Vancouver’s office market may be reaping the constraints of a wildly successful 2018.
A new market report by Avison Young predicts an impending lease crunch for the regional office market, as office vacancy reached record lows towards the end of 2018. Accelerated leasing demand from the tech industry and co-working companies led to an annual absorption of 1.8 million square feet – the highest absorption seen since 2005.
With hardly any new supply expected for the next 12 to 24 months, the region’s 5.1 per cent vacancy – 7.1 per cent in the suburban market – is expected to continue to plummet.
“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 markets such as Downtown, Yaletown, Burnaby, Richmond and, to a lesser extent, Vancouver-Broadway and Surrey,” states Josh Sookero, a principal at Avison Young’s Vancouver office specializing in suburban office leasing.
The downtown market vacancy dropped to 2.9 per cent at the end of 2018 from 7.1 per cent just a year before, representing the largest year-over-year decline in Avison Young’s history tracking the market. The region’s current vacancy is the lowest it’s been since 2008, concurred by a recent Colliers International report.
New supply currently under constructing is expected to add more than 4.6 million square feet of leasable or purchasable space to the downtown market – none of which will be completed before 2020. Much of Vancouver’s long-anticipated new office projects are already significantly pre-leased.
Burnaby represents the second largest office market in Metro Vancouver, yet only 77,000 square feet of new leasable office space is expected at the Amazing Brentwood development by the end of 2020. More supply is not expected until 2022 or 2023.
But, there is hope for new players looking to get it on one of the nation’s most active office arenas.
“Relief is on the horizon,” the report states. “New construction will start delivering in 2021 at a pace and scale previously unseen in this region. This juncture also marks the end of an era as Vancouver and the region transition to a global stage.”