Metro Vancouver's office, retail and industrial lease markets are forecast to face a challenging economic environment, according to Avison Young's 2010 forecast report.
The region's overall office vacancy rate is expected to rise to 8%, almost 3% higher than the vacancy rate in December 2008. Much of the increase will be due to oversupply in the suburban office markets like Burnaby and Richmond. Consequently, lease rates for suburban landlords will face downward pressure if office space demand remains flat.
While conditions are improving, Metro Vancouver's retail market is expected to face continued challenges in 2010. The report suggested there will be fewer speculative projects this year with food and drugstore-anchored properties continuing to generate the most demand. Redevelopment of existing or obsolete retail space in key urban locations, however, will continue to offer opportunites for developers and less risk-averse investors.
Industrial leases should see incremental growth in tenant demand after a dormant market in 2009. The report suggested tenants will benefit from more opportunities because of recent recession-related vacancies.
Investor demand for commercial properties is one area that may see improvement as the bid-ask gap between buyers and sellers narrowed and price expectations of sellers were met. Equity markets have improved, presales are returning and both institutional and private buyers are regaining confidence again.
The report suggested institutional investors in particular are in buying mode, although, possible interest rate changes and fallout from the expiration of commercial-mortgage-based securities in the U.S. may impact the Vancouver market.