Office vacancy and availability supply have fallen further in downtown Vancouver since Q3 2018, according to research by Avison Young.
In its Tenant Profile Report Q1 2019, Avison Young stated that all tenant sizes are running out of options in the city, contributing to a steady increase in rents – a trend that will, in turn, continue the vicious cycle of price growth.
“Rising rental rates and highly limited availability may start forcing tenants to consider locating outside of Downtown Vancouver in order to fulfill their office requirements. With limited relief until at least 2021 in terms of new development and vacancy expected to remain historically low through 2019 and 2020, upward pressure on rents is likely to continue for all tenant sizes,” Avison Young stated.
In particular, small tenants (those with size requirements of 1,500 -2,500 square feet) are faring the worst in this environment, with total availability falling from 1.3% in Q3 2018 to 0.59% in Q1 2019.
Tenants looking for space sizes of 10,000 - 15,000 sf are also having trouble, as the availability of such spaces fell by more than 80 basis points to 0.2%.
Moreover, large-scale tenants (those looking for spaces exceeding 30,000 sf) are facing similarly tight availability rates, with the nature of their requirements compelling them to take several other factors into account.
“Large tenants will have to plan much farther ahead than typical and explore future opportunities through preleasing or backfilling space that may become available in the future,” Avison Young explained. “They will need to be proactive and flexible well in advance of their lease expiry simply to find an option that suits their existing needs, let alone improve on their current office space.”
“Location, amenities, eco-friendly standards, access to public transit, floorplate size, IT infrastructure and building security along with lease costs are important considerations for tenants reviewing their real estate requirements. However, various combinations of these variables can limit the amount of options available to tenants and may have significant implications for overall cost and deal structure.”