of investing in best-in-class space to encourage employees back to the office,” said the report.
Average rent remained stable in the last quarter of 2023 at $56.35 per square foot, with Avison Young predicting that landlords will keep rental rates at the current level.
There is approximately 4.7 million square feet of space currently under construction in Metro Vancouver, translating to 36 projects.