Investors in prime offices in Vancouver are seeing the greatest rent growth across major global markets.
A report from CBRE shows that over the past two years rents have gained 31%, beating growth in London, Tokyo, and New York combined. Vancouver is the only city to make the top 10 in CBRE’s Global Prime Office Occupancy Costs report for the past 2 years.
“It comes as no surprise that the cost of renting office space in Vancouver is climbing so quickly. We’ve got a powerful combination of strong tenant demand, limited available space and new supply that is still years out,” said Norm Taylor, Managing Director for CBRE Vancouver. “The ongoing challenge for occupiers is to secure quality space that meets the increasingly exacting demands of the workforce, while also controlling costs.”
Although Toronto’s downtown market has posted the lowest vacancy rate in North America over recent years, rent growth for prime offices there was a more modest 13.3% over the past 2 years.
CBRE says Toronto’s smaller rise in rents can be attributed to it being farther along in its development cycle, with nearly 3.5 million sq. ft. of new downtown office supply slated for delivery within the next year.
By comparison, Vancouver has a lower level of near-term delivery which is pressuring rents. With CBRE expecting that Vancouver will see its vacancy rate tighten to the lowest in North America for the second quarter of 2019, this trend is set to continue.
“While Vancouver’s had Canada’s greatest office occupancy cost increase,” noted Taylor, “the city is only the 66th most expensive market globally, with rents 1/6th of those in Hong Kong, the world’s most expensive office market, and 1/4 of those in London, the world’s second-most expensive market.”
What tenants want
CBRE says that the current trend for prime office tenants remains focused on high-quality space in markets with robust infrastructure and social amenities.
This is vital given the competition for talent with prime workspaces giving companies a cultural advantage in hiring.