A combination of growing demand from global tech giants and lengthy development times has led to record-low office vacancy levels in Vancouver, according to Avison Young.
As of mid-year 2019, the Metro Vancouver region’s vacancy rate was 4.3%, while the downtown market’s reading was 2%. The previous regional record low of 4.7% was reached way back at the end of 2007.
In its just-released Mid-Year 2019 Metro Vancouver Office Market Report, Avison Young stated that these developments will compound the threats posed by rapidly increasing rents and geographic restrictions on growth.
Together, this cocktail of dangers “could threaten the success the region has had as an emerging global destination for companies seeking to establish new operations or expand existing ones,” Avison Young warned.
Over the past few quarters, top movers in the tech industry such as Amazon and Apple Inc. have been moving to Vancouver in earnest. These firms established major facilities that have fed into intensified demand for the city’s offices and industrial space.
Said hunger has stoked what might well be the largest commercial development cycle in the region’s history. Avison Young projected that this frenzy of construction will deliver new buildings starting next year through 2023, primarily in the downtown and Vancouver-Broadway markets.
Market tightness will continue to be a distinguishing feature of the region over the next 24 months or so, Avison Young Principal Glenn Gardner said.
“Expect continuing upward pressure on net effective rental rates in existing buildings as near-term supply constraints intensify due to a combination of increasing net rental rates and/or diminishing leasing inducements,” he explained.
“Supply constraints, escalating leasehold improvement construction costs and developer desire to secure prelease commitments will narrow the delta between net effective rental rates for new construction and existing higher-calibre buildings in the near term.”