There is a serious shortage of office space in Metro Vancouver and the strong demand for space in the first half of 2018 has highlighted the need for increased supply.
Avison Young says that the regional vacancy rate tightened to its lowest point in 6 years and supply is required in multiple markets. The vacancy rate is forecast to reach lows last seen in 2007 during the next 18 months.
“Vacancy is expected to drop significantly by year-end 2018 and, barring any substantial economic shifts, will likely approach record lows by mid-2019. Tenants seeking large blocks of space will likely have few options other than to prelease space in the next wave of development or to backfill the space that is to be vacated by those tenants who have preleased new space,” warned Avison Young Principal Glenn Gardner.
The tightest sectors, locations
Vacancy in the 51.4-million-square-foot (msf) regional market slid to 7.2% at mid-year 2018 from 9.1% a year earlier and 10.4% just 24 months ago.
First-half 2018 absorption of 764,911 sf was the second most first-half absorption recorded since mid-year 2006 and was only surpassed in recent memory at mid-year 2015 during the last wave of new development.
Overall suburban vacancy was down from 11.6% at mid-year 2017 to 9.4% a year later and was driven by declines in Burnaby, Yaletown, and the North Shore.
“While the development pipeline in Metro Vancouver has typically maintained a relatively steady stream of new supply, a gap in both new-product delivery and availability has formed in key suburban markets such as Burnaby and Richmond and, to a lesser extent, Surrey,” states Avison Young Principal Bill Elliott, who is based in the firm’s Vancouver office and specializes in suburban office leasing. “Strong leasing activity in Burnaby resulted in vacancy dropping to 7% at mid-year 2018 from 13.3% a year earlier. Virtually all of the activity was focused on the lease-up of existing inventory.”